================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
{X} 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 __________.
Comission file number: 333-18295
COLONIAL DOWNS HOLDINGS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-1826807
--------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
3610 North Courthouse Road
Providence Forge, Virginia 23140
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 966-7223
--------------------------------------------------------------------
(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 ( )
Applicable only to corporate issuers:
As of August 8, 1997, the number of shares outstanding of the Company's Class A
Common Stock was 5,000,000 shares and of the Company's Class B Common Stock
2,250,000 shares.
================================================================================
<PAGE>
FORM 10 - Q
COLONIAL DOWNS HOLDINGS, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1. - Financial Statements
Consolidated Balance Sheets - 3
June 30, 1997 (unaudited) and December 31, 1996
Consolidated Statements of Earnings (Loss) - 4
Three months and six months ended June 30, 1997 and 1996 (unaudited)
Consolidated Statement of Shareholders' Equity - 5
Six months ended June 30, 1997 (unaudited)
Consolidated Statements of Cash Flows - 6
Six months ended June 30, 1997 and 1996 (unaudited)
Notes to Consolidated Financial Statements 7-11
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-17
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 18
Item 5 - Other Information 19
Item 6 - Exhibits and Reports on Form 8-K 20
</TABLE>
<PAGE>
COLONIAL DOWNS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ -----------
<S> <C> <C>
Assets
Current
Cash and cash equivalents $ 24,396 $ 1,380
Restricted cash - purses & awards 4,296 338
Accounts receivable 342 39
Prepaid expenses 304 9
------------ -------------
Total current assets 29,338 1,766
Property and equipment
Land 2,028 800
Building and leasehold improvements 2,655 2,596
Equipment, furnishings and fixtures 1,183 888
Refundable advance - land 5,000 --
Construction in progress 22,703 5,080
------------ -------------
33,569 9,364
Less accumulated depreciation 239 126
------------ -------------
Net property and equipment 33,330 9,238
Other
Licensing costs and other assets 1,098 1,333
Less accumulated amortization 255 161
------------ -------------
Total other 843 1,172
============ =============
Total assets $ 63,511 $ 12,176
============ =============
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable - stockholders $ 3,500 $ 1,638
Current maturities of long-term debt
and capital lease obligations 100 48
Accounts payable 6,191 3,566
Accrued expenses 691 480
Purses due horsemen 4,345 1,957
Income taxes payable 326 --
------------ -------------
Total current liabilities 15,153 7,689
Long-term liabilities
Long-term debt and capital lease obligations,
net of current maturities 100 42
Notes payable - stockholders 5,500 3,449
Refundable advance - land 5,000 --
------------ -------------
Total long-term liabilities 10,600 3,491
------------ -------------
Total liabilities 25,753 11,180
Stockholders' equity
Preferred stock, $.01 par value, 2,000,000 shares
authorized; none issued -- --
Common stock
Class A, $.01 par value, 12,000,000 shares authorized;
5,000,000 and 750,000 shares outstanding, respectively 50 8
Class B, $.01 par value, 3,000,000 shares authorized;
2,250,000 shares outstanding 23 23
Additional paid-in capital 37,784 1,966
Retained earnings (deficit) (99) (1,001)
------------ ------------
Total stockholders' equity 37,758 996
============ ============
Total liabilities & stockholders' equity $ 63,511 $ 12,176
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(IN THOUSANDS, EXCEPT SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Pari-mutuel commissions - import simulcasting $4,675 $2,137 $9,672 $3,316
Other 369 200 789 326
------ ------ ------ ------
Total revenues 5,044 2,337 10,461 3,642
------ ------ ------ ------
Direct operating expenses
Purses, fees and pari-mutuel taxes 1,808 894 3,877 1,389
Simulcast and other direct expenses 2,484 1,079 4,986 1,654
----- ----- ----- -----
Total direct operating expenses 4,292 1,973 8,863 3,043
General and administrative expenses 357 489 725 767
------ ------ ------ ------
Total expenses 4,649 2,462 9,588 3,810
------ ------ ------ ------
Earnings (loss) from operations 395 (125) 873 (168)
Other income (expense)
Interest expense - stockholders (46) (7) (84) (31)
Interest income 414 3 439 4
------ ------ ------ ------
Total other income (expense) 368 (4) 355 (27)
------ ------ ------ ------
Earnings (loss) before income taxes 763 (129) 1,228 (195)
Taxes on income (290) -- (326) --
------ ------ ------ ------
Net earnings (loss) $473 $(129) $902 $(195)
------ ------ ------ ------
Earnings (loss) per share data:
Earnings (loss) per share $0.07 $(0.04) $0.17 $(0.07)
------ ------ ------ ------
Weighted average number of shares outstanding 7,250 3,000 5,442 3,000
====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
------------------------------------------------
Class A Class B Additional Retained
-------------------- --------------------- Paid-in Earnings
Shares Amounts Shares Amounts Capital (Deficit) Total
------ ------- ------ ------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, at January 1, 1997 750,000 $8 2,250,000 $23 $1,966 $(1,001) $996
Issuance of common stock 4,250,000 42 -- -- 35,818 -- 35,860
Net income for the six months
ended June 30, 1997 -- -- -- -- -- 902 902
--------- --- --------- --- ------- ---- -------
Balance at June 30, 1997 5,000,000 $50 2,250,000 $23 $37,784 $(99) $37,758
========= === ========= === ======= ==== =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
COLONIAL DOWNS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------
1997 1996
---- ----
Cash flows from operating activities
<S> <C> <C>
Net earnings (loss) $902 $(195)
Adjustments to net earnings (loss)
Depreciation and amortization 207 111
(Increase) decrease in accounts receivable and other assets (598) (21)
Increase (decrease) in accounts payable and income taxes payable 822 442
Increase (decrease) in accrued expenses and other 211 248
Increase in horsemen's purses payable 50 --
------- ------
Net cash provided by operating activities 1,594 585
------- ------
Investing activities
Purchases of property and equipment and construction in progress (19,206) (655)
Increase (decrease) in accounts payable for property, equipment and construction 2,129 (966)
Investment in other assets (97) (36)
------- ------
Net cash absorbed by investing activities (17,174) (1,657)
------- ------
Financing activities
Net proceeds from stock offering 36,192 --
Proceeds from long-term debt and capital leases 110 9
Proceeds from stockholder notes payable 4,613 814
Funding of purse account promissory notes (1,620) --
Proceeds from purse account promissory notes -- 480
Payments on stockholders' advances and notes payable (699) --
------- ------
Net cash provided by financing activities 38,596 1,303
------- ------
Net increase in cash and cash equivalents 23,016 231
Cash and cash equivalents, beginning of period 1,380 330
------- ------
Cash and cash equivalents, end of period $24,396 $561
======= ======
</TABLE>
At June 30, 1997 and 1996, $4,945,000 and $164,000, respectively,
were due vendors for property and equipment purchases.
Non cash activities
For the six months ended June 30, 1997, approximately $332,000 of
previously paid finance cost was netted against additional paid in capital.
See accompanying notes to consolidated financial statements.
6
<PAGE>
Colonial Downs Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the following entities
of Colonial Downs Holdings, Inc. (collectively, the "Company"), which are
affiliated through common ownership and control:
Colonial Downs, L.P. ("Partnership")
Stansley Racing Corp. ("SRC")
Colonial Downs Holdings, Inc. ("CD Holdings")
The consolidated financial statements have been prepared as if the
entities had operated as a single consolidated group as of December 31, 1993.
All significant intercompany accounts and transactions have been eliminated.
The Company's initial public offering ("IPO") became effective on March
17, 1997. The Company sold 4,250,000 shares of its common stock raising $35.9
million (net of expenses) which is being used to develop, construct, and operate
a pari-mutuel horse racing facility and up to six satellite wagering facilities
in Virginia.
The financial information has been prepared in accordance with the
Company's customary accounting practices and has not been audited. In the
opinion of management, the information presented reflects all adjustments
necessary for a fair statement of interim results. All such adjustments are of a
normal and recurring nature. The foregoing interim results are not necessarily
indicative of the results of operation for the full year ending December 31,
1997.
7
<PAGE>
Restricted Cash and Purses Due Horsemen
The Company has agreements with the Virginia Horseman's Benevolent and
Protective Association, Inc. and the Virginia Harness Horse Association
(collectively the "Associations") which require it to fund specified amounts
based on handle to restricted cash accounts to be used for live racing purses.
As of June 30, 1997 approximately $4,296,000 was held in the restricted cash
accounts, which, along with approximately $50,000 of funds to be remitted,
equals the amounts due for purses as of June 30, 1997.
Construction in Progress
Construction in progress is recorded at cost and includes capitalized
costs such as architect, contractor, and engineering fees. Estimated cost to
complete the racetrack, including all furnishings and equipment, is
approximately $17.6 million as of June 30, 1997. Approximately $250,000 of
interest expense was capitalized during the six months ending June 30, 1997 in
connection with the construction of the racetrack.
In March, 1997 the Company purchased land in Hampton, Virginia for a
purchase price of approximately $1.1 million to construct its third satellite
wagering facility, with an estimated cost of $3.9 million (including land), and
in June, 1997 purchased land in Brunswick County for a purchase price of
approximately $135,000 to construct its fourth satellite facility at an
estimated cost of $1.3 million (including land). The Company expects to open
both facilities late in the third quarter of 1997.
Income Taxes
The Company and its subsidiaries will file a consolidated income tax
return. Prior to the Reorganization, the Partnership and SRC (an "S" corporation
for income tax purposes) filed income tax returns as separate entities. No
provisions have been made for income taxes for the Partnership and SRC as income
taxes are the liabilities of the individual partners and shareholders,
respectively. CD Holdings' activity began March 18, 1997 and the income tax from
such time forward has been provided for in the statements.
8
<PAGE>
2. Management and Consulting Agreement with Maryland-Virginia Racing Circuit.
The Company entered into a consulting agreement with the Maryland-
Virginia Racing Circuit, Inc. an affiliate of the Maryland Jockey Club ("MJC").
Pursuant to the agreement, MJC will suspend live racing at Pimlico and Laurel
racetracks during the Company's live thoroughbred racing meet and assist in
managing the thoroughbred racing meet at the Company's racing facility. The
first live thoroughbred meet is expected to commence September 1 and end October
12, with 30 days of racing. Under this agreement the Company paid MJC
approximately $912,000 for the six months ended June 30, 1997.
3. Land Conveyance and Land Development
The land required to build the racetrack and facilities in New Kent
County was conveyed to the Company, at no cost to the Company other than the
payment of transfer and filing fees and taxes, in March, 1997 from Chesapeake
Forest Products Company ("Chesapeake Forest"), the previous owner. Under the
deed, the land is subject to reversion to Chesapeake Forest if the Company fails
to complete, open and operate for three years a racetrack licensed by the
Virginia Racing Commission. Further, the deed restricts use of the property to
operation of a horse racetrack and certain ancillary activities. The land was
recorded in March 1997, at its fair value, which the Company estimates to be
approximately $5,000,000. Due to the retention of a reversionary interest by
Chesapeake Forest, the land was recorded as a refundable advance with an offset
to a liability account. The refundable advance will be reclassified to land, and
the corresponding liability will be reclassified to contributed capital when the
likelihood for reversion is remote, which is expected to be when the Company
completes the racing facility and has shown the ability to conduct live racing
during the next three years.
9
<PAGE>
4. Notes Payable and Capital Lease Obligations
Notes payable and capital lease obligations consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
Notes Payable - Stockholders
Current:
Note payable to CD Entertainment Ltd., maturing upon the funding of the $10
million construction loan estimated to fund in the third quarter, 1997.
Interest is payable monthly at a rate of LIBOR (5.6825% and 5.625% at June 30,
1997 and December 31, 1996 respectively) plus 2%; collateralized by a deed of
trust on the Richmond facility $3,500 $ --
Note payable to CD Entertainment Ltd. bearing interest at LIBO plus 2%, with a
maximum borrowings of $5,000,000, unsecured -- 1,388
Note payable to Stockholder, maturing January 1997, non-interest bearing,
unsecured -- 175
Note payable to Norglass, Inc., maturing January 1997, non-interest
bearing, unsecured ------ -------
Total Current $3,500 $1,638
====== =======
Long Term:
Convertible subordinated note to CD Entertainment Ltd., maturing March 2000 with
interest payable quarterly at a rate of 7.25%; collateralized by a second deed
of trust on the racetrack facility $5,500 $ --
Note payable to CD Entertainment Ltd. maturing January 1998 bearing interest at
LIBOR plus 2%; collateralized by land & building -- 3,000
Note payable to Norglass, Inc., maturing March 1998, non-interest
bearing, unsecured -- 237
Note payable to stockholder, maturing March 1998, non-interest
bearing, unsecured 212
------ ------
Total Long Term $5,500 $3,449
====== ======
Long Term Debt & Capitalized Lease
Installment notes and capitalized leases collateralized by certain vehicles,
machinery, and equipment, maturing at various dates, primarily March 1997
through January 1999, at interest rates ranging from 3% to 12% $ 180 $ 70
Demand note payable to a Bank, with interest payable at prime
plus 2% (10.5% at June 30, 1997); unsecured 20 20
----- ----
Total 200 90
Less: Current Portion (100) (48)
----- ----
Net Long Term Debt and Capitalized Leases $ 100 $ 42
===== ====
</TABLE>
10
<PAGE>
5. Related Party Transactions
The Company had a management agreement to pay directly or indirectly to
SRC and CD Entertainment Ltd. a monthly management fee of $10,000 and $5,000,
respectively, per month until the closing of the IPO. In March 1997 the Company
paid $247,742 in accrued management fees. The management agreements terminated
upon the closing of the IPO.
Virginia Concessions, L.L.C., an affiliate of shareholder CD
Entertainment Ltd., was granted an option by the Company to manage the food and
beverage concessions at the satellite facilities. Under the agreement, Virginia
Concessions, L.L.C. pays rent to the Company based on gross sales. This rental
income for the Company for the six months ending June 30, 1997 was $88,448. In
April 1997, the Company entered into a management agreement to manage Virginia
Concessions in return for the net income (or losses) from the operation of the
food and beverage concessions.
Norglass, Inc., an affiliate of a shareholder, is engaged as the
general contractor to construct the racetrack and related facilities in New Kent
County, Virginia. The contract value with Norglass, Inc. for the facility is
$29.5 million. Norglass, Inc. has also been engaged to perform construction
management related to the satellite facilities. Total racetrack construction
cost incurred with Norglass, Inc. was approximately $16,040,000 through June 30,
1997. Norglass, Inc. receives a fee of $2 million under the racetrack
construction contract and reimbursement of up to $1 million for certain out-of-
pocket expenses. In addition, Norglass, Inc. has been paid approximately $2.6
million in construction cost related to the SWFs.
The Company agreed to pay Premier One Development Co. ("Premier"), a
company affiliated with a shareholder of the Company, CD Entertainment Ltd., a
fee of $250,000 (of which $125,000 was paid in 1996, $32,000 in March 1997 and
$93,000 in April 1997) for services related to the construction of the Track and
the development of the satellite facilities.
6. Earnings per share
Earnings per share for the three and six months ended June 30, 1997 and
June 30, 1996 was computed by dividing the net income by the weighted average
number of shares outstanding during the periods. (Prior to the reorganization of
the Company effective March 12, 1997, the private owners of the Company held
partnership interests which were converted to 3,000,000 shares of stock as part
of the reorganization). Outstanding stock options and shares issuable upon the
conversion of an outstanding convertible subordinated promissory note were
excluded from the earnings per share calculation as the effect of such were
anti-dilutive as of June 30, 1997.
11
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The Company was organized to pursue opportunities for horse racing and
pari-mutuel wagering in Virginia. The Company is the only entity that has been
awarded unlimited licenses to own and operate a horse racetrack with pari-mutuel
wagering in Virginia and is currently the only entity eligible to apply for
licenses to own and operate satellite wagering facilities ("SWFs") in Virginia.
The Company currently operates SWFs in Chesapeake and Richmond, Virginia and has
received licenses to own and operate facilities in each of Hampton and Brunswick
County, Virginia. The Company plans to conduct thoroughbred and standardbred
("harness") horse racing at a racetrack that it is currently constructing in New
Kent County, Virginia (the "Track"). The Company's inaugural thoroughbred meet
is scheduled to commence September 1, 1997 with thirty (30) days of live racing
ending October 12, 1997. The Company also intends to conduct pari-mutuel
wagering at the Track and at its SWFs on races run at the Track and on races
telecast from out-of-state tracks. After it begins live racing at the Track, the
Company will seek to increase its revenues by entering into agreements to
simulcast races run at the Track to out-of-state racetracks, SWFs, casinos, and
other gaming facilities.
The Company's goal is to establish the Track as one of the premier venues
for thoroughbred horse racing in the east by attracting high quality horses and
offering an appealing environment for racing participants and customers. The
Company believes that its average purses will be competitive with those
currently offered by most other tracks in the mid-Atlantic region that hold
racing meets at the same time as the Company's scheduled meets, enabling the
Track to attract high quality thoroughbred horses, trainers, and jockeys to the
Company's meets.
For the first six months of 1997, assets of the Company increased from
$12,176,000 at December 31, 1996 to $63,511,000 at June 30, 1997 largely as
result of the closing of the Company's IPO, yielding the Company net proceeds of
approximately $35.9 million. The Company has invested these proceeds on a short
term basis pending expenditures for the continuing development, construction and
equipping of its racetrack, satellite wagering facilities and related
facilities. Additionally the Company took title to the real estate upon which
the racetrack is being constructed. (The value of such property is treated as a
refundable advance until such time as the likelihood of reversion to the
property's grantor is remote. See footnote 3 to the financial statements).
12
<PAGE>
Total liabilities increased in the same period from $11,180,000 at December
31, 1996 to $25,753,000 at June 30, 1997. The increase in liabilities is mainly
attributable to the entry of the contribution of land to the Company by
Chesapeake Forest Products Company as a refundable advance (see footnote 3 to
the financial statements), an increase in loans from the Company's shareholders,
an increase in purses due horsemen, and an increase in accounts payable due to
construction of the Track.
Results of Operations
Three months ended June 30, 1997 compared to three months ended June 30, 1996
Total revenue increased by approximately $2.7 million or 117% from $2.3
million for the three months ended June 30, 1996 to $5.0 million for the three
months ended June 30, 1997. The increase was attributable to two satellite
wagering facilities, in Chesapeake and Richmond, being in operation during the
entire three months of 1997 versus only the Chesapeake facility, which opened
February 17, 1996, conducting satellite wagering for the three months ended June
30, 1996.
Total operating expenses increased by approximately $2.2 million or 92%
from $2.4 million for the three months ended June 30, 1996 to $4.6 million for
the three months ended June 30, 1997. The increase in operating expenses
resulted from operating two satellite wagering facilities 1997 versus one in
1996.
Other income comprised primarily of interest earnings increased $372,000 to
$368,000 as a result of investing the IPO proceeds.
Earnings from operations increased by approximately $520,000 from a loss
of ($125,000) to earnings of $395,000 due to the factors described above.
Net earnings increased by approximately $602,000 from a loss of ($129,000)
to net earnings of $473,000 for the three months ended June 30, 1997 due to the
factors described above. Income tax expense increased from $0 to $290,000 due to
the increase in net income for the period.
Six months ended June 30, 1997 compared to six months ended June 30, 1996
Total revenue increased by approximately $6.8 million or 189% from $3.6
million for the six months ended June 30, 1996 to $10.4 million for the six
months ended June 30, 1997. The increase was attributable to two satellite
wagering facilities, in Chesapeake and Richmond, being in operation during the
entire six months of 1997 versus only the
13
<PAGE>
Chesapeake facility, which opened February 17, 1996, conducting satellite
wagering operations for a portion of the six months ended June 30, 1996.
Total operating expenses increased by approximately $5.8 million or 153%
from $3.8 million for the six months ended June 30, 1996 to $9.6 million for the
six months ended June 30, 1997. The increase in operating expenses resulted from
operating two satellite wagering facilities for the six month period in 1997
versus only one for a portion of the six month period ended June 30, 1996.
Other income comprised primarily of interest earnings increased $382,000
due to earnings from investing the IPO proceeds.
Earnings from operations increased by approximately $1,041,000 from a loss
of ($168,000) to earnings of $873,000 due to the factors described above.
Net earnings increased by approximately $1,097,000 from a loss of
($195,000) to net earnings of $902,000 for the six months ended June 30, 1997
due to the factors described above. Income tax expense increased from $0 to
$326,000 due to the increase in net income for the period.
Liquidity and Capital Resources
The Company's primary sources of liquidity and capital resources have been
stockholders loans and proceeds from the initial public offering of the
Company's common stock. During the six months ended June 30, 1997, the Company's
cash position increased by approximately $23 million from $1.4 million at
December 31, 1996 to $24.4 million at June 30, 1997 as a result of approximately
$36.2 million in proceeds from the stock offering, a $3.9 million increase in
stockholder notes payable, a $2.1 million increase in accounts payable for
purchases of property, equipment and construction, a $1.6 million increase from
operating activities and a $.1 million increase in other debt offset primarily
by $19.3 million of cash absorbed by construction in progress and purchases of
property and equipment, and $1.6 million of cash absorbed funding purse account
promissory notes. For the six months ended June 30, 1996 the Company's cash
position increased approximately $.2 million.
Net cash provided by operating activities for the six months ended June 30,
1997 totaled approximately $1.6 million. This was a result of net earnings and
depreciation, $1.1 million, an increase in accounts payable, purses payable and
accrued expenses of $1.1 million offset by an increase in accounts receivable
and other assets of $.6 million and funding of purse account promissory notes of
$1.6 million. For the six months ended June 30, 1996, net cash provided by
operations was $.6 million.
Cash flows used in investing activities totaled approximately $ 17.2
million for the six months ended June 30, 1997 as compared to $1.7 million for
the six months ended June
14
<PAGE>
30, 1996. Capital expenditures made in the six months ended June 30, 1997 were
primarily for the purchase of land and beginning construction of the Hampton
satellite facility ($1.4 million), the purchase and the development of the
Brunswick property ($.2 million) and for the continued construction of the race
track in New Kent County ($17.6 million). In addition, the other assets
increased $.1 million during this period. These investing activities were offset
by $2.1 million increase in accounts payable for purchases of property,
equipment and construction. For the six months ended June 30, 1996 capital
expenditures were primarily for the build out and equipping of the Chesapeake
satellite wagering facility ($1.7 million).
Cash flows from financing activities for the six months ended June 30,
1997 totaled approximately $ 38.6 million. This was primarily the result of the
stock offering of 4,250,000 shares of common stock which provided proceeds of
approximately $36.2 million and net increased stockholder loans and other debt
of $4.0 million offset by $1.6 million in funding of purse account promissory
notes. For the six months ended June 30, 1996 cash flows from financing
activities was approximately $ 1.3 million primarily from increased stockholder
loans and proceeds from purse account promissory notes.
Colonial Downs, L.P. (the "Partnership"), a subsidiary of the Company
entered into a $10 million Construction Loan Agreement (the "Construction
Facility") with PNC Bank, National Association ("PNC") and a $5 million
Revolving Line of Credit Agreement ("Revolving Credit Facility") with PNC as of
June 26, 1997. Proceeds of the Construction Facility will be used for the
construction of Colonial Downs' racetrack in New Kent County, Virginia. Proceeds
of the Revolving Credit Facility will be available for working capital needs and
other general Company purposes. Amounts outstanding under each credit facility
bear interest at the rate of PNC's prime plus one and one-half percent (1.5%) or
LIBOR plus three percent (3%), at the Company's option. Each facility has a term
of three (3) years subject to two one-year extensions at the option of the
Company provided that certain financial covenants are satisfied.
The credit facilities are secured by a first deed of trust on the
racetrack and the improvements thereon (except with respect to certain specified
equipment), accounts and certain other property of the Company. Additionally,
all loans under the credit facilities are guaranteed by the Company, Stansley
Racing Corp., and certain of its officers, directors and shareholders. The
Company's guarantee is secured by the deed of trust and a pledge of the
Company's partnership interest in the Partnership. The Company is obligated to
pay an annual guarantee fee of the greater of (i) three percent (3%) of the
average outstanding balance of the credit facilities or (ii) $50,000 to an
affiliate of the non-corporate guarantors.
The Construction Loan Agreement, the Revolving Line of Credit Agreement,
and the Company's guaranty contain a number of covenants that restrict the
operations of the Company including, among other things: (i) the disposition of
assets at the racetrack, (ii) the incurrence of certain liens, and (iii)
fundamental changes in the structure of the
15
<PAGE>
Company, its subsidiaries and their business operations, including mergers,
liquidations or dissolutions.
No funds had been loaned under the Construction Facility or the
Revolving Credit Facility as of June 30, 1997. It is anticipated that the
Company will draw funds under the Construction Facility in mid-August.
The remaining proceeds from the stock offering and from the foregoing loans
will be used to complete construction and equipping of the racetrack
(approximately $17.6 million), complete construction of the Hampton satellite
facility (approximately $2.5 million, complete construction of the Brunswick
County satellite facility (approximately $1.1 million) and to complete the
opening of two additional satellite facilities projected for 1998 ($2.0
million). The Hampton satellite facility is currently under construction and is
projected to open late in the third quarter of this year. Construction of the
Brunswick facility is expected to start in August 1997 and it is also projected
to open late in the third quarter of this year.
The Company believes that the cash on hand, cash generated from operations,
and the above credit facility will be sufficient to fund its anticipated future
cash requirements.
Seasonality
The Company's revenues and net income may fluctuate from quarter to quarter
for a variety of reasons. For example, revenues may be higher during scheduled
live racing than at other times of the year (the Company conducted no live
racing in the second quarter of 1997, only imported simulcasting at its SWFs).
In addition, weather conditions sometimes cause cancellation of outdoor horse
races or curtail attendance, both of which reduce wagering. Attendance and
wagering at both outdoor races and indoor SWFs also may be adversely affected by
certain holidays and professional and college sports seasons as well as other
recreational activities. Conversely, attendance and wagering may be favorably
affected by special racing events which stimulate interest in horse racing, such
as the Triple Crown races in May and June and the Breeders' Cup in November.
16
<PAGE>
Forward Looking Statements
Statements regarding the anticipated opening of additional satellite
wagering facilities, scheduling of the thoroughbred and harness meets, and
certain other statements contained in this quarter report are forward-looking
statements and as such involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements, expressed or implied by such forward-looking statements. Such
potential risks, uncertainties and factors include, but are not limited to,
risks of construction delays, including unforeseen environmental, engineering or
geological problems, governmental regulation, including licensing of additional
satellite wagering facilities, approval by the Virginia Racing Commission of
harness dates for 1998, competition with other sporting events and forms of
entertainment, and the success of planned, advertising, marketing and
promotional efforts.
17
<PAGE>
Part II - Other Information
Item 1 - Legal Proceedings
Robin J. Pearsall and Monument Avenue Park Association, an unincorporated
association representing certain individuals residing close to the Richmond
satellite wagering facility ("SWF"), filed suit in Richmond Circuit Court on
July 11, 1996, against the Virginia Racing Commission. (Robin J. Pearsall and
Monument Avenue Park Association v. The Virginia Racing Commission.) The Company
intervened as a party on January 28, 1997. The suit seeks to overturn the award
of the Company's licenses for the Richmond SWF on the grounds that the
referendum approving the locating of an SWF in Richmond was void; that the
Virginia Racing Commission did not have authority to issue the licenses under
the Virginia Racing Act; and that no SWF licenses could be issued until
completion of construction of the Track. The case was dismissed by order entered
February 20, 1997, in which the judge found that Ms. Pearsall and the
Association lacked standing to challenge the Virginia Racing Commission's
actions. Ms. Pearsall and the Association filed a motion to vacate the court's
order, which motion was denied by order dated March 12, 1997. Ms. Pearsall and
the Association appealed the court's decision to the Virginia Court of Appeals,
an intermediate appellate court, by notice of appeal filed March 21, 1997. The
parties have filed appellate briefs. The Virginia Court of Appeals has not
determined if or when to hear oral arguments in the case.
Although the ultimate outcome of this proceeding cannot be predicted, the
Company believes that it will be ultimately resolved in a manner that will not
have a material adverse effect on the Company's results of operations,
liquidity, or financial condition.
18
<PAGE>
Item 5 - Other Information
Ian M. Stewart was appointed Vice President and Chief Financial Officer
of the Company effective as of June 23, 1997. Mr. Stewart was formerly Chief
Financial Officer of Hat Brands, Inc. and was a senior manager with Deloitte &
Touche. Mr Stewart replaces Robert Hughes who continues to work for an affiliate
of CD Entertainment Ltd.
The Company entered into a Management Agreement with Virginia
Concessions which serves to modify the Food and Beverage Concessions Agreement.
Pursuant to the Management Agreement, effective April 1, 1997, the Company
agreed to manage and oversee Virginia Concession's operations at the Track and
the initial six SWFs. The agreement serves to centralize management of the
complete operations of the Track and SWFs and is expected to result in enhanced
efficiency at the Company's facilities. Virginia Concessions remains responsible
for the performance of its duties under its Food and Beverages Concession
Agreement, subject to the Company's managerial assistance. For its services, the
Company will receive the net income (or losses) from the operation of food and
beverage concessions. Additionally, the Management Agreement accelerates the
Company's option to terminate the Food and Beverage Concessions Agreement from
two years after the opening of the sixth SWF to August 1, 1998 upon the
Company's payment of a termination fee consistent with that provided in the Food
and Beverage Concessions Agreement.
19
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
(a) - Exhibits
10.1 Management Agreement between Colonial Downs, L.P. and
Virginia Concessions, L.L.C.
10.2 Construction Loan Agreement, dated as of June 26, 1997,
between Colonial Downs, L.P. and PNC Bank, National
Association
10.3 Revolving Line of Credit Agreement, dated as of June 26,
1997, between Colonial Downs, L.P. and PNC Bank, National
Association
10.4 Deed of Trust Note, dated as of June 26, 1997, made by
Colonial Downs, L.P.
10.5 Revolving Line of Credit Note, dated as of June 26, 1997,
made by Colonial Downs, L.P.
10.6 Deed of Trust and Security Agreement, dated as of June
26, 1997, granted by Colonial Downs Holdings, Inc. and
Colonial Downs, L.P. to PNC Bank, National Association
10.7 Assignment of Leases and Rents, dated as of June 26,
1997, between Colonial Downs, L.P. and PNC Bank, National
Association
10.8 Agreement of Guaranty and Suretyship (Completion), dated
as of June 26, 1997, between Stansley Racing Corp. and
PNC Bank, National Association
10.9 Agreement of Guaranty and Suretyship (Completion), dated
as of June 26, 1997, between Colonial Downs Holdings,
Inc. and PNC Bank, National Association
10.10 Agreement of Guaranty and Suretyship (Payment), dated as
of June 26, 1997, between Stansley Racing Corp. and PNC
Bank, National Association
10.11 Agreement of Guaranty and Suretyship (Payment), dated as
of June 26, 1997, between Colonial Downs Holdings, Inc.
and PNC Bank, National Association
27 Financial Data Schedule
(b) - Reports on Form 8-K
On April 16, 1997, the Company filed a report on Form 8-K reporting
that it had been granted licenses for a fourth satellite wagering facility to be
located in Brunswick County, Virginia. The Company also reported the approval by
the Virginia Racing Commission of revised thoroughbred race days for a meet
commencing September 1, 1997 and ending October 12, 1997 with thirty (30) days
of live racing and the Company's intention to hold an inaugural standardbred
meet commencing April, 1998 and running through July 4, 1998 followed by a ten
day meet in November, 1998. No other reports on Form 8-K were filed during the
period.
<PAGE>
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Colonial Downs Holdings, Inc.
Date: August 5, 1997 /s/ O. James Peterson, III
------------------------------
O. James Peterson, III,
President and Chief
Operating Officer
Date: August 5, 1997 /s/ Ian M. Stewart
----------------------------------
Ian M. Stewart, Vice President
and Chief Financial Officer
20
Exhibit 10.1
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") is entered into as of July
3, 1997 and shall be effective as of April 1, 1997 (the Effective Date") by and
among COLONIAL DOWNS, L.P., a Virginia limited partnership ("Colonial Downs"),
STANSLEY RACING CORP., a Virginia corporation ("Stansley Racing"), and VIRGINIA
CONCESSIONS, L.L.C., a Virginia limited liability company ("Virginia
Concessions").
RECITALS
WHEREAS, Colonial Downs holds a license from the Virginia Racing
Commission (the "Commission") to own a pari-mutuel horse racing facility in New
Kent County, Virginia (the "Racetrack");
WHEREAS, Stansley Racing holds a license from the Commission to operate
the Racetrack;
WHEREAS, Colonial Downs and Stansley Racing each hold a license to own
and operate, respectively, satellite pari-mutuel wagering facilities (each an
"SWF") in Richmond, Chesapeake, Hampton, and Brunswick, Virginia;
WHEREAS, Colonial Downs, Stansley Racing, and Virginia Concessions are
parties to that certain Amended and Restated Food and Beverage Concessions
Agreement, dated March 3, 1997 (the "Concessions Agreement"), in which Colonial
Downs granted Virginia Concessions a license, subject to the terms and
conditions of the Concessions Agreement, to manage and operate food and beverage
concessions at the Racetrack and certain of the SWFs;
WHEREAS, it is the mutual desire of both parties that Colonial Downs
assume all responsibility and control over the day-to-day management and
operation of the food and beverage concessions at the Racetrack and the SWFs in
order to enhance the efficiency of such concessions; and
WHEREAS, Colonial Downs, Stansley Racing, and Virginia Concessions wish
to modify the parties' duties and obligations under the Concessions Agreement,
pursuant to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants and agreements contained herein, the receipt and sufficiency of which
are hereby acknowledged, the parties do hereby covenant and agree as follows:
<PAGE>
AGREEMENT
SECTION 1
ENGAGEMENT OF MANAGER; TERM
1.1 Engagement. Virginia Concessions hereby engages Colonial Downs, and
Colonial Downs does hereby accept such engagement from Virginia Concessions, to
operate and manage the food and beverage concessions at the Racetrack and the
SWFs during the term of this Agreement in compliance with and subject to the
provisions of this Agreement.
1.2 Term. This Agreement shall be effective as if the Effective Date
upon execution by the parties hereto, and shall continue thereafter in effect,
unless terminated earlier pursuant to the provisions of this Agreement, (i) for
ten (10) years from the opening date of the Racetrack and (ii) for ten (10)
years from the opening date of each SWF that Virginia Concessions exercises an
option to manage and operate the food and beverage concessions pursuant to the
provisions of the Concessions Agreement.
1.3 Management Fee. As consideration of the management services
provided by Colonial Downs for the food and beverage concessions at the
Racetrack and the SWFs pursuant to this Agreement and as a condition to Colonial
Downs' assumption of certain liabilities provided in Section 2.2 hereof,
Virginia Concessions shall pay to Colonial Downs on a monthly basis a management
fee in an amount equal to one hundred percent (100%) of the net income of
Virginia Concessions, after payment of all operating expenses, arising from, or
related to, the Concessions Agreement; provided, however, such net income shall
exclude the buyout fee provided for in Section 1.4 hereof. Virginia Concessions
shall pay the management fee to Colonial Downs on or before the tenth (10th) day
of each month.
1.4 Buyout Option. Notwithstanding Section 2.2 of the Concessions
Agreement, for a ninety (90) day period beginning August 1, 1998, Colonial Downs
shall have the option to terminate this Agreement and the Concessions Agreement
by delivering written notice to Virginia Concessions indicating the exercise of
such option and paying to Virginia Concessions a buyout fee equal to six (6)
times the net operating cash flow from food and beverage sales at the Racetrack
and the SWFs for the most recent twelve (12) month period, or the annualized net
operating cash flow if the Racetrack or any of the SWFs have been operating for
less than twelve (12) months, calculated in accordance with generally accepted
accounting practices, consistently applied or such lower fee as the parties
mutually agree. In calculating the foregoing fee, if the Racetrack and/or any of
the SWFs have been operating less than six (6) months, then the Racetrack's
and/or such SWF's annualized net operating cash flow shall be reasonably
discounted to reflect anomalies in increased revenues generally experienced by
Colonial Downs with respect to newly opened SWFs. In the event Colonial Downs
engages the services of a third party to provide food and beverage services at
the Racetrack, the net operating cash flow of such third party attributable to
food and beverage sales at the Racetrack shall be included in the calculation of
the buyout fee provided for hereunder.
<PAGE>
SECTION 2
RESPONSIBILITIES OF COLONIAL DOWNS
2.1 General Duties. Colonial Downs shall continue to have all of its
current obligations under the Concessions Agreement. For example, Colonial Downs
shall be responsible for providing such kitchen and dining facilities and
equipment, including facilities and equipment for serving beer, wine, and liquor
(collectively referred to as the "Premises"), as may be reasonably required to
satisfy its responsibilities and duties under this Agreement.
2.2 Assumption of Obligations Under Concessions Agreement. Except as
specifically provided in this Agreement, Colonial Downs agrees to assume all of
the costs and obligations of Virginia Concessions under the Concessions
Agreement, including, without limitation, those costs and expenses set forth in
Sections 5.6 and 5.8 of the Concessions Agreement; provided, however, Virginia
Concessions shall pay all operating expenses from revenues generated by food and
beverage sales at the Racetrack and SWFs. In the event operating expenses exceed
such revenues, Colonial Downs shall be responsible for such operating deficits.
2.3 Price and Quality Control. Colonial Downs shall have sole authority
to set all prices to be charged for food and beverages and all menu items to be
served at the Racetrack and the SWFs.
2.4 Hours of Operation. Colonial Downs shall have the sole authority to
set the hours of operation for the Premises in accord with the laws of the
Commonwealth of Virginia.
2.5 Insurance. With respect to the obligation of Virginia Concessions
to purchase and maintain certain types and amounts of insurance set forth in
Sections 5.8, 8.1, and 8.2 of the Concessions Agreement, Colonial Downs agrees
to waive the requirements for such insurance to the extent it is duplicative of
insurance maintained by Colonial Downs and determined to be unnecessary in
Colonial Downs' sole discretion.
2.6 Accounting. Colonial Downs shall assume all responsibility for the
financial reporting and accounting of Virginia Concessions' operations under the
Concessions Agreement as modified hereby, including, but not limited to, all
payroll functions, the payment of taxes, and the calculation of revenues and
expenses.
2.7 Duty to Indemnify Virginia Concessions. Colonial Downs shall
indemnify and save harmless Virginia Concessions and its directors, officers,
employees, and agents (each an "Indemnified Party") from all demands, claims,
causes of action, and judgments, and all expenses in connection therewith,
resulting from any act or neglect of Colonial Downs, or its employees, agents,
and contractors on or about the Racetrack and the SWFs, absent any Indemnified
Party's negligence or willful misconduct. This indemnity shall continue
notwithstanding the termination of this Agreement with respect to any act or
occurrence preceding such termination.
<PAGE>
SECTION 3
RESPONSIBILITIES OF VIRGINIA CONCESSIONS
3.1 Permits and Licenses. Virginia Concessions shall be responsible for
securing, and at all times maintaining, any and all permits, licenses (including
licenses to serve alcoholic beverages), and other documents which may be
required for the continuous operation of food and beverage concessions at the
Racetrack and the SWFs.
3.2 Employees. Virginia Concessions shall employ and maintain a
competent, experienced, and thoroughly trained staff to meet all the reasonable
demands of Colonial Downs and the patrons of the Racetrack and the SWFs in
accordance with good business standards (the "Staff"). Colonial Downs shall be
responsible for the day-to-day supervision and management of the Staff. Virginia
Concessions shall have final responsibility and authority over the conduct,
demeanor, and appearance of its employees and agents, and upon objection from
Colonial Downs concerning the conduct, demeanor, or appearance of any such
person, shall immediately take all reasonable steps necessary to correct and/or
remove the cause of objection.
3.3 Responsibility for Negligence. Virginia Concessions shall be
responsible for any costs or expenses related to the repair or replacement of
any equipment required due to the negligence or willful misconduct of Virginia
Concessions or its employees or agents.
3.4 Duty to Indemnify Colonial Downs. Virginia Concessions shall
indemnify and save harmless Colonial Downs and its directors, officers,
employees, and agents from all demands, claims, causes of action, and judgments,
and all expenses in connection therewith, resulting from any negligence or
willful misconduct of Virginia Concessions, or its employees, agents, and
contractors on or about the Racetrack and the SWFs. This indemnity shall
continue notwithstanding the termination of this Agreement with respect to any
act or occurrence preceding such termination.
SECTION 4
DEFAULT AND TERMINATION
4.1 Events of Default. This Agreement may be terminated prior to the
expiration of the terms set forth in Section 1.2 of this Agreement upon the
occurrence of any of the following events:
(a) by the written agreement of the parties hereto;
(b) by Colonial Downs, if Virginia Concessions fails to pay
any amounts to Colonial Downs within five (5) days following notice
from Colonial Downs that such amounts are due; provided, however, that
if Virginia Concessions fails to pay amounts to Colonial Downs within
five (5) days after date due more than twice during any twelve (12)
month period, Colonial Downs may terminate this Agreement without
further opportunity of Virginia Concessions to cure or correct such
failure;
<PAGE>
(c) by either party, if any license or permit previously
granted to the other party which is required to permit such party to
perform its obligations hereunder is revoked or suspended for any
reason and such party is legally unable to perform its obligations
hereunder for a period of two (2) business days or more;
(d) by either party, if the other party (i) files or has filed
on its behalf or against it a petition under any section or chapter of
the Federal Bankruptcy Act, which is not vacated within sixty (60)
days, (ii) shall become insolvent or unable to pay its debts or meet
its obligations, (iii) has a receiver or trustee appointed for all or
any portion of its assets, which appointment is not vacated within
sixty (60) days, or, (iv) makes an assignment to or for the benefit of
creditors of all or any portion of its assets; and
(e) by either party, if the other party fails to comply with
or perform any of the terms, conditions, or covenants under this
Agreement to be complied with or performed by such party for more than
thirty (30) days after written notice of such failure shall have been
given to such party, or within such further period as the
non-defaulting party reasonably approves as is required to fully comply
with or perform such term, condition, or covenant.
4.2 Notice of Termination. Written notice of any termination of this
Agreement by either party shall be given to the other party in the manner set
forth herein, shall be effective on and as of the date notice is given (or such
later date as may be set forth therein), and shall specify the reason for such
termination.
SECTION 5
MISCELLANEOUS
5.1 Notices. Any notices by either party to the other shall be in
writing and shall be delivered personally; sent by facsimile, acknowledgement of
receipt requested; sent by overnight courier service, return receipt requested;
or, deposited in U.S. certified mail, return receipt requested, and addressed as
follows:
To Colonial Downs: Colonial Downs, L.P
P. O. Box 456
Providence Forge, Virginia 23140
Telephone: 804-966-7223
Facsimile: 804-966-2086
<PAGE>
with copies to: James L. Weinberg, Esq.
Hirschler, Fleischer, Weinberg,
Cox & Allen
The Federal Reserve Bank Building
701 East Byrd Street, 15th Floor
P. O. Box 500 (23218-0500)
Richmond, Virginia 23219
Telephone: 804-771-9527
Facsimile: 804-644-0957
To Virginia Concessions: Virginia Concessions, L.L.C.
1231 Main Avenue
Cleveland, Ohio 44114
Telephone: 216-861-4080
Facsimile: 216-861-6315
with copies to: Stephen Owendoff, Esq.
Hahn Loeser Parks
3300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Telephone: 216-621-0150
Facsimile: 216-241-2824
Any party may at any time change the address for notices to it by
delivering, as aforesaid, a notice to the other party stating the change and
setting forth the changed address. The effective date of any notice shall be the
date it is personally delivered, received by telefax or courier, or three (3)
days after it is deposited in the U.S. mail in accordance with the provisions of
this Section 5.1.
5.2 Representations and Warranties. Each party hereto represents and
warrants that it has the legal capacity and/or authority to enter into and to
perform all of its obligations under this Agreement.
5.3 Relationship Between the Parties. Nothing contained in this
Agreement shall constitute or be construed to be or create a partnership or
joint venture between Virginia Concessions and Colonial Downs and, except as
specifically set forth herein or otherwise agreed in writing, neither shall have
the power or authority to bind or obligate the other.
5.4 Modifications. This Agreement may not be changed or modified except
by another agreement in writing signed by the parties hereto.
5.5 Headings. The section numbers and headings contained herein are for
convenience of reference only and are not intended to define, limit, or describe
the scope or intent of any provision of this Agreement.
<PAGE>
5.6 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of each party hereto, and its respective successors and
assigns. This Agreement may not be assigned by any party without the prior
written consent of the other party hereto, which consent shall not be
unreasonably withheld; provided, however, that, subject to the approval of the
assignee by the Commission, if required, Colonial Downs may assign its rights
and obligations to any affiliated entity controlling, controlled by, or under
common control with Colonial Downs which is formed for the purposes of providing
the concessions services contemplated herein with notice to, but not the consent
of, Virginia Concessions. Furthermore, Colonial Downs may engage the services of
a third party to provide food and beverage services at the Racetrack on such
terms and conditions as it may negotiate without the consent of Virginia
Concessions, provided that the sales of such third party are included in the
calculation provided for in Section 1.4 hereof.
5.7 Governing Law. The validity, enforceability, and interpretation of
this Agreement shall be determined and governed by the laws of the Commonwealth
of Virginia, without regard to conflicts of laws provisions or principles
thereof.
5.8 Stansley Racing as Party. The parties acknowledge that Stansley
Racing has been made a party to this Agreement solely because (i) it holds the
license from the Commission to operate the Racetrack, and (ii) it holds the
operator's license for the SWFs located in Chesapeake, Richmond, Hampton, and
Brunswick, Virginia and is expected to apply for SWF licenses for future SWF
locations.
5.9 Entire Agreement. This Agreement, together with the Concessions
Agreement as modified hereby, constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior oral and written discussions and understandings. Acceptance of, or
acquiescence in, a course of performance rendered under this Agreement shall not
be relevant or admissible to determine the meaning of this Agreement, even
though the accepting or acquiescing party has knowledge of the nature of the
performance and an opportunity to make objection. No representations,
understandings or agreements have been made or relied upon in making of this
Agreement other than those specifically set forth herein.
5.10 Waivers. All rights and remedies available at law, in equity, or
under the terms of this Agreement or any other agreement or instrument executed
in connection herewith shall be cumulative, and waivers thereof (i) shall not be
implied from the prior acts or omissions, or based solely upon the oral
representations, of a party hereto, and (ii) shall not be effective or binding
unless, and then only to the extent that, a party hereto signs an express
written waiver of rights or remedies and causes such written waiver to be
delivered to the party for whose benefit such written waiver is made.
5.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement on the date first written above.
COLONIAL DOWNS, L.P.
By: Stansley Racing Corp.,
its General Partner
By: /s/ O. J. Peterson, III
------------------------------
O. J. Peterson, III, President
STANSLEY RACING CORP.
By: O. J. Peterson, III
------------------------------
O. J. Peterson, III, President
VIRGINIA CONCESSIONS, L.L.C.
By: Jeffrey P. Jacobs
------------------------------
Jeffrey P. Jacobs, Manager
Exhibit 10.2
CONSTRUCTION LOAN AGREEMENT
BY AND BETWEEN
COLONIAL DOWNS, L.P.
AND
PNC BANK, NATIONAL ASSOCIATION
CLOSING DATE: JUNE 26, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS
1.1 Definitions. 1
1.2 Interpretation. 17
1.3 Accounting Principles. 18
2. AGREEMENT TO BORROW AND LEND 18
2.1 Agreement to Borrow and Lend. 18
2.2 The Note. 18
2.3 Term. 18
2.4 Extension Option 18
3. LOAN INTEREST RATES, PAYMENTS AND FEES 20
3.1 Interest Rate Options. 20
3.2 Construction Loan Requests/Interest Periods. 20
3.3 Default Interest and Late Payment Charge. 21
3.4 Euro-Rate Unascertainable. 22
3.5 Selection of Interest Rate Options. 23
3.6 Payments. 23
3.7 [Intentionally Omitted] 23
3.8 Interest Payment Dates. 23
3.9 Optional Prepayments. 23
3.10 Mandatory Principal Payments 24
3.11 Application Among Interest Rate Options. 24
3.12 Additional Compensation in Certain Circumstances. 25
3.13 Fees 26
4. AFFIRMATIVE COVENANTS 26
4.1 Preservation of Existence. 27
4.2 Payment of Liabilities, Including Impositions. 27
4.3 Compliance With Laws. 27
4.4 Keeping of Records and Books of Account. 27
4.5 Visitation Rights. 27
4.6 Subordination of Jacobs Loan and Affiliate Loans. 27
4.7 Maintenance of Insurance. 28
4.8 Notice. 29
4.9 Initial Equity Contribution. 29
4.10 Performance of Obligations. 29
4.11 Payment of Costs. 29
4.12 Compliance With Agreements. 30
4.13 Certificate of No Remedies Event. 30
4.14 [Intentionally Omitted] 30
4.15 Title to Land and Improvements. 30
4.16 Further Assurances. 30
4.17 Estoppel Certificate. 30
<PAGE>
TABLE OF CONTENTS
Page
----
4.18 Construction of Improvements. 31
4.19 Preparation of Plans. 31
4.20 Changes in Construction and Development Documents. 31
4.21 Payment, Performance and Maintenance Bonds. 32
4.22 Reliance on Inspecting Architect. 32
4.23 Subcontractors. 33
4.24 Purchase of Materials and Conditional Sales Contracts. 33
4.25 Personal Property. 33
4.26 Repairs. 33
4.27 Inspection and Right to Stop Work. 33
4.28 Protection Against Lien Claims. 34
4.29 Employee Benefit Plans. 34
4.30 Notices Regarding Multiemployer Pension and
Welfare Plans. 35
4.31 Conditions Precedent. 35
4.32 Bank Accounts 35
4.33 Financial Covenants 35
4.34 Control of Borrower 36
5. NEGATIVE COVENANTS 36
5.1 Changes in Organizational Documents. 36
5.2 Transfer of Land and Improvements. 36
5.3 Change in Ownership. 36
5.4 Liquidation or Merger. 37
5.5 Breach of Documents. 37
5.6 Judgments. 37
5.7 Leasing of Premises. 37
5.8 Changes in Documents. 37
5.9 Material Adverse Change. 37
5.10 Conduct of Business. 37
5.11 Creation of Liens. 38
5.12 Value of Collateral. 38
5.13 Transfer of Personalty. 38
5.14 Disposition of Rents. 38
5.15 Materials and Fixtures. 38
5.16 Pension Plans and Benefit Arrangements. 39
5.17 ERISA Prohibited Transaction. 40
6. DISBURSEMENT MATTERS 40
--------------------
6.1 Procedures. 40
6.2 Disbursement Amounts. 41
6.3 Cost Information. 42
6.4 First Disbursement. 42
6.5 Subsequent Disbursements. 43
6.6 Retainage Disbursements. 44
6.7 Post-Completion Disbursements. 46
<PAGE>
TABLE OF CONTENTS
Page
----
6.8 Deposit of Funds by Borrower. 46
6.9 Additional Security. 46
7. REPORTING REQUIREMENTS 47
7.1 Appraisals, Environmental Reports and Title Reports. 47
7.2 Financial Reports. 47
8. REPRESENTATIONS AND WARRANTIES 47
8.1 Due Formation; Capacity. 48
8.2 Power and Authority. 48
8.3 Validity and Binding Effect. 48
8.4 No Conflict. 48
8.5 Other Agreements. 49
8.6 No Conditional Default or Remedies Event. 49
8.7 No Litigation or Investigations. 49
8.8 Financial Statements and Other Information. 49
8.9 Impositions. 49
8.10 Title Aspects. 50
8.11 Zoning and Governmental Approvals. 50
8.12 Plans. 50
8.13 Utilities. 50
8.14 Security Interests. 50
8.15 Deed of Trust. 51
8.16 Construction and Development Documents. 51
8.17 Environmental Matters. 51
8.18 Insurance. 51
8.19 Solvency. 51
8.20 Pension Plans and Benefit Arrangements. 51
9. [INTENTIONALLY OMITTED] 53
10. DEFAULTS AND REMEDIES 53
10.1 Events of Default. 53
10.2 Remedies. 55
10.3 Notice of Sale. 57
11. MISCELLANEOUS 57
11.1 Modifications, Amendments or Waivers. 57
11.2 No Implied Waivers; Cumulative Remedies; Writing
Required. 57
11.3 Reimbursement and Indemnification of the Bank
by the Borrower; Impositions. 57
11.4 Holidays. 59
11.5 Funding by Branch, Subsidiary or Affiliate. 59
11.6 Notices. 59
<PAGE>
TABLE OF CONTENTS
Page
----
11.7 Severability. 60
11.8 Governing Law. 60
11.9 Prior Understanding. 60
11.10 Duration; Survival. 60
11.11 Successors and Assigns. 60
11.12 Counterparts. 61
11.13 Exceptions. 61
11.14 Consent to Jurisdiction. 61
11.15 No Third Parties Benefitted. 62
11.16 Authority to File Notices. 62
11.17 Signs; Publicity. 62
11.18 Interpretation. 62
11.19 Status of Parties. 62
11.20 Brokerage Fee. 63
11.21 Waiver of Jury Trial. 63
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibits
- --------
Exhibit A - Development Budget
Exhibit B - Form of Request for Disbursement
Exhibit C - Forms of Architect's Contractor's and Engineer's Consents and
Architect's and Engineer's Certificates
Exhibit D - Request for Extension
Exhibit E - Items to be Supplied
Exhibit F - Interest Rate Request
Schedules
- ---------
Schedule I Names, Addresses, Telephone and Telecopier Numbers of Parties
Schedule II Excluded Equipment
Schedule III Excluded Debt
Schedule IV Included Equipment
<PAGE>
CONSTRUCTION LOAN AGREEMENT
THIS CONSTRUCTION LOAN AGREEMENT ("Agreement") made as of the 26th day
of June, 1997, by and between COLONIAL DOWNS, L.P., a Virginia limited
partnership (the "Borrower"), and PNC BANK, NATIONAL ASSOCIATION, a national
banking association (the "Bank").
WITNESSETH:
WHEREAS, the Borrower has requested that the Bank provide a
construction and term loan to the Borrower in an aggregate principal amount not
to exceed $10,000,000 (each initially capitalized term used in these recitals
having the meaning ascribed to it in Article 1);
WHEREAS, the Construction Loan shall be used to finance the
construction of a thoroughbred and standardbred race track and related
facilities located in New Kent County, Virginia; and
WHEREAS, the Bank is willing to provide the Construction Loan upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:
1. DEFINITIONS
1.1 Definitions.
In addition to words and terms defined elsewhere in this Agreement, the
following terms shall have the following meanings:
"Acceleration Event" shall mean (i) the occurrence of any uninsured
damage to or loss due to theft or destruction to any of the Collateral which
Borrower or Guarantors are financially unable to replace or (ii) any of the Loan
Documents shall cease to be legal, valid and binding agreements, enforceable
against the Borrower or Guarantors in accordance with the respective terms
thereof or shall in any way be terminated (except in accordance with their
terms) or become judicially declared to be ineffective or inoperative or shall
in any way cease to give or provide the respective liens, security interests,
rights, titles, interests, remedies, powers or privileges intended to be created
thereby or (iii) any party shall obtain an order or decree in any court of
competent jurisdiction enjoining the construction of the Improvements or to
delay construction of the same or to enjoin or prohibit the Bank or the Borrower
from carrying out the terms and conditions of any of the Loan Documents and such
order or decree is not vacated or stayed within ninety (90) days after the
filing thereof.
<PAGE>
"Affiliate" as to any Person shall mean any other Person which (i)
directly or indirectly controls, is controlled by, or is under common control
with such Person, (ii) which beneficially owns or holds more than 50% of any
class of the voting stock (or in the case of a Person which is not a
corporation, more than 50% of the equity interest) of such Person, or (iii) more
than 50% of the voting stock (or in the case of a Person which is not a
corporation, more than 50% of the equity interest) of which is beneficially
owned or held, directly or indirectly, by such Person. "Control," as used
herein, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, including
the power to elect a majority of the directors or trustees of a corporation or
trust, as the case may be.
"Agreement" shall mean this Construction Loan Agreement as the same may
be supplemented, amended, renewed or replaced from time to time in writing by
the parties hereto, including all schedules and exhibits hereto.
"Amortization Period" shall mean the period of time during the term of
the Loan where Borrower shall make the Mandatory Principal Payments to Lender;
which period shall begin on the earlier of (i) March 31, 1998 or (ii) six months
following the commencement of live horse racing at the Project.
"Architect" shall mean P.M.D. Architects, or such other architect as
may be approved by Bank.
"Architect's Agreement" shall mean that certain Standard Form of
Agreement between Owner and Architect dated May 26, 1996, entered into between
Borrower and the Architect, and all exhibits and attachments thereto, as the
same may be amended from time to time in writing by the parties thereto with the
consent of the Bank in accordance with the terms of this Agreement.
"Assignment of Construction and Development Documents" shall mean that
certain Assignment of Construction and Development Documents of even date
herewith from the Borrower to the Bank, as the same may be amended, replaced or
supplemented from time to time in writing by the Borrower and the Bank.
"Assignment of Leases and Rents" shall mean that certain Assignment of
Leases and Rents of even date herewith from the Borrower to the Bank, as the
same may be amended, replaced or supplemented from time to time in writing by
the Borrower and the Bank.
"Assignment of Development Agreement" shall mean that certain
Assignment of Development Agreement of even date herewith from the Borrower to
the Bank, and consented to by Delmarva Properties, Inc., a Virginia corporation,
as the same may be amended, replaced or supplemented from time to time in
writing by the parties thereto.
"Assignment of Management Agreement" shall mean that certain Assignment
of Management Agreement of even date herewith from the Borrower and Racing to
the Bank, as the
<PAGE>
same may be amended, replaced or supplemented from time to time in writing by
the Borrower, Racing and the Bank.
"Assumed Debt Service" shall have the meaning assigned to such term in
Section 2.4.
"Authorized Officer" shall mean those persons designated by written
notice to the Bank from the Borrower, who are authorized to execute notices,
reports and other documents required hereunder. The Borrower may amend such list
of persons from time to time by giving written notice of such amendment to the
Bank.
"Bank Debt" shall mean all obligations, liabilities and indebtedness of
the Borrower to the Bank, its successors, assigns or participants, evidenced by,
arising under or directly relating to the Loan Documents, whether as principal,
guarantor, surety or otherwise, secured or unsecured, joint and/or several,
absolute or contingent, due or not due, matured and unmatured, original,
renewed, extended, refinanced or replaced, now existing or hereafter incurred or
created, consensual or created by Law, and including principal (whether
resulting from advances made by the Bank or from indebtedness purchased by the
Bank), interest, yield protection payments, premiums, fees, expenses (including
reasonable collection expenses), taxes, charges, commissions and reasonable
attorneys' fees actually incurred, including indemnification obligations of
Borrower with respect to any claims that may be made against the Bank whether
arising before or after payment of Bank Debt or any assignment or participation
of Bank Debt, and including all obligations, liabilities and indebtedness of
Borrower to the Bank incurred or arising after the commencement of any case by
or against Borrower under the U.S. Bankruptcy Code, specifically including any
post-petition interest or advances.
"Base Rate" shall have the meaning assigned to that term in Section 3.1
hereof.
"Base-Rate Option" shall have the meaning assigned to that term in
Section 3.1 hereof.
"Benefit Arrangement" shall mean at any time an "employee benefit
plan," within the meaning of Section 3(3) of ERISA, which is neither a Pension
Plan, a Multiemployer Pension Plan, nor a Multiemployer Welfare Plan and which
is maintained, sponsored or otherwise contributed to, by any member of the ERISA
Group.
"Borrower" shall mean Colonial Downs, L.P., a Virginia limited
partnership.
"Borrower Documents" shall mean the Borrower's limited partnership
agreement and the certificate of limited partnership and all amendments thereto.
"Borrowing Date" shall mean the date for the making of an advance of
the Construction Loan or the renewal or conversion thereof to the same or a
different Interest Rate Option, which date must be a Business Day.
"Borrowing Tranche" shall mean (i) portions of the Construction Loan to
which a Euro-Rate Option applies by reason of the selection of, conversion to or
renewal of such Interest Rate
<PAGE>
Option on the same day and having the same Interest Period, and (ii) portions of
the Construction Loan to which the Base-Rate Option applies by reason of the
selection of or conversion to such Interest Rate Option.
"Business Day" shall mean any day other than a Saturday or Sunday or a
legal holiday on which commercial banks are authorized or required to be closed
for business in Pittsburgh, Pennsylvania.
"Capital Expenditures" shall have the meaning assigned to such term in
Section 2.4.
"Category" shall have the meaning assigned to that term in Section
4.20.
"Closing Date" shall mean the date hereof. The closing shall take place
on the Closing Date at the offices of Marcus & Shapira, L.L.C., Pittsburgh,
Pennsylvania, or at such other place as the Bank may designate.
"Closing Fee" shall mean the Borrower's payment to the Bank, on the
Closing Date, of the amount of $150,000, which amount is equal to one and
one-half percent (1 1/2%) of the maximum principal amount of the Construction
Loan.
"COBRA Violation" shall mean a failure by the Borrower or any member of
the ERISA Group to comply with the group health plan continuation coverage
requirements of Section 601 et seq. of ERISA.
"Collateral" shall mean the real estate encumbered by the Deed of Trust
and the other Collateral Documents and all security pledged pursuant to this
Agreement and the Collateral Documents.
"Collateral Documents" shall mean the Deed of Trust, the Assignment of
Leases and Rents, the Assignment of Management Agreement, the Assignment of
Construction and Development Documents, the Assignment of Development Agreement,
and the Financing Statements.
"Completion Date" shall mean the date by which all of the conditions to
the release of Retainage contained in Section 6.6(b)(iii) shall occur, which
must be on or before September 1, 1997.
"Completion Guaranties" shall mean those four (4) certain Continuing
Agreements of Guaranty and Suretyship (Completion), of even date herewith, given
by each of the Guarantors to the Bank, as the same may be amended, replaced or
supplemented from time to time in writing by the applicable Guarantor and the
Bank.
"Conditional Default" shall mean an event or condition which, with the
passage of time, the giving of notice, or a determination by the Bank, as
provided herein, or any combination of the foregoing, would constitute a
Remedies Event, provided that any failure to make a payment
<PAGE>
required under in Section 10.1(a) shall not constitute a Conditional Default or
a Remedies Event until the period of time following the due date for any payment
provided for thereunder, if any, shall have expired.
"Conditions for Extension" shall have the meaning assigned to such term
in Section 2.4.
"Consequential Loss" shall mean an amount equal to the present value
(as determined by Bank) of the product of (a) the positive difference resulting
from subtracting the interest rate for a portion of the Construction Loan
subject to the Euro-Rate Option which would be applicable to a similarly sized
Borrowing Tranche determined on the day of prepayment for a period of time
commencing on the date of prepayment and terminating on the last day of the
Euro-Rate Interest Period for the Borrowing Tranche being prepaid from the
interest rate for the Euro-Rate Option actually in effect for the Borrowing
Tranche being prepaid; and (b) the amount of the Borrowing Tranche; and (c) a
fraction with a numerator equal to the number of days remaining in the Euro-Rate
Interest Period of the Borrowing Tranche being prepaid and a denominator of 360.
Any certificate of Bank delivered to Borrower setting forth the amount of
Consequential Loss as provided herein shall show the calculations required to
determine such Consequential Loss and shall be conclusive and binding, absent
manifest error, as to such amount and determination.
"Construction and Development Documents" shall mean the Construction
Contract, the Architect's Agreement, the Engineer's Agreement, the Plans, the
Governmental Approvals, and all other instruments, documents and rights relating
to the design, construction and development of the Improvements.
"Construction Contract" shall mean that certain AIA Standard Form of
Agreement between owner and Construction Manager dated February 10, 1997 entered
into by Borrower and Contractor with respect to the construction of the
Improvements.
"Construction Loan" shall mean the loan to be made by the Bank pursuant
to this Agreement in the maximum principal amount of $10,000,000.
"Contractor" shall mean Norglass, Inc. an Ohio corporation, or such
other contractor as may be approved by the Bank.
"Credit Agreement" shall mean that certain Revolving Line of Credit
Agreement of even date herewith between Borrower and Bank, as the same may be
amended, replaced or supplemented from time to time.
"Deed" shall mean that certain Deed dated March 19, 1997 conveying the
land to the Borrower from Chesapeake Forest Products Company, filed with the
Clerk of the Circuit Court of New Kent County, Virginia at Deed Book 241, page
452.
"Deed of Trust" shall mean that certain Deed of Trust and Security
Agreement, of even date herewith, given by the Borrower and Holdings to Lawyers
Title Realty Services, Inc., a Virginia corporation, which main office is
located in Henrico County, as trustee, for the benefit of
<PAGE>
the Bank, among other things, securing the Note, as the same may be amended,
replaced or supplemented from time to time in writing with the prior written
consent of the Bank.
"Default Rate" shall mean interest at a rate per annum which shall be
four percent (4%) above the Prime Rate.
"Development Agreement" shall mean that certain Development Agreement
dated October 16, 1996, between Borrower and Delmarva Properties, Inc., a
Virginia corporation.
"Development Budget" shall mean the Development Budget attached to this
Agreement as Exhibit A, as the same may be amended from time to time in writing
by the Borrower and approved by the Bank in accordance with Section 6.3 of this
Agreement.
"Disbursement Request" shall mean any request for proceeds of the
Construction Loan in accordance with Article 6 hereof.
"Dollar," "U.S. Dollar" and the symbol "$" shall mean the lawful money
of the United States of America.
"EBITDA" shall mean net income plus depreciation plus amortization plus
other non-cash losses plus Interest Expense plus income taxes less non-cash
gains, as determined in accordance with GAAP.
"Engineer" shall mean Resource International, Ltd., a Virginia
corporation, or such other engineer as may be approved by the Bank.
"Engineer's Agreement" shall mean that certain Agreement for
Engineering Services entered into between Borrower and Engineer dated May 28,
1997, relating to the furnishing of civil engineering services by Engineer with
respect to the Improvements, and all exhibits and attachments thereto, as the
same may be amended from time to time in writing by the parties thereto with the
consent of the Bank in accordance with the provisions of this Agreement.
"Environmental Complaint" shall mean any written complaint setting
forth a cause of action for personal or property damage or equitable relief,
order, notice of violation, citation, request for information issued pursuant to
any Environmental Law by an Official Body, subpoena or other written notice of
any type relating to, arising out of, or issued pursuant to any Environmental
Law or any Environmental Conditions, as the case may be.
"Environmental Conditions" shall mean any adverse change in the
conditions of the environment, including, without limitation, the work place,
natural resources (including flora or fauna), soil, surface water, ground water,
any actual or potential drinking water supply sources, substrata or the ambient
air, caused by the use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, emptying, discharging,
injecting, escaping, leaching, disposal, dumping, threatened release or other
management or mismanagement of
<PAGE>
Regulated Substances resulting from the renovation and construction of the
Improvements or the use of, or operations on, the Land.
"Environmental Indemnity Agreement" shall mean that certain Hazardous
Materials Certificate and Indemnity Agreement of even date herewith from
Borrower and Guarantors to the Bank, as the same may be amended, replaced or
supplemented from time to time in writing by the parties thereto with the prior
written consent of the Bank.
"Environmental Laws" shall mean all federal, state and local laws and
regulations, including permits, judicial and administrative orders, judgments,
consent decrees issued, or entered into, pursuant thereto, relating to pollution
or protection of human health or the environment or employee safety in the work
place.
"Environmental Report" shall mean that certain Phase I Environmental
Site Assessment dated April 23, 1997 prepared by Resource International, Ltd.
together with all annexes, schedules, exhibits and attachments thereto,
including a reliance letter indicating that the Bank may rely on such report in
making the Construction Loan.
"Equipment Financing" shall mean the financing and equipment leases
relating to the Excluded Equipment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
"ERISA Group" shall mean, at any time, the Borrower and all members of
a controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control and all other entities which, together with
the Borrower, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Rate" shall mean with respect to any Borrowing Tranche to which
the Euro-Rate Option applies for any Interest Period, the interest rate per
annum determined by the Bank by dividing (the resulting quotient rounded upward
to the nearest 1/16th of 1% per annum) (i) the rate of interest determined by
the Bank in accordance with its usual procedures (which determination shall be
conclusive absent manifest error) to be the "offered" eurodollar rate evidenced
by Telerate page 4756 as quoted by Exco Noonan, Inc., or such other display page
on the Telerate System as may replace such page (or appropriate successor or, if
Exco Noonan, Inc. or its successor ceases to provide such quotes, a comparable
replacement as determined by Bank) at 9:00 a.m., Eastern time, two (2) Business
Days prior to the first day of such Interest Period in amounts comparable to
such Borrowing Tranche and having maturities comparable to such Interest Period
by (ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage. The
Euro-Rate may also be expressed by the following formula:
Telerate Display Page 4756 as quoted by Exco
Euro-Rate = Noonan, Inc. or appropriate successor
<PAGE>
1.00 - Euro-Rate Reserve Percentage
Each determination by the Bank of the Euro-Rate or of the non-existence or
non-determinability through its customary means of any Euro-Rate, in the absence
of manifest error, shall be conclusive and binding. The Euro-Rate shall be
adjusted with respect to any Euro-Rate Option outstanding on the effective date
of any change in the Euro-Rate Reserve Percentage as of such effective date. The
Bank shall give prompt notice to the Borrower of the Euro-Rate as determined or
adjusted in accordance herewith, which determination shall be conclusive and
binding absent manifest error.
"Euro-Rate Option" shall have the meaning assigned to that term in
Section 3.1.
"Euro-Rate Reserve Percentage" shall mean the maximum effective
percentage (expressed as a decimal rounded upward to the nearest 1/100th of 1%)
applicable to the Bank, which is in effect during any relevant period, as
specified by the Board of Governors of the Federal Reserve System (or any
successor) for determining the reserve requirements (including, without
limitation, supplemental, marginal and emergency reserves) with respect to
eurocurrency funding (currently referred to as "Eurocurrency Liabilities") of a
member bank in such system with deposits exceeding Five Billion Dollars
($5,000,000,000). Each determination by the Bank of a Euro-Rate Reserve
Percentage, in the absence of manifest error, shall be conclusive and binding.
"Event of Default" or "Events of Default" shall have the meaning
assigned to those terms in Section 10.1.
"Excluded Equipment" shall mean the items listed on Schedule II hereto.
"Exhibits" shall mean those schedules and exhibits attached hereto and
made a part hereof, including Schedule I - Names, Addresses, Telephone and
Telecopier Numbers of Parties; Schedule II - Excluded Equipment; Schedule III -
Excluded Debt; Schedule IV - Included Equipment; Exhibit A - Development Budget;
Exhibit B - Form of Request for Disbursement; Exhibit C - Forms of Architect's,
Contractor's and Engineer's Consents and Form of Architect's and Engineer's
Certificates; Exhibit D - Request for Extension; Exhibit E - Items to be
Supplied; and Exhibit F - Interest Rate Request.
"Expiration Date" shall mean the earlier of (i) June 30, 2000, which
date is three (3) years following the Closing Date, as such date may be extended
pursuant to Section 2.4 below or (ii) the date upon which the Construction Loan
is accelerated pursuant to this Agreement .
"Extension Fee" shall mean each extension fee payable by Borrower to
Bank upon Borrower's exercise of each Extension Option in an amount equal to
one-half of one percent (0.5%) of the outstanding principal balance of the
Construction Loan at the commencement of the applicable Extension Period.
"Extension Options" shall have the meaning assigned to such term in
Section 2.4 hereof.
<PAGE>
"Extension Periods" shall have the meaning assigned to such term in
Section 2.4 hereof.
"Financing Statements" shall mean the financing statements which the
Bank may from time to time require in order to perfect its security interest in
the collateral described in the Deed of Trust, the other Collateral Documents
and this Agreement pursuant to the applicable Uniform Commercial Code.
"First Disbursement" shall mean the first disbursement of Construction
Loan proceeds, to be made upon the fulfillment of the conditions set forth in
Section 6.4.
"Force Majeure" shall mean an act of God, labor dispute, an industrial
action of any kind (including, without limitation, a strike, interruption,
slowdown, and other similar action on the part of labor), a lockout, war
(declared or undeclared), civil war, sabotage, blockage, revolution, riot,
insurrection, civil disturbance, terrorism, epidemic, tornado, hurricane,
landslide, lightning, earthquake, flood, storm, fire, adverse weather
conditions, act of eminent domain, laws, rules, regulations or orders of
governmental authority, explosion, breakage or accident to machinery or
equipment or pipe or transmission line or other facility, embargo, inability to
obtain or delay in obtaining equipment, materials, or transport, or any event
similar to the foregoing which is not within the reasonable control of the
Borrower, and which has an adverse effect on the ability of the Borrower to
perform its obligations.
"GAAP" shall mean generally accepted accounting principles as are in
effect from time to time, and applied on a consistent basis (except for changes
in application in which Borrower's independent certified public accountants
concur) both as to classification of items and amounts.
"Governmental Approvals" shall mean all consents, licenses, permits and
all other authorizations or approvals required by Official Bodies with respect
to the construction, completion, use and occupancy of the Improvements.
"Guaranties" shall mean collectively, the Payment Guaranties and the
Completion Guaranties.
"Guarantors" shall mean collectively, Richard E. Jacobs, Jeffrey P.
Jacobs, Holdings and Racing, and each, individually a "Guarantor".
"Guaranty" of any Person shall mean any obligation of such Person
guaranteeing or in effect guaranteeing any liability or obligation of any other
Person in any manner, whether directly or indirectly, including, without
limiting the generality of the foregoing, any agreement to indemnify or hold
harmless any other Person, any performance bond or other suretyship arrangement
and any other form of assurance against loss, except endorsement of negotiable
or other instruments for deposit or collection in the ordinary course of
business.
"Holdings" shall mean Colonial Downs Holdings, Inc., a Virginia
corporation, being the owner of all limited partnership interests in the
Borrower and all of the stock of Racing.
<PAGE>
"Impositions" shall mean all (i) real estate and personal property
taxes and other taxes and assessments, water and sewer rates and charges and all
other governmental charges and any interest or costs or penalties with respect
thereto and charges for any easement or agreement maintained for the benefit of
the Land and Improvements, general and special, ordinary and extraordinary,
foreseen and unforeseen, of any kind and nature whatsoever which at any time may
be assessed, levied or imposed upon the Land or the Improvements, or the rent or
income received therefrom, or any use or occupancy thereof, and (ii) other
taxes, assessments, fees and governmental charges levied, imposed or assessed
upon or against the Borrower or any of its properties.
"Improvements" shall mean horse racing track and related facilities
located in New Kent County, Virginia including a grandstand, track kitchen,
barns and paddock to be made in accordance with the Plans as provided in this
Agreement.
"Included Equipment" shall mean the items listed on Schedule IV hereto.
"Indebtedness" shall mean, as to any Person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations under any letter of
credit, currency swap agreement, interest rate swap, cap, collar or floor
agreement or other interest rate management device, (iv) any other transaction
(including without limitation forward sale or purchase agreements, capitalized
leases and conditional sales agreements) having the commercial effect of a
borrowing of money entered into by such Person to finance its operations or
capital requirements (but not including trade payables and accrued expenses
incurred in the ordinary course of business which are not represented by a
promissory note or other evidence of indebtedness and which are not more than
thirty (30) days past due), or (v) any Guaranty of Indebtedness for borrowed
money.
"Initial Equity Contribution" shall mean the contribution of
$23,300,000, and the Land as set forth on the Development Budget and on Exhibit
E, Section 1(x), (y) and (z) toward the cost of the Project which shall be made
prior to the disbursement of any Construction Loan proceeds.
"Insolvency Proceedings" shall mean an action or proceeding seeking any
reorganization, arrangement, composition, readjustment, liquidation or other
similar relief under the U.S. Bankruptcy Code or any present or future statute,
Law or regulation, or any proceedings for voluntary liquidation, dissolution or
other winding up, or the appointment of any trustee, receiver, liquidator or
conservator or similar official (whether in a proceeding or otherwise), or any
assignment for the benefit of creditors or any marshalling of assets.
"Inspecting Architect" shall mean Inspection & Valuation International,
or such other person or entity as the Bank may designate from time to time to
inspect the construction of the Improvements and to perform other related
services with respect thereto on behalf of the Bank.
<PAGE>
"Interest Expense" shall mean, for any period, all interest expense
incurred by the Borrower and with the interest payments prorated over the
applicable period.
"Interest Payment Date" shall mean each date specified for the payment
of interest in Section 3.8.
"Interest Period" shall mean the term during which any Euro-Rate will
apply, such period to be one, two, three, four, six or twelve months, as
Borrower may elect.
"Interest Rate Option" shall mean the Euro-Rate Option or the Base-Rate
Option.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
"Jacobs Loan" shall mean that certain $5,500,000 loan made by CD
Entertainment Ltd., an Ohio limited liability company, to Holdings as evidenced
by a Convertible Subordinated Note, dated March 21, 1997 and secured by the
Second Deed of Trust.
"Land" shall mean the real property owned by Holdings identified in
Exhibit A to the Deed of Trust, together with all rights in and to all
easements, rights and privileges benefiting the Land.
"Law" shall mean any law (including common law), or constitution,
statute, treaty, regulation, rule, ordinance, or order applicable to Borrower or
Bank, as the context so indicates, or any injunction, writ, decree or award of
any Official Body, to which the Borrower or the Bank, as the context so
indicates, is a party.
"Leases" shall have the meaning assigned to such term in the Deed of
Trust.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, whether voluntarily or involuntarily given, including but not
limited to any conditional sale or title retention arrangement, and any
assignment, deposit arrangement or lease intended as, or having the effect of,
security and any filed financing statement or other notice of any of the
foregoing (whether or not a lien or other encumbrance is created or exists at
the time of the filing), other than any of the foregoing created under the Deed.
"Line of Credit" shall mean the revolving line of credit to be made by
the Bank pursuant to the Credit Agreement in the maximum principal amount of
$5,000,000.
"Line of Credit Loan Documents" shall mean the term "Loan Documents" as
defined in the Credit Agreement.
"Loan Documents" shall mean, collectively, this Agreement, the Note,
the Guaranties, the Subordination Agreement (Deed of Trust), the Subordination
Agreement (Reconveyance Rights),
<PAGE>
the Pledge Agreement, the Collateral Documents, the Environmental Indemnity, the
Line of Credit Loan Documents and the Security Documents and all other
documents, instruments, certificates and agreements executed in connection with
the Construction Loan or the Line of Credit, as the same may be amended,
replaced or supplemented from time to time. "Loan Document" shall mean any of
the Loan Documents.
"Loans" shall mean collectively, the Construction Loan and the Line of
Credit.
"Major Subcontractors" shall mean all subcontractors under any
subcontract with the Contractor with respect to the Project which provides for
aggregate payments in excess of $200,000.
"Major Subcontracts" shall mean any subcontract with the Contractor
under the Construction Contract with respect to the Project which provides for
payments in excess of $200,000.
"Management Agreement" shall mean that certain Management and
Consulting Agreement dated April 22, 1996 among the Borrower, Stansley
Management Corp., Racing and the Manager, together with a certain side letter
addressed to Borrower from the Manager also dated April 22, 1996.
"Manager" shall mean Maryland-Virginia Racing Circuit, Inc., a Virginia
corporation.
"Mandatory Principal Payments: shall have the meaning assigned to such
term in Section 3.10 hereof.
"Material Adverse Change" shall mean any set of circumstances or events
which (a) has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of this Agreement or any
other Construction Loan Document, (b) is or could reasonably be expected to be
material and adverse to the business properties, assets, financial condition,
results of operations or prospects, as a whole, of the Borrower or either
Guarantor, (c) impairs materially or could reasonably be expected to impair
materially the ability of the Borrower or either Guarantor to duly and
punctually pay or perform its or his obligations under the Loan Documents, or
(d) impairs materially or could reasonably be expected to impair materially the
ability of the Bank to enforce its legal remedies pursuant to this Agreement or
any other Construction Loan Document.
"Month," with respect to an Interest Period, shall mean the interval
between the days in consecutive calendar months numerically corresponding to the
first (1st) day of such Interest Period.
"Multiemployer Pension Plan" shall mean any employee pension benefit
plan (within the meaning of Section 3(2) of ERISA) which is a "multiemployer
plan" within the meaning of Section 4001(a)(3) of ERISA and to which the
Borrower or any Partner is then making or
<PAGE>
accruing an obligation to make contributions or, within the preceding five Plan
years, has made or had an obligation to make such contributions.
"Multiemployer Welfare Plan" shall mean any employee welfare benefit
plan (within the meaning of Section 3(1) of ERISA) established and maintained
pursuant to one or more collective bargaining agreements and contributed to by
two or more unrelated employers.
"Multiple Employer Pension Plan" shall mean a Pension Plan which has
two or more contributing sponsors (including the Borrower or any member of the
ERISA Group) at least two of whom are not under common control, as such a plan
is described in Sections 4063 and 4064 of ERISA.
"Net Worth" shall mean stockholders' equity in Holdings as determined
in accordance with GAAP.
"Note" shall mean that certain Deed of Trust Note, of even date
herewith, given by Borrower to the Bank in the aggregate principal face amount
of $10,000,000, as it may be amended, renewed, replaced or supplemented from
time to time with the prior written consent of the Bank and the Borrower.
"Official Body" shall mean any national, federal, state, local or other
government or political subdivision or any agency, authority, bureau, central
bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
"Partnership Lease" shall mean the Agreement to Lease, dated March 21,
1997, between Holdings as landlord and Borrower as tenant.
"Payment Guaranties" shall mean those four (4) certain Continuing
Agreement of Guaranty and Suretyship (Payment), of even date herewith, given by
each Guarantor to the Bank, as the same may be amended, replaced or supplemented
from time to time with the prior written consent of the Bank.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor.
"Pension Plan" shall mean at any time an employee pension benefit plan
(including a Multiple Employer Pension Plan but not a Multiemployer Pension
Plan) which is covered by Title IV of ERISA or is subject to the minimum funding
standards under Section 412 of the Code and either (i) is maintained by any
member of the ERISA Group for employees of any member of the ERISA Group, or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the ERISA Group for employees of any
entity which was at such time a member of the ERISA Group.
<PAGE>
"Permitted Encumbrances" shall mean the Liens, assignments and security
interests in favor of the Bank pursuant hereto; the easements, restrictions,
reconveyance rights and other matters created under the Deed; the easements,
restrictions, encumbrances and other matters described in and permitted to exist
under the terms of the Deed of Trust; the Second Deed of Trust; pledges or
deposits to secure obligations under workers' compensation laws or similar
legislation, including liens of judgments thereunder which are not currently
dischargeable; deposits of cash or readily marketable securities to secure
public or statutory obligations of the Borrower; materialmen's, mechanics',
vendors', or other like liens incurred in the ordinary course of business with
respect to obligations or which are being contested in accordance with the
provisions of this Agreement; liens created by or resulting from any legal
proceedings (including legal proceedings instituted by the Borrower) which are
being contested in accordance with the provisions of this Agreement; zoning
restrictions, easements, licenses, restrictions on the use of real property or
minor irregularities in title thereto, which do not, in the opinion of Bank,
materially detract from the value or impair the use of Project; such other
matters as may be expressly consented to in writing by the Bank; and real estate
taxes on the Land and Improvements not yet due and payable.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture, government or political subdivision or agency thereof, or any other
entity.
"Plans" shall mean the final plans and specifications for the
construction and equipping of the Improvements, including all schematic and
working drawings and designations of all manufacturers and model numbers of all
equipment, and any improvements to be constructed off of the Land, as approved
by all necessary parties in accordance with this Agreement and as the same may
be amended from time to time in accordance with this Agreement.
"Pledge Agreements" shall mean those certain Pledge Agreements of even
date herewith from Holdings and Racing to Bank, as the same may be amended,
replaced or supplemented from time to time in writing by the Holdings or Racing,
as applicable, and the Bank.
"Prime Rate" shall mean the interest rate announced from time to time
by the Bank at its Principal Office as its "prime rate." Borrower acknowledges
that the Prime Rate is not necessarily the lowest interest rate charged by the
Bank on other credit and that such term does not imply or indicate that the
interest rate designated from time to time by the Bank as its "prime rate" is
equal to or lower than other credit extended by the Bank. Each interest rate
referred to and determined by reference to the Prime Rate shall change
automatically from time to time, effective as of the effective date of each
change in the Prime Rate.
"Principal Office" shall mean the main banking office of the Bank in
Pittsburgh, Pennsylvania.
"Prohibited Transaction" shall mean any prohibited transaction as
defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA for
which neither an individual nor a class exemption has been issued by the United
States Department of Labor and for which a statutory exemption is not available.
<PAGE>
"Project" shall mean the Land and Improvements.
"Project Account" shall mean the demand deposit account of the Borrower
maintained with the Bank for the purpose of disbursement of funds with respect
to the Construction Loan.
"Racing" shall mean Stansley Racing Corp., a Virginia corporation,
being a wholly-owned subsidiary of Holdings and the sole general partner of the
Borrower.
"Reduced Availability Limit" shall have the meaning assigned to such
term in Section 2.4.
"Remedies Event" shall mean the occurrence of an Event of Default or an
Acceleration Event.
"Regulated Substances" shall mean any substance, including the chemical
compounds, constituents and degradation products thereof, the generation,
manufacture, processing, distribution, treatment, storage, disposal, transport,
recycling, reclamation, use, reuse or other management or mismanagement of which
is regulated by the Environmental Laws.
"Regulation U" shall mean Regulation U, T, G or X as promulgated by the
Board of Governors of the Federal Reserve System, as amended from time to time.
"Release" shall have the meaning assigned to such term in Section 2.4.
"Reportable Event" means a reportable event described in Section 4043
of ERISA and regulations thereunder with respect to a Pension Plan or
Multiemployer Pension Plan.
"Required Amortization Portion" shall mean a portion of the
Construction Loan (as determined by Bank immediately prior to the commencement
of each Interest Period during the Amortization Period) which shall be
sufficient to permit all principal payments projected by Bank to occur during
the term of an applicable Interest Period to be applied against the portion of
the outstanding principal balance of the Construction Loan that is subject to
the Base Rate Option.
"Second Deed of Trust" shall mean a Second Deed of Trust, dated March
21, 1997, from Holdings to David F. Belkowitz and James W. Theobald, as
trustees, for the benefit of CD Entertainment Ltd., recorded in the Office of
the Circuit Court of New Kent County, Virginia at Deed Book 242, page 277.
"Retainage" shall mean the retainage with respect to certain
construction costs of the Improvements as provided in Section 6.6.
"SWF's" shall mean the satellite wagering facilities licensed to the
Borrower for operation by the Virginia Racing Commission.
<PAGE>
"Solvent" shall mean, with respect to any party on a particular date,
that on such date (i) the fair value of the property of such party is greater
than the total amount of liabilities, (ii) the present fair market value of the
assets of such party is not less than the amount that will be required to pay
the probable liability of such party on its debts as they become absolute and
matured, (iii) such party is able to realize upon its assets and pay its debts
and other liabilities, contingent obligations and other commitments as they
mature in the normal course of business, and (iv) such party does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
party's ability to pay such debts and liabilities as they mature.
"Security Documents" shall have the meaning assigned to such term in
the Credit Agreement.
"Subordination Agreement (Deed of Trust )" shall mean that certain
Subordination Agreement of even date herewith among Borrower, Holdings, Lender,
CD Entertainment Ltd. and the respective deed of trust trustees, by which the
Jacobs Loan shall be subordinated to the Construction Loan and the Line of
Credit.
"Subordination Agreement (Reconveyance Rights)" shall mean that certain
Subordination Agreement among Lender, Chesapeake Forest Products Corp., Delmarva
Properties, Inc., and the trustees under the Deed of Trust by which the
reconveyance rights granted under the Deed are subordinated to the lien of the
Deed of Trust.
"Total Debt" shall mean all Indebtedness of Holdings, as determined in
accordance with GAAP, excluding, however, the indebtedness more particularly
described on Schedule III.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
enacted in each applicable jurisdiction.
1.2 Interpretation.
Unless the context of this Agreement otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole, "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation." References in this Agreement to "determination" of or by
the Bank shall be deemed to include good faith estimates by the Bank (in the
case of quantitative determinations) and good faith beliefs by the Bank (in the
case of qualitative determinations). Whenever the Bank is granted the right
herein to act in its sole discretion or to grant or withhold consent or
approval, such right shall be exercised in good faith. The words "hereof,"
"herein," "hereunder" and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
section and other headings contained in this Agreement and the Table of Contents
preceding this Agreement are for reference purposes only and shall not control
or affect the construction of this Agreement or the interpretation thereof in
any respect. Section, subsection, schedule and exhibit references are to
sections, subsections, schedules and exhibits to this Agreement unless otherwise
specified.
<PAGE>
1.3 Accounting Principles.
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP.
2. AGREEMENT TO BORROW AND LEND
2.1 Agreement to Borrow and Lend.
Subject to the terms, provisions and conditions contained in this
Agreement in reliance upon the representations and warranties set forth herein,
the Bank agrees to lend to Borrower the amount of the Construction Loan.
2.2 The Note.
The Construction Loan is and shall be evidenced by the Note, and the
Construction Loan shall bear interest calculated and payable as provided in
Section 3 below. Borrower shall pay the outstanding principal of the
Construction Loan and all unpaid interest accrued on the Construction Loan and
all other sums then owing under the Loan Documents in full on the Expiration
Date. The unpaid amounts of the Construction Loan, as set forth on the books and
records of the Bank or other holder of the Note maintained in the ordinary
course of business shall be presumptive evidence of the principal amount thereof
owing and unpaid, absent manifest error, but the failure to record any such
amount on the books and records shall not limit or affect the obligations of
Borrower hereunder or under the Note to make payments of principal and interest
on the Construction Loan when due.
2.3 Term.
Subject to the provisions of Section 2.4 hereof, the term of the
Construction Loan shall commence on the Closing Date and shall terminate on the
Expiration Date.
2.4 Extension Option.
If the Conditions for Extension are satisfied on the date of exercise
of the applicable Extension Option and remain satisfied on the date of the
commencement of the applicable Extension Period, the Borrower shall have the
right to extend the Expiration Date for two (2) successive periods of twelve
(12) months each (each such twelve (12) month period being hereinafter called an
"Extension Period" and each right to so extend being hereinafter called an
"Extension Option"). Borrower shall provide the Bank with written notice of its
election to extend the then-applicable Expiration Date in the form attached
hereto as Exhibit D not more than one-hundred eighty (180) days nor less than
thirty (30) days prior to the then-applicable Expiration Date. If Borrower
desires to exercise an Extension Option but Condition for Extension (h) is not
satisfied, the Borrower may satisfy the failure of such condition by making a
permanent principal payment with respect to the Construction Loan, within thirty
(30) days
<PAGE>
following the Bank's determination of such failure, but in no event later than
the then-applicable Expiration Date, in the amount required to reduce the
outstanding principal balances of the Construction Loan and the Line of Credit
to the amount where such condition is satisfied (the "Reduced Availability
Limit"), subject to Borrower's simultaneous payment of any Consequential Loss
caused thereby. For the purposes hereof, the term "Conditions for Extension"
shall mean the following conditions: (a) no Remedies Event shall have occurred
and be continuing; (b) no Conditional Default shall have occurred which shall
remain uncured on the date of the commencement of the applicable Extension
Period; (c) the applicable Extension Fee shall be paid by the Borrower to the
Bank simultaneously with the exercise of the applicable Extension Option; (d) on
or before the date of commencement of the applicable Extension Period, Borrower
shall reduce the outstanding principal balance of the Line of Credit to a
maximum of (i) Four Million Dollars ($4,000,000) following the exercise of the
first Extension Option and the aggregate principal amount available pursuant to
the Line of Credit during the first Extension Period shall be limited to such
amount, and (ii) Three Million Dollars ($3,000,000) following the exercise of
the second Extension Option, and the aggregate principal amount available
pursuant to the Line of Credit during the second Extension Period shall be
limited to such amount; (e) all licenses and permits of the Borrower shall
remain in full force and effect; (f) construction of the Improvements shall have
been completed; (g) the Payment Guaranties shall remain in full force and
effect, and shall remain enforceable in accordance with their respective terms
against both of the Guarantors and the Guarantors shall be in compliance with
their respective financial covenants, if any; and (h) the ratio of EBITDA to
Assumed Debt Service plus Capital Expenditures for Holdings for the twelve (12)
month period ending on December 31 of the preceding calendar year, shall be
greater than 3.5 to 1. For the purposes hereof, the term "Assumed Debt Service"
shall mean the sum of all principal and interest payments for a twelve (12)
month period with respect to a loan equal to the sum of the maximum amount
available under the Line of Credit during the applicable Extension Period and
the outstanding principal balance of the Construction Loan on the date of
exercise of the applicable Extension Option, which payments are based upon a
twenty (20) year mortgage-style amortization schedule of such sum, assuming an
interest rate per annum equal to two and one-half percent (2.5%) above the
"weekly average yield" on United States Treasury Securities adjusted to a
constant maturity of ten (10) years, as published in the Release five (5)
Business Days prior to the date of determination (in the event that the Release
is no longer published, a reasonable equivalent substitute therefor as may be
selected by the Bank in its reasonable discretion shall be utilized and further
in the event that if the Release is not published five (5) Business Days prior
to the date of determination, then the Release as published on the most recent
date prior thereto shall be utilized). For the purposes hereof, the term
"Release" shall mean the Federal Reserve Statistical Release H.15(519) titled
"Selected Interest Rates." For the purposes hereof, the term "Capital
Expenditures" shall mean all recurring capital expenditures in the ordinary
course of business made by the Borrower for the twelve (12) month period ending
on December 31 of the calendar year preceding the exercise of the applicable
Extension Option determined in accordance with GAAP and limited to the amount of
the annual capital expenditure budget prepared by Borrower and approved by the
Bank in accordance with Schedule 1, Subparagraph (c) of the Payment Guaranty
from Holdings.
<PAGE>
3. CONSTRUCTION LOAN INTEREST RATES, PAYMENTS AND FEES
3.1 Interest Rate Options.
The Borrower shall pay interest in respect of the outstanding unpaid
principal amount of the Construction Loan as selected by it from the Base-Rate
Option or Euro-Rate Option set forth below, it being understood that, subject to
the provisions of this Agreement, the Borrower may select different Interest
Rate Options and different Interest Periods to apply simultaneously to the
Construction Loan comprising different Borrowing Tranches and may convert to or
renew one or more Interest Rate Options with respect to all or any portion of
the Construction Loan comprising any Borrowing Tranche, provided that, there
shall not be at any one time outstanding more than six (6) Borrowing Tranches in
the aggregate, with no more than five (5) of such Borrowing Tranches being
subject to a Euro-Rate Option. The Bank's determination of a rate of interest
and any change therein shall, in the absence of a manifest error, be conclusive
and binding upon all parties hereto. If at any time the designated rate
applicable to any portion of the Construction Loan made by the Bank exceeds the
Bank's highest lawful rate, the rate of interest on the Construction Loan shall
be limited to the Bank's highest lawful rate. The Borrower shall have the right
to select from the following Interest Rate Options:
(a) Base-Rate Option: A fluctuating rate per annum (computed
on the basis of a year of 365 or 366 days, as applicable), equal to the sum of
one and one-half percent (1.5%) above the Prime Rate (the "Base Rate"). If and
when the Prime Rate changes, the Base Rate will change automatically without
notice to the Borrower, effective on the date of any such change.
(b) Euro-Rate Option: A rate per annum (computed on the basis
of a year of 360 days and actual days elapsed) equal to the Euro-Rate plus three
percent (3%).
3.2 Construction Loan Requests/Interest Periods.
Except as otherwise provided herein, the Borrower may, on any Borrowing
Date prior to the Expiration Date, request the Bank to make advances of the
Construction Loan, or renew or convert any Interest Rate Option applicable to
existing advances of the Construction Loan, by the delivery to the Bank, not
later than 11:00 a.m. Pittsburgh time (i) two (2) Business Days prior to the
proposed Borrowing Date with respect to the advances of a portion of the
Construction Loan to which the Euro-Rate Option shall apply or the conversion to
or the renewal of the Euro-Rate Option for any advance of the Construction Loan;
and (ii) one (1) Business Day prior to either the proposed Borrowing Date with
respect to the advance of a portion of the Construction Loan to which the
Base-Rate Option shall apply or the last day of the preceding Interest Period
with respect to the conversion to the Base-Rate Option for any advance of the
Construction Loan, of a duly completed request therefor in the form of Exhibit F
attached hereto, or a request by telephone immediately confirmed in writing by
letter, facsimile or telex in such form (each, an "Interest Rate Request"), it
being understood that the Bank may rely on the authority of any authorized
officer making such a telephonic request without the necessity of receipt of
such written confirmation. Each Interest Rate Request shall be irrevocable and
shall specify (i) the proposed Borrowing Date; (ii) the aggregate amount of the
proposed advances of the Construction Loan comprising the Borrowing Tranche,
which shall not be less than $500,000 for advances of the Construction Loan to
which the Euro-Rate Option applies and not less than
<PAGE>
$100,000 for advances of the Construction Loan to which the Base Rate Option
applies; (iii) whether the Euro-Rate Option or Base-Rate Option shall apply to
the proposed advances of the Construction Loan comprising the Borrowing Tranche;
(iv) in the case of advances of the Construction Loan to which the Euro-Rate
Option applies, an appropriate Interest Period for the proposed advance of the
Construction Loan comprising the Borrowing Tranche, and (v) at the time of the
commencement of each Interest Period during the Amortization Period, the
aggregate amount of all Borrowing Tranches subject to the Euro-Rate Option shall
not be greater than the amount by which the outstanding principal balance of the
Note exceeds the Required Amortization Portion, provided that:
(a) any Interest Period which would otherwise end on a date
which is not a Business Day shall be extended to the next succeeding Business
Day unless such Business Day falls in the next calendar month, in which case
such Interest Period shall end on the immediately preceding Business Day;
(b) any Interest Period which begins on the last day of a
calendar month for which there is no numerically corresponding day in the
subsequent calendar month during which such Interest Period is to end shall end
on the last Business Day of such subsequent month;
(c) the Borrower shall not select, convert to or renew the
Euro-Rate Option for an Interest Period that would end after the Expiration
Date; and
(d) in the case of the renewal of a Euro-Rate Option at the
end of an Interest Period, the first day of the Interest Period shall be the
last day of the preceding Interest Period, without duplication in payment of
interest for such day.
3.3 Default Interest and Late Payment Charge.
To the extent permitted by Law, upon the occurrence and during the
continuation of any Remedies Event, the Borrower shall pay interest on the
entire principal amount then outstanding and all other sums due under the
Construction Loan, regardless of the Interest Rate Option otherwise applicable
thereto, at a rate per annum equal to the Default Rate. The Default Rate shall
accrue before and after any judgment has been entered. In addition, Borrower
shall pay upon demand by the Bank a late payment charge equal to five percent
(5%) of the amount of any payment due under the Construction Loan, prior to
maturity or acceleration, which is not received by the Bank within ten (10) days
after the date such payment is due. The Borrower acknowledges that the increased
interest rate and the late payment charge provided for herein reflect, among
other things, the fact that the Construction Loan has become a substantially
greater risk given its default status and that the Bank is entitled to
additional compensation for such risk.
3.4 Euro-Rate Unascertainable.
(a) If, on any date on which a Euro-Rate would otherwise be
determined, the Bank shall have determined (which determination shall be
conclusive absent manifest error) that:
<PAGE>
(i) adequate and reasonable means do not exist for
ascertaining such Euro-Rate, or
(ii) an event or condition has occurred which
materially and adversely affects the applicable U.S. eurodollar markets, or
(b) If, at any time, the Bank shall have determined (which
determination shall be conclusive absent manifest error) that:
(i) the making, maintenance or funding of any portion
of the Construction Loan to which a Euro-Rate Option applies has been made
impracticable or unlawful if the Bank complies in good faith with any Law or any
interpretation or application thereof by any Official Body or with any request
or directive of any such Official Body (whether or not having the force of Law),
or
(ii) such Euro-Rate will not adequately and fairly
reflect the cost to the Bank of the establishment or maintenance of any portion
of the Construction Loan to which a Euro-Rate Option applies, or
(iii) after making all reasonable efforts, deposits
of the relevant amount in U.S. dollars for the relevant Interest Period for any
portion of the Construction Loan to which a Euro-Rate Option applies are not
available to the Bank in the applicable U.S. eurodollar markets, then, in the
case of any event specified in subsection (a) or (b) above, the Bank shall
promptly so notify the Borrower thereof. Upon such date as shall be specified in
any such notice (which shall not be earlier than the date such notice is given)
the obligation of the Bank to allow the Borrower to select, convert to or renew
a Euro-Rate Option or, in the case of an existing Euro-Rate Option which shall
be unlawful for the Bank to maintain, to continue such Euro-Rate Option, shall
be suspended until the Bank shall have later notified the Borrower of the Bank's
determination (which determination shall be conclusive absent manifest error)
that the circumstances giving rise to such previous determination no longer
exist. If at any time the Borrower receives notice from the Bank as provided for
in this Section 3.4 whether or not any Euro-Rate Option has gone into effect,
such notification shall, subject to the Borrower's indemnification obligations
under Section 3.12(b), be deemed to provide for selection of, conversion to or
renewal of the Base-Rate Option.
3.5 Selection of Interest Rate Options.
If the Borrower fails to select an Interest Period in accordance with
the provisions of Section 3.2 in the case of a portion of the Construction Loan
to which a Euro-Rate Option applies, the Borrower shall be deemed to have
converted such portion of the Construction Loan to the Base-Rate Option. If a
Remedies Event shall occur and be continuing, the Bank may in its discretion
limit the Borrower to the Default Rate.
<PAGE>
3.6 Payments.
All payments and prepayments to be made in respect of principal,
interest, the Extension Fee, the Closing Fee or other amounts due from the
Borrower to the Bank hereunder shall be payable prior to 12:00 noon, Eastern
Time, on the date when due without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrower, and without
setoff, counterclaim or other deduction of any nature, and an action therefor
shall immediately accrue. Such payments shall be made to the Bank at its
Principal Office in U.S. Dollars and in immediately available funds. The Bank's
statement of account, ledger or other relevant record shall, in the absence of
manifest error, be conclusive as the statement of the amount of principal of and
interest on the Construction Loan and other amounts owing under this Agreement
and shall be deemed an "account stated."
3.7 [Intentionally Omitted]
3.8 Interest Payment Dates.
Interest on the Construction Loan shall be due and payable in arrears
on the first (1st) day of the first full calendar month after the date of the
First Disbursement and on the first (1st) day of each calendar month thereafter
throughout the term of the Construction Loan and on the Expiration Date or upon
acceleration of the Note.
3.9 Optional Prepayments.
(a) The Borrower shall have the right at its option from time
to time to prepay the Construction Loan in whole or part on the dates set forth
below without premium or penalty (except as provided below or in Section 3.12(b)
hereof):
(i) on any Business Day with respect to any portion
of the Construction Loan to which the Base-Rate Option applies;
(ii) on the last day of the applicable Interest
Period with respect to any portion of the Construction Loan to which a Euro-Rate
Option applies; or
(iii) with the Bank's prior approval, on any Business
Day of an Interest Period with respect to any portion of the Construction Loan
to which a Euro-Rate Option applies, provided such prepayment is accompanied by
an amount sufficient to compensate the Bank for all Consequential Loss and other
costs and losses reimbursable under Section 3.12(b).
Whenever the Borrower desires to prepay any part of the Construction
Loan, it shall provide a prepayment notice to the Bank at least five (5)
Business Days prior to the date of prepayment setting forth the date, which
shall be a Business Day, on which the proposed prepayment is to be made, and the
total principal amount of such prepayment, which shall not be less than
$100,000. The principal amount of the portion of the Construction Loan for which
a prepayment notice is given shall be due and payable on the date specified in
such prepayment notice.
<PAGE>
3.10 Mandatory Principal Payments.
Beginning on the first (1st) day of each calendar quarter during the
Amortization Period and on the first day of each calendar quarter thereafter,
throughout the remaining term of the Construction Loan the Borrower shall make
quarterly payments (the "Mandatory Principal Payments") of the outstanding
principal balance of the Construction Loan of $500,000 per quarter.
3.11 Application Among Interest Rate Options.
All payments permitted or required pursuant to Sections 3.9 or 3.10
shall be applied among the Interest Rate Options first to the principal amount
of the Construction Loan subject to a Base-Rate Option, then to the principal
amount of the Construction Loan subject to a Euro-Rate Option as designated by
the Bank. In accordance with Section 3.12(b), the Borrower shall indemnify the
Bank for any loss or expense including loss of margin incurred with respect to
any such prepayments applied against any portion of the Construction Loan
subject to a Euro-Rate Option on any day other than the last day of the
applicable Interest Period, provided that, to the extent that the outstanding
principal balance which is subject to the Base-Rate Option is less than the
amount of the applicable payment, then, at the election of Borrower, so long as
no Remedies Event shall then exist, such payment and any interest earned
thereon, if applicable, shall be applied against such Borrowing Tranches subject
to the Euro-Rate Option as Borrower may choose, to the extent of such
insufficiency, subject to Borrower's obligation to indemnify the Bank pursuant
to Section 3.12(b), or shall be held by the Bank in an interest-bearing escrow
account pending the termination of the next Borrowing Tranche subject to a
Euro-Rate Option.
3.12 Additional Compensation in Certain Circumstances.
(a) Increased Costs or Reduced Return on Borrowing Tranches
Subject to a Euro-Rate Option Resulting From Taxes, Reserves, Capital Adequacy
Requirements, Expenses, Etc. With respect to Borrowing Tranches subject to the
Euro-Rate Option, if any Law, guideline or interpretation or any change in any
Law, guideline or interpretation or application thereof by any Official Body
charged with the interpretation or administration thereof or compliance with any
request or directive (whether or not having the force of Law) of any central
bank or other Official Body:
(i) subjects the Bank to any tax or charge with
respect to this Agreement, the Note, the Construction Loan or payments by the
Borrower of principal, interest, or other amounts due from the Borrower
hereunder or under the Note (except for taxes on the overall net income of the
Bank, any corporate franchise tax imposed on the Bank or any withholding tax
imposed by the United States of America),
(ii) imposes, modifies or deems applicable any
reserve, special deposit or similar requirement against credits or commitments
to extend credit extended by, or assets (funded or contingent) of, deposits with
or for the account of, or other acquisition of funds by, the Bank, or
<PAGE>
(iii) imposes, modifies or deems applicable any
capital adequacy or similar requirement (A) against assets (funded or
contingent) of, or credits or commitments to extend credit extended by, the
Bank, or (B) otherwise applicable to the obligations of the Bank under this
Agreement, and the result of any of the foregoing is to increase the cost to,
reduce the income receivable by, or impose any expenses (including loss of
margin) upon the Bank with respect to this Agreement, the Note or the making,
maintenance or funding of any part of the Construction Loan (or, in the case of
any capital adequacy or similar requirement, to have the effect of reducing the
rate of return on the Bank's capital, taking into consideration the Bank's
customary policies with respect to capital adequacy) by an amount which the Bank
in its sole discretion deems to be material, the Bank may from time to time
notify the Borrower of the amount determined in good faith (using any averaging
and attribution methods employed in good faith) by the Bank (which determination
shall be conclusive absent manifest error) to be necessary to compensate the
Bank for such increase in cost, reduction of income or additional expense. Such
notice shall set forth in reasonable detail the basis for such determination.
Such amount shall be due and payable by Borrower to the Bank within ten (10)
Business Days after such notice is given; provided, however, that if the Bank
demands compensation under this Section 3.12, Borrower may at any time upon two
(2) Business Days' prior notice to the Bank (a) give notice to the Bank that it
is canceling such Borrowing Tranches subject to a Euro-Rate Option, whereupon
each such Borrowing Tranche so canceled shall terminate and the Borrower shall
be obligated to compensate the Bank as provided in this Section 3.12(a) above
and to indemnify the Bank as provided in subsection 3.12(b) below and to pay the
Bank upon demand an amount equal to all Consequential Loss, if any, resulting
therefrom, and (b) convert such Borrowing Tranches subject to the Euro-Rate
Option to the Base Rate.
(b) Indemnity. In addition to the compensation required by
subsection (a) of this Section 3.12, the Borrower shall indemnify the Bank
against any loss or expense (including Consequential Loss, loss of margin, any
loss incurred in liquidating or employing deposits from third parties and any
loss or expense incurred in connection with funds acquired by the Bank to fund
or maintain a portion of the Construction Loan subject to the Euro-Rate Option)
which the Bank sustains or incurs as a consequence of any
(i) payment, prepayment, conversion or renewal of any
portion of the Construction Loan to which the Euro-Rate Option applies on a day
other than the last day of an Interest Period (whether or not such payment or
prepayment is mandatory or automatic and whether or not such payment or
prepayment is then due), or
(ii) attempt by the Borrower to revoke (expressly, by
later inconsistent notices or otherwise) in whole or part any notice relating to
the selection of the Euro-Rate Option under Section 3.2 or prepayments under
Section 3.9.
If the Bank sustains or incurs any such loss or expense it shall from time to
time notify the Borrower of the amount determined in good faith by the Bank
(which determination shall be conclusive absent manifest error and may include
such assumptions, allocations of costs and expenses and averaging or attribution
methods as the Bank shall deem reasonable) to be necessary
<PAGE>
to indemnify the Bank for such loss or expense within three (3) months of the
Bank becoming aware of such loss or expense. Such notice shall set forth in
reasonable detail the basis for such determination. Such amount shall be due and
payable by the Borrower to the Bank ten (10) Business Days after such notice is
given.
3.13 Fees.
(a) The Borrower agrees to pay to the Bank on or before the
Closing Date, as consideration for the Construction Loan, the Closing Fee.
(b) Upon the exercise of each Extension Option, the Borrower
shall pay the Extension Fee to the Bank.
4. AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that, from the date hereof and
until the Bank Debt has been paid in full and all other obligations hereunder
shall have been performed and discharged, it shall comply at all times with the
following affirmative covenants:
4.1 Preservation of Existence.
The Borrower shall maintain its existence and its license or
qualification and good standing in each jurisdiction in which the nature of its
business makes such licensing or qualification necessary or appropriate.
4.2 Payment of Liabilities, Including Impositions.
The Borrower shall duly pay and discharge all liabilities to which it
is subject or which are asserted against it at such times and in the manner set
forth in Section 2.3 of the Deed of Trust.
4.3 Compliance With Laws.
The Borrower shall comply with all applicable Laws in all material
respects, including, but not limited to, all Environmental Laws.
4.4 Keeping of Records and Books of Account.
The Borrower shall maintain and keep proper books of record and account
which enable it to issue financial statements and reports in accordance with
Section 7.2 and in which full, true and correct entries shall be made in all
material respects of all its dealings and business and financial affairs.
4.5 Visitation Rights.
Upon advance notice, the Borrower shall permit any of the officers or
authorized employees or representatives of the Bank to visit and inspect the
Project and to examine and make
<PAGE>
excerpts from its books and records and discuss its affairs, finances and
accounts with its officers, all in such reasonable detail and at such reasonable
times during normal business hours and as often as the Bank may reasonably
request, provided (i) the Bank shall provide the Borrower with reasonable notice
prior to any visit or inspection and a reasonable opportunity to participate in
such visit or inspection, and (ii) the Bank agrees to keep confidential any
information obtained that is not generally available to the public.
4.6 Subordination of Jacobs Loan and Affiliate Loans.
The Borrower shall cause the Jacobs Loan and any Indebtedness between
it and any Affiliates to be subordinated to the Construction Loan.
4.7 Maintenance of Insurance.
(a) The Borrower shall obtain the insurance coverages
specified in this Section 4.7(a) and shall also cause the Contractor to obtain
the insurance coverages specified in Sections 4.7(a)(ii) and (iii). The insurer
issuing any such policy shall certify to the Bank that (1) losses will be
adjusted with the approval of the Bank, (2) loss payments will be payable to the
Bank, such payments to be applied in the manner set forth in the Deed of Trust
either to the restoration, repair or replacement of the Improvements or to the
payment of the Bank Debt, (3) the interest of the Bank shall be insured
regardless of any breach or violation by the Borrower of any warranties,
declarations or conditions contained in such policy, and (4) if such insurance
is canceled or materially changed or if any reinsurance is canceled for any
reason whatsoever, such insurer will promptly notify the Bank and such
cancellation or change shall not be effective as to the Bank for thirty (30)
days after receipt by the Bank of such notice. The Borrower shall deliver to the
Bank Accord Form 27 Evidence of Property Insurance with respect to such policies
on or before the Closing Date, and evidence of each renewal policy in a form
acceptable to the Bank not less than thirty (30) days prior to the expiration of
the original policy or preceding renewal policy (as the case may be); and to
deliver to the Bank, upon the Bank's request, receipts or other evidence that
the premiums thereon have been paid in accordance with the Policy. The insurer
or reinsurer for all such policies shall be rated A-IX by A.M. Best, or such
other rating reasonably acceptable to the Bank. The form, content, insurers and
reinsurers of all insurance policies required under this Agreement and the Deed
of Trust shall be satisfactory to the Bank in accordance with the standards
established in this Section 4.7.
(i) Fire and Extended Coverage Insurance. Fire and
Extended Coverage Insurance insuring the Improvements and all materials
(installed and uninstalled), supplies and other personal property on the Land
against loss or damage by fire, vandalism, burglary, theft, riot, earthquake and
other hazards insured against by extended coverage insurance and such other
insurance (including, but not limited to, business interruption insurance
covering loss of net earnings, including rental income, and costs associated
with the period of project restoration, malicious mischief insurance and flood
insurance if in a Federal flood prone area) as may be specified by the Bank from
time to time, in amounts acceptable to the Bank and to be evidenced by an Accord
Form 27 Evidence of Insurance (or such other equivalent form as may be
acceptable to the Bank). The Borrower shall, to the extent applicable, cause
each insurance
<PAGE>
policy issued in connection herewith to contain coverage for so-called
"Builder's Risk 100% Completed Value Non-Reporting" insurance and Borrower shall
cause the insurer to name the Bank as mortgagee/loss payee.
(ii) Public Liability Insurance. Commercial general
liability insurance in connection with the Land and Improvements, and during
construction, contractor's protective liability insurance (including explosion
and collapse coverage), and contractual liability and completed operations
coverage, and automobile liability insurance covering all motor vehicles used in
connection with the Land and Improvements, all in amounts and with insurers
reasonably acceptable to the Bank. The Borrower shall cause the insurer to name
the Bank as an additional insured under such coverage.
(iii) Workers' Compensation Insurance. Workers'
compensation and employer's liability insurance covering all liability in
connection with the Land and Improvements under applicable Laws with respect to
the Borrower and the Contractor.
(b) The Borrower shall insure its properties and assets (other
than the Land and Improvements which are required to be insured in the manner
provided in subsection (a) above) against loss or damage by fire and such other
insurable hazards as such assets are commonly insured (including business
interruption) and in such amounts as similar properties and assets are insured
by prudent companies in similar circumstances carrying on similar businesses and
against public liability for damages and against other risks (including errors
and omissions) in amounts normally carried by prudent companies carrying on
similar businesses and reasonably satisfactory to the Bank.
4.8 Notice.
The Borrower shall give prompt written notice to the Bank (a) of any
action or proceeding instituted by or against it which constitutes a Conditional
Default or a Remedies Event under this Agreement, or (b) of a default by the
Borrower under any other material contract, instrument or agreement to which it
is a party or by which it or any of its properties or assets may be bound or to
which it or any of its properties or assets may be subject, which default could
be reasonably expected to result in a Material Adverse Change.
4.9 Initial Equity Contribution.
The Borrower shall cause Holdings to fund the Initial Equity
Contribution on or before the date of the First Disbursement of Construction
Loan proceeds and deliver evidence reasonably satisfactory to the Bank of the
application of the Initial Equity Contribution.
4.10 Performance of Obligations.
The Borrower shall duly pay, perform and discharge all of its
obligations hereunder and under the other Loan Documents.
<PAGE>
4.11 Payment of Costs.
The Borrower shall pay promptly, or cause to be paid promptly, all
costs for which it is directly responsible in connection with constructing the
Improvements as and when the same become due and payable, paying for the same
with the Initial Equity Contribution, the proceeds of the Jacobs Note, the
proceeds of the Construction Loan advanced from time to time and the Borrower's
own funds as provided in this Agreement.
4.12 Compliance With Agreements.
The Borrower shall comply in all material respects with the
Construction and Development Documents and all other material obligations under
other contracts, instruments and agreements to which it is a party or to which
any of its properties or assets may be subject.
4.13 Certificate of No Remedies Event.
At the time the financial reports set forth on Schedule 1, Section (e)
of the Payment Guaranty from Holdings to the Bank are due, the Borrower shall
furnish quarterly to the Bank a certificate signed by an officer of the
Borrower, that to the best of his or her knowledge, the Borrower has kept,
observed, complied with, fulfilled and performed in all material respects every
term, covenant and condition in this Agreement and the other Loan Documents on
its part to be kept and performed (or, if such should not be the fact,
specifying the nature of such non-compliance); that no Conditional Default or
Remedies Event exists (or if one exists, specifying the nature thereof); that no
event has occurred or is threatened which if continued would permit the holder
of any Indebtedness of the Borrower or to which its property is subject to
accelerate the maturity thereof or enforce any Lien securing the same; that no
material litigation or administrative proceeding has been instituted by or
against the Borrower (or, if such should not be the fact, then the facts and
circumstances relating to such event or litigation in detail) and covering such
other matters relating to the Borrower, the Construction Loan or the Collateral
as the Bank may reasonably require.
4.14 [Intentionally Omitted]
4.15 Title to Land and Improvements.
Except as approved by the Bank in writing, the Borrower shall retain
its leasehold interest in the Land and Improvements until the Bank Debt has been
indefeasibly paid in cash and satisfied in full.
4.16 Further Assurances.
The Borrower shall, from time to time, at its expense, faithfully
preserve and protect the Bank's lien on and security interest in the Collateral
as a continuing first priority perfected lien, subject only to Permitted
Encumbrances, and shall take such other action as the Bank may reasonably
request from time to time in order to preserve, perfect and protect the liens
granted
<PAGE>
under the Collateral Documents, to exercise and enforce the Bank's rights and
remedies thereunder and with respect to the Collateral and to carry out the
terms of this Agreement and the other Loan Documents.
4.17 Estoppel Certificate.
At any time or times, within ten (10) Business Days after written
demand by the Bank therefor, the Borrower shall deliver to the Bank a
certificate duly executed and in form reasonably satisfactory to the Bank,
stating and acknowledging, to the best of Borrower's knowledge, the then unpaid
principal balance, and interest due and unpaid under the Construction Loan, the
fact that there are no defenses, off-sets or counterclaims thereto (or, if such
should not be the fact, then the facts and circumstances relating to such
defenses, off-sets or counterclaims) and such other matters as the Bank may
reasonably require.
4.18 Construction of Improvements.
The Borrower shall diligently and continuously prosecute construction
in accordance with the Plans which shall have been approved in the manner and by
the parties specified below; and in accordance with applicable zoning
ordinances, building and use restrictions applicable to the Land and
Improvements and all other Laws, restrictive covenants or requirements of
governmental authorities, including those of the appropriate board of fire
underwriters or its equivalent. The Improvements shall be completed, to the
extent required under Section 6.6 (d)(iii), on or before the Completion Date,
provided that, in the event that the Improvements shall not be completed on or
before the Completion Date, such failure shall not constitute a Remedies Event
hereunder as long as the Improvements are completed on or before October 30,
1997. In the event that the Improvements are not completed on or before the
Completion Date, the Bank shall thereafter have no further obligation to
disburse any proceeds of the Construction Loan unless the Improvements are
completed within sixty (60) days following the Completion Date and thereafter
all licenses necessary to operate the SWF's are reinstated and all licenses
necessary to operate the Project shall remain in full force and effect, in which
events the proceeds of the Construction Loan shall thereupon be available for
disbursement, subject to the fulfillment of all other conditions contained in
this Agreement.
4.19 Preparation of Plans.
Prior to the Closing Date, the Borrower shall cause the Plans to be
prepared by the Architect and, prior to the First Disbursement, approved and
signed for identification purposes by the Borrower, the Architect and Engineer,
with respect to the Plans and all Plans shall be approved by the Bank, and the
Inspecting Architect and all governmental authorities and all other entities and
persons with a right to approve any aspect of the work,provided that the Plans
approved by the governmental authorities may not include certain immaterial
buildings, such as maintenance buildings.
<PAGE>
4.20 Changes in Construction and Development Documents.
Except as set forth in this Section 4.20, no changes in the Plans or
the other Construction and Development Documents (including change orders) shall
be effective, unless approved in writing by the Bank, provided, however, the
Bank's approval shall not be required for any proposed changes costing less than
$$50,000 ("Minor Changes") as long as the cost of such Minor Changes, when
aggregated with the cost of all previous Minor Changes, does not exceed
$300,000. The Borrower shall obtain all approvals of any changes in the Plans or
other Construction and Development Documents (including change orders) that are
required by Law or under any other agreement with respect to the Land or
Improvements. The Borrower shall deliver to the Bank and the Inspecting
Architect documentation as required by the Bank pertaining to any change
referred to in this Section 4.20. Notwithstanding the fact that a proposed
change may constitute a Minor Change, the Bank's approval of such change
nevertheless will be required if such change (i) extends the date for completion
of the work pursuant to the Construction Contract, or (ii) changes the overall
scope and nature of the Project, or (iii) reduces the quality, size or capacity
of any particular system or component of the Project. The Bank shall have ten
(10) Business Days after receipt by the Bank and the Inspecting Architect of all
such documentation within which to evaluate any requested change, and the Bank
will not be required to consider approving any changes, unless all other
approvals which, in the Bank's reasonable judgment, are required from other
parties have been obtained. Subject to the provisions of Section 6.8 below, if
the Bank, in its judgment exercised in good faith, determines that any change
may increase the cost of completion of the Improvements in excess of the amount
of any category as shown on the Development Budget ("Category"), the Bank may
demand that the Borrower deposit additional funds sufficient to cover the
increased costs as a condition to giving its approval, such funds to be held by
the Bank and disbursed in accordance with Article 6 of this Agreement.
4.21 Payment, Performance and Maintenance Bonds.
The Borrower shall obtain payment, performance and maintenance bonds
with respect to the Construction Contract and such Major Subcontracts as may be
designated at the discretion of the Bank, in the amount of the Construction
Contract and any designated Major Subcontract. The bonds shall be issued or
reinsured by a surety rated A+ by A.M. Best and AA or higher by Standard &
Poor's Corporation or Moody's Investors Services. All bonds shall include dual
obligee riders naming the Bank and shall be in form and substance satisfactory
to the Bank.
4.22 Reliance on Inspecting Architect.
At any time that the Bank's consent or approval is required with
respect to the Plans, any of the other Construction and Development Documents,
construction of the Improvements and the cost thereof, or changes to any of the
foregoing, the Bank may, but shall not be required to, rely conclusively on the
opinion of the Inspecting Architect. The Bank will use its reasonable efforts to
cause the Inspecting Architect to complete its review of the Plans and other
Development Documents in a timely manner and in no event later than June 30,
1997.
<PAGE>
4.23 Subcontractors.
The Borrower shall furnish to the Bank current and accurate lists of
the names, addresses, telephone numbers and primary contacts of all
subcontractors (including, but not limited to, Major Subcontractors) employed in
connection with the construction of the Improvements and true and correct copies
of all executed subcontracts therefor. The work to be performed under any
subcontract shall include no work other than that for the Improvements. All
Major Subcontracts have been delivered to the Bank as of the date hereof and are
in form and content acceptable to the Bank. The Bank may contact the Contractor,
Major Subcontractors or any other subcontractor to verify any facts disclosed in
the subcontracts or the foregoing lists.
4.24 Purchase of Materials and Conditional Sales Contracts.
Other than as set forth in Schedule II, no materials, equipment,
fixtures or articles of personal property placed in or on the Land or
Improvements shall be purchased by or installed under any security agreement,
financing lease or other agreement whereby the seller reserves or purports to
reserve title, a Lien, a security interest, the right of removal or repossession
or the right to consider such items personal property after their incorporation
into the Improvements, unless previously authorized by the Bank in writing.
4.25 Personal Property.
The Borrower shall furnish to the Bank from time to time as reasonably
required by the Bank evidence that all fixtures and equipment necessary for the
operation of the Improvements have been or will be obtained and in place on the
Completion Date with respect to all of the Improvements. Upon completion of the
Improvements, the Borrower shall furnish the Bank with a detailed inventory
certified by an authorized officer of the Borrower, showing make, model,
valuation and location of all fixtures and equipment (except fixtures and
equipment of tenants) used in the management or maintenance of any part of the
Improvements.
4.26 Repairs.
The Borrower shall maintain and keep the Land and the Improvements and
all properties and assets of Borrower in good working order and condition and
make all necessary and proper repairs and replacements thereto.
4.27 Inspection and Right to Stop Work.
(a) The officers or authorized employees of the Bank and the
Inspecting Architect shall have the right at any reasonable time to enter the
Land and Improvements and inspect the construction work and all materials,
plans, specifications and other matters relating to construction of the
Improvements. Officers or authorized employees of the Bank and the Inspecting
Architect shall also have the right to examine, copy and audit the books,
records, accounting data and other documents of the Contractor relating to the
construction of the Improvements and costs associated therewith.
<PAGE>
(b) If the Bank, in good faith, reasonably determines that any
work or materials do not conform to the Plans or otherwise depart from any of
the requirements of this Agreement, the Bank may require the work to be stopped
and may withhold disbursements until the matter is corrected. Borrower shall
promptly correct any such non-conforming work or materials. No such action by
the Bank will affect Borrower's obligations to complete the Improvements on or
before the Completion Date.
(c) The Bank shall be under no duty to examine, supervise or
inspect the Plans or the construction of the Improvements or to examine any
books and records. Any inspection or examination by the Bank, or the Inspecting
Architect is for the sole purpose of protecting its security interests and
preserving its rights under this Agreement. No default or breach of Borrower
will be waived by any inspection by the Bank or the Inspecting Architect, nor
shall any such inspection constitute a representation that there has been or
will be compliance with the Plans or that the construction is free from
defective materials or workmanship.
4.28 Protection Against Lien Claims.
The Borrower shall promptly notify the Bank in writing of any dispute,
of which the Borrower may become aware, with the Architect, Engineer, the
Contractor, any Major Subcontractor or any other subcontractor, or any supplier
of labor or materials, and any proceeding against Borrower, including, but not
limited to, proceedings to assert or enforce mechanic's, materialman's or other
involuntary Liens. Any Lien claimed or filed against any part of the Land or the
Improvements for labor done or materials or services furnished in connection
with the construction of the Improvements shall be insured over or discharged,
by bond or otherwise, within fifteen (15) Business Days after the date of the
filing thereof, and the Bank reserves the right to withhold further disbursement
of Construction Loan proceeds until such Lien or claim shall have been so
insured over or discharged.
4.29 Employee Benefit Plans.
The Borrower and all members of the ERISA Group shall comply with
ERISA, the Internal Revenue Code and other applicable Laws applicable to any of
them with respect to Benefit Arrangements, Pension Plans, Multiemployer Pension
and/or Welfare Plans, except where such failure, alone or in conjunction with
any other failure, would not result in a Material Adverse Change. Without
limiting the generality of the foregoing, the Borrower and Partner shall cause
all of the Pension Plans maintained by Borrower or any member of the ERISA Group
to be funded in accordance with the minimum funding requirements of ERISA, and
shall make, in a timely manner, all contributions due to Pension Plans, Benefit
Arrangements and Multiemployer Pension and Welfare Plans, except where such
failure, alone or in conjunction with any other failure, would not result in a
Material Adverse Change.
4.30 Notices Regarding Multiemployer Pension and Welfare Plans.
Promptly upon becoming aware of the occurrence thereof, Borrower or the
Partner shall notify the Bank (including the nature of the event and, when
known, any action taken or
<PAGE>
threatened by the Internal Revenue Service, the Department of Labor or the PBGC
with respect thereto) of:
(a) any Prohibited Transaction which could subject the
Borrower or any Partner to a civil penalty assessed pursuant to Section 502(i)
of ERISA or a tax imposed by Section 4975 of the Internal Revenue Code in
connection with any Multiemployer Pension or Welfare Plan; and
(b) any partial or complete withdrawal by the Borrower or the
Partner from a Multiemployer Pension or Welfare Plan or assertion thereof, where
such withdrawal or asserted withdrawal is likely to result in withdrawal
liability.
4.31 Conditions Precedent.
As conditions precedent to the Bank's obligation to close the
Construction Loan, Borrower shall have complied with all the requirements and
shall have fulfilled all the conditions set forth in this Agreement and shall,
execute and deliver the Loan Documents and Collateral Documents to Bank on the
Closing Date, and at least five (5) days prior to the Closing Date (unless
otherwise set forth herein or waived in writing by the Bank), furnish to the
Bank at Borrower's sole cost and expense, the items set forth on Exhibit E
attached hereto, all of which shall be in form and content satisfactory to the
Bank and its counsel.
4.32 Bank Accounts.
The Borrower shall use its best efforts to maintain at the Bank a major
presence in Borrower's operating accounts.
4.33 Control of Borrower.
At all times during his life, Jeffrey P. Jacobs shall hold the position
of an officer and/or director of Racing.
4.34 Licenses and Permits.
The Borrower shall take all actions necessary to maintain and keep in
good standing all licenses, permits and other approvals necessary for the
operation and occupancy of the Land and Improvements and for the conduct of
horse racing at the Land and Improvements. The Borrower shall keep the Bank
advised of the status of such licenses, permits and other approvals and shall
provide the Bank with copies of any notices from the Virginia Racing Commission
or other Official Body threatening the suspension or revocation of any such
license, permit or approval promptly following the receipt thereof by Borrower.
<PAGE>
5. NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that, from the date hereof and
until the Bank Debt has been paid in full and all other obligations hereunder
shall have been performed and discharged, it shall comply at all times with the
following negative covenants:
5.1 Changes in Organizational Documents.
The Borrower shall not amend or modify, or permit the amendment or
modification of, in any material respect, the Borrower Documents without
providing prior written notice to the Bank and obtaining the prior written
consent of the Bank.
5.2 Transfer of Land and Improvements.
The Borrower shall not voluntarily or by operation of law, directly or
indirectly, sell, convey, transfer, assign, pledge, encumber, or permit to be
sold, conveyed, transferred, assigned, pledged or encumbered its leasehold
interest in or any part of the Land or the Improvements, or any license issued
by the Virginia Racing Commission, without the prior written consent of the Bank
having been obtained. Any transaction which is prohibited under this Section 5.2
shall be null and void to the extent permitted by applicable Law. The Bank shall
not be under any obligation to allege or show any impairment of the Collateral,
and the Bank may pursue any legal or equitable remedies for default, without
such allegation or showing, notwithstanding the foregoing.
5.3 Change in Ownership.
The Borrower shall not cause or permit sales, pledges, encumbrances,
conveyances, transfers or assignments of interests in the Borrower without the
prior written consent of the Bank.
5.4 Liquidation or Merger.
The Borrower shall not liquidate, dissolve, consolidate or merge with
or into any other corporation, partnership or other entity or permit any other
corporation, partnership or other entity to consolidate or merge with or into it
without the prior written consent of the Bank.
5.5 Breach of Documents.
The Borrower shall not commit any act, or permit any act to occur,
which would, in any manner, give rise to a breach of any material term, covenant
or condition on such party's part to be performed under the Construction and
Development Documents or any other contract to which the Borrower is a party or
by which it is bound.
<PAGE>
5.6 Judgments.
The Borrower shall not permit any final judgment obtained against it in
excess of $50,000 to remain unpaid for a period of thirty (30) days following
the entry thereof without obtaining a stay of execution or bonding or causing
such judgment to be bonded.
5.7 Leasing of Premises.
Except as may be permitted under the Deed of Trust and the Assignment
of Leases and Rents, Borrower shall not, without the prior written approval of
the Bank, terminate, amend, modify, extend, enter into, or give any consent to
any tenant under any Lease.
5.8 Changes in Documents.
Subject to Borrower's right to change the Plans and modify the
Construction and Development Documents pursuant to the provisions of Section
4.20 hereof, the Borrower shall not amend or modify any provisions of the
Construction and Development Documents without providing prior written notice to
the Bank and obtaining its prior written consent.
5.9 Material Adverse Change.
The Borrower shall not take any action or omit to take any action which
would cause a Material Adverse Change in the business, assets, operation or
financial condition, of the Borrower to occur.
5.10 Conduct of Business.
The Borrower shall not conduct any business or activity, the nature of
which would differ in any material respect from that presently conducted by it
or contemplated hereunder.
5.11 Creation of Liens.
Except for Permitted Encumbrances and except as otherwise specifically
contemplated by the Loan Documents, the Borrower shall not create, incur, assume
or suffer to exist or be created, or permit any pledge of, or any deed of trust,
mortgage, Lien, charge, security interest or encumbrances of any nature with
respect to the Land or the Improvements, or assign, pledge or in any way
transfer or encumber its rights to receive income from the Land or the
Improvements.
5.12 Value of Collateral.
The Borrower shall not take any action which would result in any
material impairment of the value of any Collateral.
5.13 Transfer of Personalty.
Except with respect to the Excluded Equipment, and except as provided
under the Permitted Encumbrances, the Borrower shall not voluntarily or by
operation of law, directly or
<PAGE>
indirectly, sell, assign, transfer, encumber, pledge, mortgage, hypothecate,
convey or otherwise dispose of any interest in or any part of any personalty
located upon the Land or the Improvements or used or intended to be used in
connection therewith, or any of the licenses, permits or other approvals
necessary for the operation and occupancy of the Land and Improvements or the
conduct of horse racing at the Land and Improvements, provided that Borrower may
dispose of any worn out personal property as long the same is promptly replaced,
to the extent necessary, with personal property that is the functional
equivalent of the replaced property within such time as would not impair the
operation of the Project.
5.14 Disposition of Rents.
Except as provided in the Loan Documents, and except as provided under
the Permitted Encumbrances, the Borrower shall not consent to or commit any
sale, conveyance, pledge, mortgage, hypothecation or other disposition of any
rents or other funds arising from the Land or the Improvements.
5.15 Materials and Fixtures.
Except as provided in Schedule II, the Borrower shall not use, or allow
the use of, any materials, furnishings, fixtures or equipment intended to become
a part of the Improvements or otherwise included in the Plans that are under
lease or have been purchased upon a conditional bill of sale or to which
Borrower does not have absolute and unencumbered title. Proceeds of the Loan
allocated to the Equipment category on the Development Budget shall be limited
to reimbursement of the Borrower's expenses incurred in connection with the
acquisition of the Included Equipment.
5.16 Pension Plans and Benefit Arrangements.
The Borrower and members of the ERISA Group shall not:
(a) fail to satisfy the minimum funding requirements of ERISA
and the Internal Revenue Code with respect to any Pension Plan;
(b) request a minimum funding waiver from the Internal Revenue
Service with respect to any Pension Plan;
(c) engage in a Prohibited Transaction with any Pension Plan,
Benefit Arrangement or Multiemployer Pension or Welfare Plan which, alone or in
conjunction with any other circumstances or set of circumstances resulting in
liability under ERISA, would constitute a Material Adverse Change;
(d) permit the aggregate actuarial present value of all
benefit liabilities (whether or not vested) under each Pension Plan, determined
on a plan termination basis, as disclosed in the most recent actuarial report
completed with respect to such Plan, to exceed, as of any actuarial valuation
date, the fair market value of the assets of such Plan;
<PAGE>
(e) fail to make when due any contribution to any
Multiemployer Pension or Welfare Plan that the Borrower or any member of the
ERISA Group may be required to make under any agreement relating to such
Multiemployer Plan, or any Law pertaining thereto;
(f) withdraw (completely or partially) from any Multiemployer
Pension or Welfare Plan or withdraw (or be deemed under Section 4062(e) of ERISA
to withdraw) from any Multiple Employer Pension Plan, where any such withdrawal
is likely to result in a material liability of Borrower or any member of the
ERISA Group;
(g) terminate, or institute proceedings to terminate, any
Pension Plan, where such termination is likely to result in a material liability
to the Borrower or any member of the ERISA Group;
(h) make any amendment to any Pension Plan with respect to
which security is required under Section 307 of ERISA; or
(i) fail to give any and all notices and make all disclosures
and governmental filings required under ERISA or the Internal Revenue Code,
where such failure is likely to result in a Material Adverse Change.
5.17 ERISA Prohibited Transaction.
Neither the Borrower, nor members of the ERISA Group shall take any
action which would result in the Construction Loan constituting a Prohibited
Transaction between Borrower or the Partner and Bank.
6. DISBURSEMENT MATTERS
6.1 Procedures.
(a) The Bank shall disburse Construction Loan proceeds not
more frequently than twice each month pursuant to Borrower's Disbursement
Request in the form attached hereto as Exhibit B, provided that one of the
monthly fundings shall be limited to interest expense. Upon receipt of a
Disbursement Request, the Bank shall cause an inspection to be made of the
progress of construction with respect to any Disbursement Request for costs of
construction . If the Bank determines that construction is proceeding diligently
in accordance with the Plans and otherwise in the manner required by this
Agreement and that all conditions to such disbursement shall have been
fulfilled, including the Bank's receipt of title clearance (conveyed verbally by
the title company) confirming that the status of title is as described in
Section 6.4(g) below, the Bank shall make the disbursement within five (5) days
of satisfaction of the requirements set forth in Sections 6.4, 6.5, 6.6 and/or
6.7, as applicable.
(b) [Intentionally Omitted]
<PAGE>
(c) Bank may also require verification of the information contained in
the Disbursement Request by the Contractor, Major Subcontractors and other
applicable subcontractors, the Architect, the Engineer, as applicable, and the
Inspecting Architect, and will require separate lien waivers and releases from
all contractor and subcontractors covering all prior disbursements. Without
limiting the foregoing, in connection with any Disbursement Request, Borrower
shall submit copies of invoices for costs included in such Disbursement Request.
Invoices submitted with all Disbursement Requests except the first Disbursement
Request shall not be dated prior to the date that is one hundred twenty (120)
days preceding the date of the Disbursement Request except as may be permitted
by the Bank in its reasonable discretion. Subject to subsection (d) of this
section, all disbursements will be made, at the Bank's option, into the Project
Account of Borrower maintained with Bank, and Borrower agrees to pay Bank's
customary charges for wire transfers and account maintenance, or, upon five (5)
days prior written notice to the Borrower, advanced directly (or jointly with
Borrower, as the Bank may elect) to such party or parties as have actually
supplied labor, material or services in connection with the construction of the
Improvements or advanced to a title company or other escrow agent acceptable to
the Bank for disbursement to such third parties. All Construction Loan proceeds
will be considered to have been advanced to and received by Borrower upon, and
interest on the Construction Loan proceeds will be payable by Borrower from and
after, the deposit or advance of the Construction Loan proceeds as aforesaid or
the charge against the Construction Loan proceeds as provided in subsection (d)
below.
(d) Notwithstanding the provisions of subsection (c) of this
section, the Bank may elect, without obtaining authorization by Borrower, to use
the Construction Loan proceeds to pay, as and when due, interest on the
Construction Loan and, upon five (5) days prior written notice to Borrower
(except in the case of the First Disbursement), the Construction Loan fees owing
to the Bank, reasonable fees and disbursements of the Inspecting Architect and
the Bank's attorneys which are payable by Borrower as provided in the Loan
Documents and such other sums as may be owing from time to time by Borrower to
the Bank with respect to the Construction Loan or the transactions contemplated
by this Agreement. Such payments may be made by debiting or charging the
Construction Loan in the amount of such payments.
(e) All advances of the Construction Loan proceeds shall be
evidenced by the Note and secured by the Collateral Documents.
6.2 Disbursement Amounts.
(a) Aggregate advances of the Construction Loan shall be
limited to the maximum amount of the Construction Loan. The aggregate amount of
the Construction Loan for any Category shall be limited to the amount shown in
the Development Budget for such Category, taking into account any reallocation
authorized by the Bank, pursuant to Section 6.8. Prior to disbursement of any
Construction Loan proceeds, Borrower shall have expended, for costs approved by
the Bank, sums at least equal to the Initial Equity Contribution.
(b) Subject to the terms of this Agreement, the Bank will make
disbursements of the Construction Loan or other amounts held, if applicable, in
the Project Account to defray
<PAGE>
actual and reasonable costs approved by the Bank and shown on the Development
Budget of (i) labor performed on the Improvements and equipment and materials
incorporated into the Improvements, (ii) materials suitably stored on the Land,
as approved by the Bank, and (iii) developing and financing the Improvements
including any other costs within the Categories shown on the Development Budget.
The undisbursed balance of the Construction Loan and the sums delivered and held
by the Bank pursuant to Section 6.8 shall at no time be less than the sum of (1)
the amount reasonably estimated by the Bank to complete the construction,
development and financing of the Improvements, and (2) the aggregate amount of
the Retainage to date.
(c) Borrower shall provide such written information as
requested by the Bank evidencing Borrower's expenditure of any portion of the
Initial Equity Contribution.
(d) The amount allocated to the Contingency Category shall not
be subject to disbursement without the prior approval of the Bank.
6.3 Cost Information.
If Borrower becomes aware of any change in the approved costs set forth
in the Development Budget that would increase, change or cause a reallocation of
the costs as shown on the Development Budget, Borrower shall immediately notify
the Bank in writing and promptly submit a proposed revised Development Budget to
the Bank. The Bank shall have no obligation to make further disbursements unless
and until the revised Development Budget is approved by the Bank. The approval
of the revised Development Budget by the Bank shall not be unreasonably delayed
following receipt of all required information. The Bank shall have the right to
withhold approval of the proposed revised Development Budget, pending the
deposit of funds pursuant to Section 6.8.
6.4 First Disbursement.
The Bank shall not be obligated to make the First Disbursement until
Borrower, at its expense, shall have fulfilled all conditions of this Agreement
applicable thereto, including, without limitation, the delivery and approval of
the items referred to on Exhibit E attached hereto on or before the Closing
Date, and satisfaction of the following conditions:
(a) No portion of the Improvements shall have been damaged by
fire or other casualty and no condemnation or taking of the Land or the
Improvements or any material portion thereof shall be pending or threatened;
(b) The Bank shall have received all duly executed Loan
Documents and Construction and Development Documents; and the Collateral
Documents and other documents to be placed of record shall have been duly
recorded and filed in all appropriate offices;
(c) The security interest in all property described in the
Collateral Documents shall have been duly perfected and shall be a valid and
enforceable first lien subject to Permitted Encumbrances;
<PAGE>
(d) The Closing Fee shall have been paid on or before the
Closing Date.
(e) Borrower shall have obtained and delivered to the Bank the
consents of the Architect, Engineer and the Contractor and the Architect's
Certificate and the Engineer's Certificate in substantially the forms attached
hereto as Exhibit C or as otherwise specified by the Bank;
(f) All Governmental Approvals then obtainable shall be in
full force and effect, and no notices of violation or revocation with respect
thereto shall have been received which have not been cured to the satisfaction
of the applicable Governmental Authority;
(g) The Bank shall have received, at Borrower's expense, a
title policy and the verbal title confirmation described in Section 6.1(b) and,
prior to any subsequent disbursement, a title policy endorsement with respect to
the prior disbursement. Such title policy, verbal title confirmation and
endorsement shall be satisfactory to the Bank and shall insure the priority of
the Lien of the Deed of Trust and contain no exception other than the Permitted
Encumbrances;
(h) No Remedies Event or Conditional Default shall have
occurred and be continuing under this Agreement, the Credit Agreement, or any of
the other Loan Documents or Line of Credit Loan Documents;
(i) The Bank shall receive evidence to its satisfaction of the
prior or contemporaneous funding of the Initial Equity Contribution;
(j) Upon the actual location of the Improvements, the
Improvements shall not encroach over any building, zoning, right-of-way or
property boundary lines.
(k) The Bank shall have received effective lien waivers and
releases from the Contractor, Major Subcontractors and all other subcontractors,
materialmen, suppliers and other persons having the right to file a mechanic's
or materialmen's lien against the Project with respect to the work completed
through a date no later than the date of the First Disbursement, other than work
to be paid from the proceeds of the First Disbursement;
(l) The receipt by the Bank of a report satisfactory to the
Bank from the Inspecting Architect concerning its review of the Improvements,
the Plans, the Construction Contract, Major Subcontracts, the Development Budget
and the Governmental Approvals; and
(m) The representations and warranties of the Borrower
contained in Article 8 hereof shall be true and accurate on and as of the date
of the First Disbursement of Construction Loan proceeds with the same effect as
though such representations and warranties had been made on and as of such date
(except representations and warranties which relate solely to an earlier date or
time, which representations and warranties shall be true and correct on and as
of the specific dates or times referred to therein), and the Borrower shall have
performed and complied with all covenants and conditions hereof.
<PAGE>
6.5 Subsequent Disbursements.
The Bank shall not be obligated to make further disbursements
of the Construction Loan (including the Retainage disbursements referred to in
Section 6.6), until Borrower, at its expense, shall have fulfilled all
provisions of this Agreement applicable thereto including, without limitation,
the following conditions:
(a) The conditions of the preceding Section 6.4 shall continue
to be met;
(b) Within forty-five (45) days following the location of any
portion of the Improvements not shown on the survey to be supplied in connection
with the Closing Date, such survey shall be updated to a current date and shall
show the location of the Improvements and the absence of any encroachment of all
Improvements over any building, zoning, right-of-way or property boundary lines;
and
(c) The Bank shall have received an updated verbal title
report followed, prior to any subsequent disbursement, with a title policy
endorsement, such verbal report and endorsement to be satisfactory to the Bank
and to insure the priority of the lien of the Deed of Trust in the amount of all
disbursements hereunder, and contain no exception other than the Permitted
Encumbrances.
6.6 Retainage Disbursements.
(a) The amount of each disbursement shall be subject to
Retainage in accordance with the provisions of the Construction Contract, which
Retainage shall in no event be less than ten percent (10%) of costs incurred
under the Construction Contract, other than (i) Construction and Development
Documents entered into before February 10, 1997 for which Retainage shall be no
less than five percent (5%) and (ii) Construction and Development Documents
relating to clearing and grubbing, rough grading, foundations and steel for the
Project for which there shall be no Retainage.
(b) The amount of the Retainage withheld under the
Construction Contract less an amount equal to 150% of the aggregate costs of
performing remaining punchlist items under the Construction Contract, as
reasonably estimated by the Bank and the Inspecting Architect, shall be released
only upon the fulfillment of the following conditions:
(i) All conditions of Sections 6.4 and 6.5 shall
continue to be met;
(ii) The Bank shall have received a certificate of
the Architect and Engineer, whichever is applicable, and the Contractor to the
effect, inter alia, that the Improvements have been substantially completed in
accordance with the Plans, all Laws and all Governmental Approvals, and the
matters in such certificate shall have been verified by the Inspecting
Architect;
<PAGE>
(iii) A permanent unconditional certificate of
occupancy and all other Governmental Approvals shall have been duly issued for
those portions of the Improvements necessary to place the Project in service as
a horse racetrack, including, without limitation, the clubhouse and grandstand,
at which pari-mutual wagering is permitted as licensed by the Virginia Racing
Commission (which improvements shall not include immaterial buildings, such as
maintenance buildings, dormitories or barns not necessary for the initial
operation of the Project), and the Bank shall have received copies thereof, or
if a permanent certificate of occupancy for any such Improvements is not then
available, a temporary certificate of occupancy, provided that the Bank and the
Inspecting Architect shall have received satisfactory evidence that the
permanent certificate of occupancy shall be issued upon completion of punchlist
items approved by the Bank and for which Construction Loan proceeds are being
held ;
(iv) The Bank shall have received an endorsement to
the Bank's title insurance policy, in a form approved by the Bank, insuring that
no encroachments exist over any building, zoning, right-of-way or property
boundary lines;
(v) The Bank shall have received an as-built survey,
showing the location of the Improvements, easements, rights-of-way and other
matters affecting the Land;
(vi) The Bank shall have received final lien releases
from the Contractor, Major Subcontractors and all other subcontractors with
respect to the work performed in connection with the construction and equipping
of the Improvements, except with respect to work included in the punchlist items
and except work not required to be completed under subsection (iii) above;
(vii) The Bank shall have received tax receipts
evidencing the payment of the current year's real estate taxes and assessments
to the extent such taxes and assessments are then due and payable;
(viii) The Bank shall have received evidence
satisfactory to the Bank that the fire and extended coverage insurance policy
with respect to the applicable Improvements is in full force and effect;
(ix) The Bank shall have received the written consent
of any and all third parties reasonably judged by the Bank to be necessary for
the occupancy and operation of the Improvements; and
(x) The Bank shall have received a letter from the
Borrower whereby Borrower represents and warrants that Borrower has inspected
the Improvements and the Improvements have been completed substantially in
accordance with the Plans.
(c) Any amounts withheld from the final disbursement pursuant
to Section 6.6(b) shall be disbursed upon completion of all punchlist items and
the issuance of all permits necessary for the occupancy and operation of all of
the Improvements, as determined by the Bank and the Inspecting Architect.
<PAGE>
6.7 Post-Completion Disbursements.
The Bank shall not be obligated to make disbursements after the
Completion Date unless all of the applicable conditions of Sections 6.4, 6.5 and
6.6 shall continue to be met, In no event will any proceeds of the Construction
Loan be disbursed after December 31, 1997.
6.8 Deposit of Funds by Borrower.
If the Bank, at any time and from time to time, in good faith
determines that (a) the amount of the undisbursed Construction Loan proceeds
will not be sufficient to pay in full all costs required to complete the
construction of the Improvements in accordance with the Plans and all financing
and development costs covered by the Development Budget, or that (b) after
taking into account any changes and reallocation of amounts approved by the Bank
pursuant to Section 6.3 hereof, any amount shown in any Category will not be
sufficient to pay in full the items to which such amount is allocated, then the
Bank may make demand on Borrower to deposit with the Bank funds equal to the
insufficiency so determined by the Bank (or Borrower shall provide evidence of
the availability of such funds in the form of amounts held by the Bank in the
account(s) of Borrower maintained at the Bank), and Borrower shall deposit the
funds required hereby, or provide such evidence, with the Bank within ten (10)
Business Days after the date of such demand, such funds to be held in the
Project Account. The Bank shall have no obligation to make further disbursements
until the demanded funds shall have been so deposited by Borrower with the Bank.
Whenever the Bank has any such funds on deposit, such funds shall be additional
security for the Construction Loan and all disbursements will be considered to
be made by the Bank first from those funds until they are exhausted.
6.9 Additional Security.
As additional security for the Borrower's obligations under this
Agreement and the other Loan Documents, the Borrower irrevocably assigns and
grants to the Bank a security interest in all Construction Loan proceeds now or
hereafter held by the Bank, whether or not disbursed. The Borrower further
irrevocably assigns and grants to the Bank as additional security for the
Borrower's obligations under the Loan Documents (x) all funds now or hereafter
deposited by the Borrower with the Bank under this Agreement or any of the other
Loan Documents, including, without limitation, amounts held in the Project
Account, (y) all Governmental Approvals to the extent permitted by Law or by the
terms thereof, and (z) all reserves, deferred payments, deposits, refunds, cost
savings and payments of any kind relating to the construction of the
Improvements. Upon the occurrence of a Remedies Event and so long thereafter as
such Remedies Event shall remain uncured, the Bank, in addition to any other
rights and remedies it may have under the Loan Documents or at law or in equity,
may use any of the other property referred to above for any purpose for which
the Borrower could have used them under this Agreement or with respect to the
construction or financing of the Improvements. Further, the Borrower hereby
assigns to the Bank all of the Borrower's rights under the Construction and
Development Documents, subject to the terms thereof, which rights the Bank may
exercise upon the occurrence of a
<PAGE>
Remedies Event. Such assignment is made for collateral purposes only and imposes
no obligations upon the Bank.
7. REPORTING REQUIREMENTS
7.1 Appraisals, Environmental Reports and Title Reports.
(a) Appraisal. Until the Bank Debt is repaid in full the Bank
shall have the right at any time and from time to time to obtain an Appraisal
with respect to the Project, which Appraisal shall be at the reasonable expense
of the Borrower, but no more frequently than once during the initial term of the
Loan and once during the Extension Periods.
(b) Title Reports. Except as provided in Article 6, at option
of the Bank, once each calendar year until the Bank Debt has been repaid in
full, the Bank may request and Borrower shall deliver within fifteen (15) days
of such request, an updated title report on the Project, prepared and issued by
the same title insurance company that delivered to the Bank the lender's policy
of title insurance in connection with the delivery of the Deed of Trust. After
the occurrence of a Remedies Event and so long thereafter as such Remedies Event
shall remain uncured, Borrower will furnish such title reports, endorsements or
policies as the Bank shall require. If Borrower fails to deliver the title
updates, reports, endorsements or policies required pursuant to this Section,
the Bank may obtain such item(s) and Borrower will reimburse the Bank for costs
incurred upon demand.
(c) Environmental Reports. Within sixty (60) days following
the request of the Bank, which, in the absence of a Remedies Event, or prior to
such time that the Bank believes that there has been a breach of the
Environmental Indemnity Agreement, may be made once each calendar year if a
previously undisclosed adverse environmental condition becomes apparent or a
change in applicable Law with respect to environmental matters should occur (but
such request may be made at any time following the occurrence of a Remedies
Event and so long thereafter as such Remedies Event shall remain uncured, or if
the Bank has reason to believe there has been a breach of the Environmental
Indemnity Agreement) until the Bank Debt has been repaid in full, the Borrower
shall cause an environmental audit of the Project to be prepared at Borrower's
sole reasonable cost and expense, which environmental audit will be in form and
performed by a consultant approved by the Bank, and if Borrower does not respond
to the Bank's request within sixty (60) days, the Bank shall cause an
environmental audit of the Project and, upon demand, Borrower will reimburse the
Bank for all costs incurred.
<PAGE>
8. REPRESENTATIONS AND WARRANTIES
The Borrower hereby warrants and represents to the Bank as follows,
which warranties and representations shall be recertified to the Bank with each
Disbursement Request:
8.1 Due Formation; Capacity.
The Borrower is duly organized, validly existing and in good standing
under the Laws of the Commonwealth of Virginia, and has full power and authority
to own or lease and operate properties, and to conduct its affairs as now being
conducted and as proposed to be conducted. The sole general partner of Borrower
is Racing and the sole limited partner of Borrower is Holdings.
8.2 Power and Authority.
The Borrower has full partnership power and authority to enter into,
execute, deliver and carry out this Agreement and the other Loan Documents and
the Construction and Development Documents to which it is a party, and to
perform its obligations hereunder and thereunder and all such actions have been
duly authorized by all necessary partnership proceedings on its part.
8.3 Validity and Binding Effect.
This Agreement, the other Loan Documents and the Construction and
Development Documents which are required to be executed and delivered prior to
the Closing Date pursuant to the terms of this Agreement, have been duly and
validly executed and delivered by the Borrower and, to the best knowledge of the
Borrower, by all other parties thereto. This Agreement, the other Loan Documents
and the executed Construction and Development Documents constitute legal, valid
and binding obligations of the Borrower enforceable against it in accordance
with their respective terms. The Borrower has delivered to the Bank a true and
correct copy of the Construction and Development Documents which are required to
be executed and delivered prior to the Closing Date pursuant to the terms of
this Agreement and any amendments, waivers and other documents executed in
connection therewith, and there has been no other amendment, waiver or
modification of such Construction and Development Documents.
8.4 No Conflict.
Neither the execution and delivery of this Agreement, the other Loan
Documents or the Construction and Development Documents, nor the consummation of
the transactions herein or therein contemplated, nor compliance with the terms
and provisions hereof or thereof, will conflict with, constitute a default under
or result in any breach of (i) the terms and conditions of the Borrower
Documents, or (ii) any Governmental Approval, any applicable Law or any material
agreement or instrument to which the Borrower is a party or by which Borrower or
the Deed of Trust Property (as defined in the Deed of Trust) is bound.
8.5 Other Agreements.
The Borrower is not, to the best of its knowledge and belief, a party
to any agreement or instrument that materially and adversely affects its present
or proposed business, properties or assets, operation or conditions, financial
or otherwise and is not in default of the performance, observance, or
fulfillment of any of the material obligations, covenants or conditions set
forth in any material agreement or instrument to which it is a party.
<PAGE>
8.6 No Conditional Default or Remedies Event.
No Conditional Default has occurred and no condition exists or will be
caused by the First Disbursement which will constitute a Conditional Default or
Remedies Event.
8.7 No Litigation or Investigations.
Except as previously disclosed to the Bank in writing, there is no
pending or, to Borrower's knowledge, threatened litigation or governmental
investigation (or any basis therefor known to the Borrower) which questions the
capacity, ability or authority of the Borrower to execute, deliver and perform
the provisions of the Loan Documents or the Construction and Development
Documents to which it is a party, or if determined adversely to the Borrower ,
would reasonably be expected to cause a Material Adverse Change.
8.8 Financial Statements and Other Information.
The information, financial statements and other financial data
furnished by the Borrower to the Bank are true and correct in all material
respects and present fairly the financial condition of the Borrower as of the
date of such statements or data. All other information given to the Bank by and
with respect to the Borrower is accurate, correct and complete in all material
respects, as of the date such information is given. To Borrower's knowledge, all
surveys, plot plans and similar documents heretofore furnished by the Borrower
to the Bank with respect to the Improvements are accurate and complete in all
material respects as of their respective dates.
8.9 Impositions.
All returns for Impositions required to have been filed by the Borrower
have been timely filed and payment has been made, or will be made prior to the
date upon which any penalty or fine may be imposed, for all Impositions which
have or may become due pursuant to said returns or to assessments received
except to the extent that any such Imposition may be contested in a manner
consistent with Section 2.3(c) of the Deed of Trust.
8.10 Title Aspects.
The Borrower has a good and marketable leasehold estate in the Land,
subject only to Permitted Encumbrances. The Borrower has been granted all
easements appropriate for the construction of the Improvements, and any mortgage
liens now or hereafter affecting any land burdened by such easements are
subordinate to such easements.
8.11 Zoning and Governmental Approvals.
To the best knowledge of Borrower, the development, construction, use
and occupancy of the Improvements in accordance with the Plans will conform in
all material respects to all applicable Laws, all existing Governmental
Approvals and all covenants, conditions and restrictions contained in a deed,
lease or other instrument or agreement covering or affecting all
<PAGE>
or any portion of the Land. All Governmental Approvals (except to the extent the
same are of a nature so as not to be obtainable until a later stage of
construction or completion of the Improvements) have been obtained and are valid
and in full force and effect.
8.12 Plans.
To the best knowledge of the Borrower, the Plans are accurate, true and
correct, complete and are satisfactory to the Borrower, except as provided in
Section 4.19 hereof. The Plans have been, or will be, prior to the date of the
First Disbursement of Construction Loan proceeds, approved by each Official Body
having jurisdiction over the Improvements and any others whose approval of the
Plans, in whole or in part, may be called for by applicable undertakings of the
Borrower.
8.13 Utilities.
All utility and municipal services necessary for the construction,
completion, use and occupancy of the Improvements are, or will be made,
available to the Land and have, or will have, sufficient capacity to operate the
Improvements for their intended purposes, including water supply, storm and
sanitary sewer facilities, electricity and telephone facilities. All impact,
connection or other requisite fees for such services have been paid or are
included in the Development Budget.
8.14 Security Interests.
Upon proper filing and continuation, the Liens and security interests
granted or to be granted to the Bank pursuant to this Agreement and the other
Loan Documents constitute and will continue to constitute valid perfected first
priority security interests, except for the Excluded Equipment, under the
Uniform Commercial Code or other applicable Law, entitled to all the rights,
benefits and priorities provided by the Uniform Commercial Code or any
other Law. As of the date hereof, the property encumbered by the Liens and
security interests granted to the Bank pursuant to this Agreement and the other
Loan Documents is subject to no other Liens or encumbrances except for the
Permitted Encumbrances.
8.15 Deed of Trust.
The Lien granted to the Bank pursuant to the Deed of Trust constitutes
and will, upon proper recording, constitute a valid perfected first priority
Lien under applicable Law, and the property secured thereby is subject to no
other Liens or encumbrances except for the Permitted Encumbrances. All action as
is necessary or advisable to establish such Lien and its priority as described
in the preceding sentence, including recordation of the Deed of Trust in the
appropriate offices, will be taken promptly following the Closing Date, and
there will be, upon execution, delivery and recordation of the Deed of Trust, no
necessity for any further action in order to protect, preserve and continue such
Lien and such priority.
<PAGE>
8.16 Construction and Development Documents.
The only agreements executed and delivered by or on behalf of the
Borrower in connection with the development, construction or provision of labor,
materials or design or supervisory services with respect to the Improvements are
those Construction and Development Documents which shall be furnished to the
Bank and the Inspecting Architect prior to the Closing Date pursuant to the
terms of this Agreement except for any miscellaneous agreements entered into
following the date of the First Disbursement for consulting and related services
which shall be subject to the Bank's reasonable review and approval.
8.17 Environmental Matters.
The Environmental Indemnity Agreement is hereby incorporated herein by
this reference.
8.18 Insurance.
All insurance policies and bonds furnished to the Bank by the Borrower
are valid and in full force and effect. No notice has been given or claim made
and, to the best of the Borrower's knowledge, no grounds presently exist to
cancel or void any of such policies or bonds or to reduce the coverage provided
thereby. In Borrower's reasonable judgment, such policies and bonds provide
adequate coverage in amounts sufficient to insure the assets and risks of the
Borrower in accordance with prudent business practices.
8.19 [INTENTIONALLY DELETED]
8.20 Pension Plans and Benefit Arrangements.
(a) The Borrower and each member of the ERISA Group are in
compliance in all material respects with any applicable provisions of ERISA with
respect to all Benefit Arrangements, Pension Plans and Multiemployer Pension and
Welfare Plans. There has been no Prohibited Transaction with respect to any
Benefit Arrangement or any Pension Plan or, to the best knowledge of the
Borrower, with respect to any Multiemployer Pension Plan or Multiple Employer
Pension Plan, which could result in any material liability of the Borrower or
any other member of the ERISA Group. The Borrower and all members of the ERISA
Group have made when due any and all payments required to be made under any
agreement relating to a Multiemployer Pension Plan or a Multiple Employer
Pension Plan or any Law pertaining thereto. With respect to each Pension Plan
and Multiemployer Pension Plan, the Borrower and each member of the ERISA Group
(i) have fulfilled in all material respects their obligations under the minimum
funding standards of ERISA, (ii) have not incurred any liability to the PBGC,
and (iii) have not had asserted against them any penalty for failure to fulfill
the minimum funding requirements of ERISA.
(b) To the best of the Borrower's knowledge, each
Multiemployer Pension or Welfare Plan and Multiple Employer Pension Plan is able
to pay benefits thereunder when due.
<PAGE>
(c) Neither the Borrower nor any other member of the ERISA
Group has instituted or intends to institute proceedings to terminate any
Pension Plan.
(d) No event requiring notice to the PBGC under Section
302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur with
respect to any Pension Plan, and no amendment with respect to which security is
required under Section 307 of ERISA has been made or is reasonably expected to
be made to any Plan.
(e) The aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Pension Plan, determined on a
plan termination basis, as disclosed in, and as of the date of, the most recent
actuarial report for such Plan, does not exceed the aggregate fair market value
of the assets of such Pension Plan.
(f) Neither the Borrower nor any other member of the ERISA
Group has incurred or reasonably expects to incur any material withdrawal
liability under ERISA to any Multiemployer Pension or Welfare Plan or Multiple
Employer Pension Plan. Neither the Borrower nor any other member of the ERISA
Group has been notified by any Multiemployer Pension Plan or Multiple Employer
Pension Plan that such MultiEmployer Pension Plan or Multiple Employer Pension
Plan has been terminated within the meaning of Title IV of ERISA, and, to the
best knowledge of the Borrower, no Multiemployer Pension Plan or Multiple
Employer Pension Plan is reasonably expected to be reorganized or terminated,
within the meaning of Title IV of ERISA.
(g) To the extent that any Benefit Arrangement is insured, the
Borrower and all members of the ERISA Group have paid when due all premiums
required to be paid for all periods through and including the Closing Date. To
the extent that any Benefit Arrangement is funded other than with insurance, the
Borrower and all members of the ERISA Group have made when due all contributions
required to be paid for all periods through and including the Closing Date.
There has been no COBRA Violation by Borrower or any member of the ERISA Group
which could result in any material liability to the Borrower.
9. [Intentionally Omitted]
10. DEFAULTS AND REMEDIES
10.1 Events of Default.
The following shall be deemed to be Events of Default under this
Agreement (whatever the reason therefor and whether voluntary, involuntary or
effected by operation of Law):
(a) The Borrower shall fail to make any payment of principal
or interest due with respect to the Construction Loan within ten (10) days
following the date on which such payment shall become due (except for the
payment of principal and interest due on the Expiration Date, which if not paid
in full on such date, shall constitute on Event of Default), or the Borrower
<PAGE>
shall fail to pay within ten (10) days after written notice any other amount
owing hereunder or under the other Loan Documents;
(b) Any representation or warranty made at any time by the
Borrower or any Guarantor herein or in any other Loan Document, or in any
certificate, other instrument or written statement furnished by Borrower or any
Guarantor pursuant to the provisions hereof or thereof, shall prove to have been
false or misleading in any material respect as of the time it was made or
furnished;
(c) The Borrower shall fail to make any deposit of funds
required under this Agreement within ten (10) days after written demand by the
Bank or such longer period of time, if any, expressly provided for in this
Agreement;
(d) The Borrower shall fail to comply with any other covenant
contained in this Agreement or any of the other Loan Documents which calls for
the payment of money and shall not cure that failure within ten (10) days after
written demand by the Bank;
(e) The Borrower or any Guarantor shall fail to comply with
any covenant contained in this Agreement or any of the other Loan Documents,
other than those defaults referred to in the other subparagraphs of this Section
10.1, and shall not cure that failure within thirty (30) days after written
notice thereof by the Bank to Borrower and the Guarantors or such shorter period
of time for cure specified in any Loan Document (such grace period to be
applicable only in the event such default can be remedied by corrective action
of the Borrower or the applicable Guarantor as determined by the Bank in its
reasonable discretion), provided that, in the event that such default cannot be
remedied with reasonable due diligence during such thirty (30) day period, such
default shall not constitute an Event of Default so long as Borrower or the
applicable Guarantor continues with reasonable due diligence to attempt to
remedy the same for such additional period of time as may be required not to
exceed an additional ninety (90) days;
(f) Construction of the Improvements is not completed to the
extent required under Section 6.6(b)(iii) hereof on or before October 30,
1997or, subject to Force Majeure, is abandoned for a period in excess of ten
(10) consecutive Business Days;
(g) A default by the Borrower or any Guarantor shall occur
under the Construction and Development Documents, and such default shall not be
cured within any available cure period provided therein;
(h) Any Guarantor shall cease to be Solvent or shall be unable
to pay their respective debts as the same shall mature or there shall be filed
by or against (unless dismissed within sixty (60) days after any involuntary
filing) Borrower or any Guarantor a petition in bankruptcy or a petition seeking
the appointment of a receiver, trustee or conservator for Borrower or any
Guarantor or any portion of their respective properties or seeking
reorganization or to effect a plan or other arrangement with or for the benefit
of creditors, or any Borrower or any Guarantor shall consent to the appointment
of a receiver, trustee or conservator;
<PAGE>
(i) Any Lien or encumbrance, other than a Permitted
Encumbrance, is entered against the Land or Improvements and such Lien or
encumbrance is not discharged, vacated or bonded within fifteen (15) Business
Days after the filing thereof;
(j) Any final judgment(s) for the payment of money in excess
of $50,000 shall be entered against the Borrower or any Guarantor by a court
having jurisdiction which is not discharged, vacated, bonded or stayed pending
appeal within a period of thirty (30) days from the date of entry of such
judgment(s);
(k) Richard E. Jacobs shall fail to comply with the covenants
contained in Sections 10, 11 and 12 of his Payment Guaranty;
(l) Jeffrey P. Jacobs shall fail to comply with the covenants
contained in Section 10 of his Payment Guaranty;
(m) Any of the following occurs: (i) any Reportable Event,
which the Bank determines in good faith constitutes grounds for the termination
of any Pension Plan by the PBGC or the appointment of a trustee to administer or
liquidate any Pension Plan, shall have occurred and be continuing; (ii)
proceedings shall have been instituted or other action taken to terminate any
Pension Plan, or a termination notice shall have been filed with respect to any
Pension Plan; (iii) a trustee shall be appointed to administer or liquidate any
Pension Plan; (iv) the PBGC shall give notice of its intent to institute
proceedings to terminate any Pension Plan or Pension Plans or to appoint a
trustee to administer or liquidate any Pension Plan; and, in the case of the
occurrence of (i), (ii), (iii) or (iv) above, the Bank determines in good faith
that the amount of Borrower's liability is likely to cause a Material Adverse
Change; (v) the Borrower or any member of the ERISA Group shall fail to make any
contributions when due to a Pension Plan or a Multiemployer Pension Plan; (vi)
the Borrower or any member of the ERISA Group shall make any amendment to a
Pension Plan with respect to which security is required under Section 307 of
ERISA; (vii) the Borrower or any member of the ERISA Group shall withdraw
completely or partially from a Multiemployer Pension Plan; (viii) the Borrower
or any member of the ERISA Group shall withdraw (or shall be deemed under
Section 4062(e) of ERISA to withdraw) from a Multiple Employer Pension Plan; or
(ix) any applicable Law, rule or regulation is adopted, changed or interpreted
by any governmental authority or agency or court with respect to or otherwise
affecting one or more Pension Plans, Multiemployer Pension Plans or Benefit
Arrangements and, with respect to any of the events specified in (v), (vi),
(vii), (viii) or (ix), the Bank determines in good faith that any such
occurrence would be reasonably likely to materially and adversely affect the
total enterprise represented by the Borrower and the other members of the ERISA
Group;
(n) An Event of Default shall have occurred under the Line of
Credit;
(o) An Event of Default shall occur under any other note, loan
agreement or other credit facility between the Borrower and the Bank;
<PAGE>
(p) An acceleration of the maturity of any Indebtedness in an
amount in excess of $5,000,000 shall occur under any note, loan agreement or
other credit facility between the Borrower or Richard E. Jacobs and any party
other than the Bank, except for any such Indebtedness where recourse thereon is
limited to real or personal property subject to customary exceptions such as
fraud and misappropriation of funds; or
(q) Holdings shall fail to comply with any of the covenants
contained in Sections 11, 12 and 14 of its Payment Guaranty.
10.2 Remedies.
Following the occurrence of a Remedies Event, the Bank may exercise any
or all of the following rights and remedies:
(a) The Bank shall be under no further obligations to make
disbursements of the Construction Loan hereunder. The Bank may declare the
unpaid principal amount of the Note then outstanding and all interest accrued
thereon and all other indebtedness of the Borrower to the Bank hereunder and
thereunder to be immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived.
(b) The Bank and any branch, subsidiary or affiliate of the
Bank anywhere in the world shall have the right, in addition to all other rights
and remedies available to it, without notice to the Borrower or the Guarantors,
to set-off against and apply to the then unpaid balance of the Construction Loan
and all other obligations of the Borrower hereunder or under any other
Construction Loan Document any debt owing to, and any other funds held in any
manner for the account of, the Borrower, or by such branch subsidiary or
affiliate, including without limitation, all funds in all deposit accounts
(whether time or demand, general or special, provisionally credited or finally
credited, or otherwise) now or hereafter maintained by the Borrower for its own
account with the Bank or such branch, subsidiary or affiliate. Such right shall
exist whether or not the Bank shall have made any demand under this Agreement or
any other Construction Loan Document, whether or not such debt owing to or funds
held for the account of the Borrower is or are matured or unmatured and
regardless of the existence or adequacy of any Collateral, the Guaranties or
other security given to the Bank.
(c) Whether or not the Bank shall have accelerated the
maturity of the Construction Loan pursuant to any of the foregoing provisions of
this Section 10.2, the Bank may proceed to protect and enforce the Bank's rights
by suit in equity, action at law and/or other appropriate proceeding, for the
specific performance of any covenant or agreement contained in this Agreement or
the other Loan Documents and, as to any amount that shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or to enforce
any other legal or equitable right of the Bank.
(d) From and after the date on which the Bank has taken any
action pursuant to this Section 10.2 and until all Bank Debt has been paid in
full, any and all proceeds received by
<PAGE>
the Bank from any sale or other disposition of any Collateral, or any part
thereof, or the exercise of any other remedy by the Bank, shall be applied as
follows:
(i) first, to reimburse the Bank for out-of-pocket
costs, expenses and disbursements, including without limitation, reasonable
attorneys' fees and legal expenses actually incurred by the Bank in connection
with realizing on any Collateral or collection of any obligations of the
Borrower or the Guarantor under any of the Loan Documents, including advances
made subsequent to a Remedies Event by the Bank or for the reasonable
maintenance, preservation, protection or enforcement of, or realization upon,
any Collateral, including without limitation, advances for Impositions,
insurance, repairs and the like and reasonable expenses incurred to sell or
otherwise realize on, or prepare for sale or other realization on, any of the
Collateral;
(ii) second, to the repayment of all Bank Debt,
whether of principal, interest, fees, expenses or otherwise; and
(iii) the balance, if any, as required by Law.
(e) The Bank shall have all of the rights and remedies
contained in this Agreement and the other Loan Documents (including the right to
appoint a receiver and all other rights described in the Deed of Trust). In
addition, the Bank shall have all of the rights and remedies of a secured party
under the Uniform Commercial Code or other applicable Law, all of which rights
and remedies shall be cumulative and non-exclusive, to the extent permitted by
Law.
(f) The Bank shall have the further right to enter the Land
and Improvements and take any and all actions necessary, in its judgment, to
secure, winterize, protect and preserve the Improvements and any materials or
supplies located on the Land, to complete in part or in full the construction of
the Improvements, including, but not limited to, making changes in the Plans,
and entering into, and, subject to the terms thereof, modifying or terminating
the Construction and Development Documents and other contractual arrangements.
The Bank may elect to continue construction in accordance with the Plans. If the
Bank elects to continue with the construction of the Improvements, the Bank will
not assume any liability to Borrower or any other person for completing the
Improvements or for the manner or quality of construction of the Improvements
and Borrower expressly waives any such liability, except to the extent that such
liability shall be caused directly by the gross negligence or willful misconduct
of the Bank. Borrower irrevocably appoints the Bank as its attorney-in-fact,
with full power of substitution, to complete the Improvements in Borrower's name
or the Bank may elect to complete construction in the name of the Bank. In any
event, all sums actually expended by the Bank in completing construction or
otherwise exercising its rights hereunder or under the other Loan Documents will
be secured by the Deed of Trust and all other Collateral Documents and shall
bear interest at the Default Rate.
10.3 Notice of Sale.
Any notice required to be given by the Bank of a sale, lease, or other
disposition of any Collateral or any other intended action by the Bank, if given
at least fifteen (15) Business Days
<PAGE>
prior to such proposed action, shall constitute commercially reasonable and fair
notice thereof to the Borrower.
11. MISCELLANEOUS
11.1 Modifications, Amendments or Waivers.
The Bank and the Borrower may from time to time enter into written
agreements amending or changing any provision of this Agreement or any other
Construction Loan Document (except as otherwise expressly provided herein) or
the rights of the Bank or the Borrower hereunder or thereunder, or may grant
written waivers or consents to a departure from the due performance of the
obligations of the Borrower hereunder or thereunder.
11.2 No Implied Waivers; Cumulative Remedies; Writing Required.
No course of dealing and no delay or failure of the Bank in exercising
any right, power, remedy or privilege under this Agreement or any other the
Construction Loan Document shall affect any other or future exercise thereof or
operate as a waiver thereof; nor shall any single or partial exercise thereof or
any abandonment or discontinuance of steps to enforce such a right, power,
remedy or privilege preclude any further exercise thereof or of any other right,
power, remedy or privilege. To the extent permitted by Law, the rights and
remedies of the Bank under this Agreement and any other Construction Loan
Document are cumulative and not exclusive of any rights or remedies which it
would otherwise have. Any waiver, consent or approval of any kind or character
on the part of the Bank of any breach or default under this Agreement or any
such waiver of any provision or condition of this Agreement must be in writing
and shall be effective only to the extent specifically set forth in such
writing.
11.3 Reimbursement and Indemnification of the Bank by the Borrower;
Impositions.
The Borrower agrees unconditionally upon demand to pay to or reimburse
the Bank and to hold the Bank harmless against (i) liability for the payment of
all reasonable out-of-pocket costs, expenses and disbursements, including but
not limited to reasonable fees and expenses of counsel actually incurred by the
Bank subsequent to the Closing Date (a) relating to any amendments, waivers or
consents pursuant to the provisions hereof, and (b) in connection with any
workout or restructuring, or in connection with the protection, preservation,
exercise or enforcement of this Agreement or any other Construction Loan
Document or collection of amounts due hereunder or thereunder or the proof and
allowability of any claim arising under this Agreement or any other Construction
Loan Document, whether in insolvency proceedings or otherwise, and (ii) all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
actually imposed on, incurred by or asserted against the Bank in any way
relating to or arising out of this Agreement or any other Construction Loan
Document or any action taken or omitted by the Bank hereunder or thereunder,
provided that the Borrower shall not be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or
<PAGE>
disbursements, if the same results from the Bank's gross negligence or willful
misconduct. The Borrower agrees unconditionally to pay all stamp, document,
transfer, recording or filing taxes or fees and similar Impositions (except for
taxes on the overall net income of any Bank and except for franchise taxes) now
or hereafter determined by any Official Body to be actually due and payable in
connection with this Agreement or any other Construction Loan Document, and the
Borrower agrees unconditionally to save the Bank harmless from and against any
and all present or future claims, liabilities or losses with respect to or
resulting from any omission to pay or delay in paying any such taxes, fees or
other similar Impositions, except as otherwise provided herein.
11.4 Holidays.
Whenever any payment or action to be made or taken hereunder 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 (except as provided in
Section 3.2 with respect to Interest Periods), and such extension of time may be
included in computing interest or fees, if any, in connection with such payment
or action.
11.5 Funding by Branch, Subsidiary or Affiliate.
(a) Notional Funding. The Bank shall have the right from time
to time, without notice to the Borrower, to deem any franchise, subsidiary or
affiliate entity (which for the purposes of this Section 11.5 shall mean any
corporation or association which is directly or indirectly controlled by or is
under direct or indirect common control with any corporation or association
which directly or indirectly controls the Bank) of the Bank to have made,
maintained or funded any portion of the Construction Loan to which the Euro-Rate
Option applies at any time. Notional funding offices may be selected by the Bank
without regard to the Bank's actual methods of making, maintaining or funding
the Construction Loan or any sources of funding actually used by or available to
the Bank.
(b) Actual Funding. The Bank shall have the right from time to
time to make or maintain any portion of the Construction Loan by arranging for a
branch, subsidiary or affiliate of the Bank to make or maintain such portion of
the Construction Loan subject to the last sentence of this Section 11.5(b). If
the Bank causes a branch, subsidiary or affiliate to make or maintain any
portion of the Construction Loan hereunder, all terms and conditions of this
Agreement shall, except where the context clearly requires otherwise, be
applicable to such portion of the Construction Loan to the same extent as if
such portion of the Construction Loan were made or maintained by the Bank.
11.6 Notices.
All notices, requests, demands, directions and other communications
(collectively, "notices") given to or made upon any party hereto under the
provisions of this Agreement shall be by telephone (except for default notices
and notices to the Bank of funding requirements) or in writing (including telex
or facsimile communication) unless otherwise expressly required hereunder and
shall be delivered or sent by telex or facsimile to the respective parties at
the
<PAGE>
addresses and numbers set forth on Schedule I hereto or in accordance with any
subsequent written direction from any party to the others. All notices shall,
except as otherwise expressly herein provided, be effective (i) in the case of
telex or facsimile, when received, (ii) in the case of hand delivered notice,
when hand delivered, (iii) in the case of telephone, when telephoned to the
individual specified in Schedule I, provided, however, that in order to be
effective, telephonic notices must be confirmed in writing no later than the
next Business Day by letter, facsimile or telex, (iv) if given by mail, four (4)
days after such communication is deposited in the mails with first class postage
prepaid, return receipt requested, and (v) if given by any other means
(including by air courier), when delivered; provided, however, that notices to
the Bank with respect to conversion or renewal of Interest Rate Options and
prepayment shall not be effective until received.
11.7 Severability.
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be 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.
11.8 Governing Law.
This Agreement shall be deemed to be a contract under the Laws of the
Commonwealth of Pennsylvania and for all purposes shall be governed by and
construed and enforced in accordance with the Laws of the Commonwealth of
Pennsylvania without regard to its conflicts of laws principles.
11.9 Prior Understanding.
This Agreement, together with the other Loan Documents, supersedes all
prior understandings and agreements, whether written or oral, between the
parties hereto and thereto relating to the transactions provided for herein and
therein, including any prior confidentiality agreements and commitments.
11.10 Duration; Survival.
All representations and warranties of the Borrower contained herein or
made in connection herewith shall survive the making of the Construction Loan
and shall not be waived by the execution and delivery of this Agreement, any
investigation by the Bank, the making of the Construction Loan, or payment in
full of the Bank Debt in each case. All covenants and agreements of the Borrower
contained herein relating to the payment of principal, interest, premiums,
additional compensation or expenses and indemnification, including those set
forth in the Note and Sections 3.12 and 11.3 hereof, shall survive payment in
full of the Bank Debt.
11.11 Successors and Assigns.
<PAGE>
This Agreement shall be binding upon and shall inure to the benefit of
the Bank and the Borrower and their respective successors and assigns, except
that the Borrower may not assign or transfer any of its rights and obligations
hereunder or any interest herein. The Bank may, at its own cost, make
assignments of or sell participating in all or any part of the Construction Loan
to one or more banks or other entities. In the case of an assignment, the Bank
shall provide written notice thereof to the Borrower. Upon receipt and
acceptance by the Bank of the written agreement of such assignee to be bound by
the terms hereof, the assignee shall have, to the extent of such assignment, the
same rights, benefits and obligations as it would have if it had been a
signatory hereunder, and upon surrender of the Note, the Borrower shall execute
and deliver a replacement Note to the assignee in an amount equal to the amount
of the portion of the Construction Loan assumed by it and a new Note to the Bank
in an amount equal to the Construction Loan retained by it hereunder. In the
case of a participation, the participant's rights against the Bank in respect of
such participation shall be those set forth in the agreement executed by the
Bank in favor of the participant relating thereto and shall not include any
voting rights, except for voting rights limited to any increase in the principal
amount of the Construction Loan, any reduction in the applicable interest rate
or fees, and any postponement of any scheduled payment of principal, interest or
fees. All of the Bank's obligations under this Agreement or any other Loan
Documents shall remain unchanged and all amounts payable by the Borrower
hereunder or thereunder shall be determined as if the Bank had not sold such
participation.
11.12 Counterparts.
This Agreement may be executed by different parties hereto on any
number of separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together constitute one
and the same instrument.
11.13 Exceptions.
The representations and warranties and covenants contained herein shall
be independent of each other and no exception to any representation, warranty or
covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable Law.
11.14 Consent to Jurisdiction.
THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY AND THE UNITED
STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA, AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND AGREES THAT ALL SUCH SERVICE
OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE BORROWER AT
THE ADDRESSES PROVIDED FOR IN SECTION 11.6 HEREOF AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED UPON ACTUAL
<PAGE>
RECEIPT THEREOF. THE BORROWER WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF
ANY ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY
DEFENSE BASED ON LACK OF JURISDICTION OR VENUE.
11.15 No Third Parties Benefitted.
This Agreement is made and entered into for the sole protection and
benefit of the Borrower and the Bank. No trust fund is created by this Agreement
and no other persons or entities will have any right of action under this
Agreement or any right against the Bank to obtain any proceeds of the
Construction Loan.
11.16 Authority to File Notices.
The Borrower irrevocably appoints the Bank as its attorney-in-fact,
with full power of substitution, to file for record, at the Borrower's cost and
expense and in the Borrower's name, any notices that the Bank considers
reasonably necessary or desirable to protect the Collateral.
11.17 Signs; Publicity.
The Borrower may, at Borrower's expense, erect a sign or signs as
reasonably approved by the Bank upon the Land and Improvements at any reasonable
location indicating the source of the development and construction financing.
The announcement of, and the issuance of any publicity with respect to, the
Construction Loan and the transactions contemplated hereby shall be subject to
the prior written approval of the Bank, which approval shall not be unreasonably
withheld or delayed.
11.18 Interpretation.
Whenever the context requires, all words used in the singular will be
construed to have been used in the plural, and vice versa, and each gender will
include any other gender. The captions of the articles, sections, schedules and
exhibits of this Agreement are for convenience only and do not define or limit
any terms or provisions. In the event of a conflict between the terms of the
other Loan Documents and the terms of this Agreement, the terms of this
Agreement shall control.
11.19 Status of Parties.
It is understood and agreed that the relationship of the parties hereto
is that of borrower and lender and that nothing contained herein or in any of
the other Loan Documents shall be construed to constitute a partnership, joint
venture or co-tenancy among Borrower or the Bank.
<PAGE>
11.20 Brokerage Fee.
The Borrower represents to the Bank that no broker or other person is
entitled to a brokerage fee or commission as a result of the Borrower's actions
or undertakings in connection with the financing of the Improvements and agrees
to hold the Bank harmless from all claims for brokerage commissions which may be
made as a result of such actions or undertakings, if any.
11.21 Waiver of Jury Trial.
THE BORROWER AND THE BANK EACH WAIVES THE RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS RELATED
TO ANY OF THE LOAN DOCUMENTS. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND
VOLUNTARILY MADE BY BORROWER AND THE BANK AND EACH ACKNOWLEDGES THAT NONE OF THE
BORROWER OR THE BANK NOR ANY PERSON ACTING ON BEHALF OF EITHER OF THEM HAS OR
HAVE MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR
IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE BORROWER AND THE BANK EACH
FURTHER ACKNOWLEDGES THAT EACH OF THEM HAS BEEN REPRESENTED (OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE
MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED BY ITS OWN FREE
WILL, AND THAT BORROWER AND THE BANK EACH HAS HAD THE OPPORTUNITY TO DISCUSS
THIS WAIVER WITH COUNSEL. THE BORROWER AND THE BANK EACH AGREES THAT THE
OBLIGATIONS EVIDENCED BY THIS AGREEMENT ARE EXEMPTED TRANSACTIONS UNDER THE
TRUTH-IN-LENDING ACT, 15 U.S.C. SECTION 1061, ET SEQ. THE BORROWER AND THE BANK
EACH FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING OF THIS
WAIVER PROVISION.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement under seal as of the day and year
first above written.
BORROWER:
ATTEST/WITNESS: COLONIAL DOWNS, L.P.,
a Virginia limited partnership
By: STANSLEY RACING CORP., a Virginia
corporation, its sole general partner
By: /s/ Jeffrey P. Jacobs
- ---------------------- ------------------------
Name: Name: Jeffrey P. Jacobs
Title: Title: CEO
[CORPORATE SEAL]
BANK:
ATTEST/WITNESS: PNC BANK, NATIONAL ASSOCIATION, a national banking
association
By: /s/ Brad J. Carpenter
- ---------------------- --------------------------
Name: Name: Brad J. Carpenter
Title: Title:
<PAGE>
SCHEDULE I
NAMES, ADDRESSES, TELEPHONE
AND TELECOPIER NUMBERS OF PARTIES
Borrower:
Colonial Downs, L.P.
6201 North Courthouse Road
P.O. Box 456
Providence Forge, VA 23140
Telephone: (804) 966-2477
Telecopier: (804) 966-2063
Attn: O.J. Peterson, III, President
with copies to:
Richard E. Jacobs
The Richard E. Jacobs Group, Inc.
25425 Center Ridge Road
Cleveland OH 44145-4122
and
Jeffrey P. Jacobs
Jacobs Entertainment, Inc.
425 West Lakeside Avenue, Suite 601
Cleveland OH 44113
and
James L. Weinberg, Esquire
Hirschler, Fleischer, Weinberg
Cox & Allen
P.O. Box 500
701 East Byrd Street
Richmond, Virginia 23219
<PAGE>
Bank:
PNC BANK, NATIONAL ASSOCIATION
One PNC Plaza, 19th Floor
249 Fifth Avenue
P1-POPP-19-2
Pittsburgh, PA 15219-2707
Attention: Brad J. Carpenter
Telephone: 412-762-7947
Telecopier: 412-762-6500
With a copy to:
Marcus & Shapira, L.L.P.
One Oxford Centre - 35th Floor
301 Grant Street
Pittsburgh, PA 15219-6401
Attention: Charles G. Knox, Esq.
<PAGE>
SCHEDULE II
EXCLUDED EQUIPMENT
Item Quantity
---- --------
Window Washing Equipment 1
Security Camera System
Tram Pullers 3
Timing Systems (Infield Only)
Finish Line Lighting
Starting Gates 2
Harness Gates
Mid-Size Tractors 3
Large Tractors 3
Trash Dumpsters
Manure Bins (10 x 10) Concrete 30
Copy Machines
Fax Machines
Medical Waste Dumpster
Mutuel Line Office Camera System 10
Horse Walkers
Tote equipment to be leased from Auto Tote or other nationally recognized tote
equipment manufacturer
Computer equipment to be used in connection with the operation of the
racetrack's pari-mutuel operations
Television and satellite dishes used for export and import broadcasts of
simulcast horse races
Lighting used to illuminate the racetrack surfaces for night racing
Point of sale cash registers for food and beverage operations.
Office furniture for corporate headquarters.
<PAGE>
SCHEDULE III
EXCLUDED DEBT
1. Letters of Credit in the aggregate amount of $1 million issued in favor
of the Virginia Racing Commission pursuant to an Amended and Restated
Performance Guarantee Agreement, dated as of February 27, 1997.
2. Letter of Credit in the amount of $200,000 issued in favor of New Kent
County, Virginia to secure Colonial Downs, L.P.'s obligations under its
Erosion and Sediment Control Plan.
3. Reconciliation of simulcast horse racing pari-mutuel pools made every
two weeks to settle obligations arising in the normal course of
business through the Borrower's "hubbing" arrangements. A "hub"
coordinates the broadcast of simulcast horse races from sending and
receiving racetracks; the placement of wagers on such broadcasts; the
setting of pari-mutuel odds based on such wagers, and the payout of
winning wagers. The Borrower currently contracts with Pocono Downs on a
month-to-month basis for its hubbing needs.
4. Any liabilities of the Borrower for horsemen purses or contributions
thereto to the extent the Borrower has funded such liabilities by
deposits to the appropriate accounts pursuant to agreements with the
horsemen.
5. Monthly management fee payable to the Maryland Jockey Club in the
ordinary course of business pursuant to a Management and Consulting
Agreement, dated as of April 22, 1996, by and among Colonial Downs,
L.P., Stansley Management Corp., Stansley Racing Corp., and
Maryland-Virginia Racing Circuit, Inc. (an affiliate of the Maryland
Jockey Club)
6. Jacobs Loan
<PAGE>
SCHEDULE IV
INCLUDED EQUIPMENT
Description Quantity
1. Food Service Equipment
2. Furnishings, Milwork and Specialties
3. Track Kitchen and Paddock Concession Equipment
4. Overhead and Profit relating to the foregoing
5. Installations relating to the foregoing
6. Tax and Freight relating to the foregoing
7. Miscellaneous Construction Costs relating to the foregoing
8. Design and Permit Fees relating to the foregoing
9. Contingency (Included Equipment)
10. Property Maintenance
11. Parking Lot Vacuum/Sweeper 1
12. Snow Removal Equipment
13. Garden Tractor 1
14. Tractor Accessories
15. Gas Powered Edgers 1
16. Pressure Washers 1
17. 60" Deck Mower 1
18. 36" Walk Behind Mower 1
19. Miscellaneous Tools
20. Hedge Trimmer 1
21. Bob Cat Loader 1
22. Tractor w/Accessories 1
23. Facility Landscaping*
- ------------------------------
<PAGE>
*Front Gate/Entrance Lawn/Infield Tote Board
1. Building Maintenance
1. Back Pack Blowers 2
2. Fire Extinguishers 50
3. Floor Buffer/Scrubbers 3
4. Hand Truck 4
5. Wet/Dry Vac 2
6. Carpet Vacuum 2
7. Miscellaneous Mops, Tools, Etc.
1. Security
1. Key Cabinet 1
2. Radio/Paging System 15
3. Flashlights 10
4. Safety Vests 10
5. First Aid Equipment
6. Miscellaneous Office Supplies
1. Vehicles
1. 1 Ton Truck 2 Used
2. 2 Ton Flatbed 1 Used
3. Jeeps for Security 2 Used
4. Golf Carts 2
1. Track
1. Track Rail (Safety, Outside, Portable)
2. Tote Board
3. Infield Flag Poles 3
4. Infield Watering System
5. Distance Markers
6. Track Lighting System (Barns/Parking)
7. Back Up Generator for Track Lighting
8. TV Towers 5
9. TV Towers Phone System
10. TV Towers Electrical
11. Finish Line Marker 2
<PAGE>
15. Track Maintenance
1. 22,500 - 30,000 Gal. Water Truck 3
2. Motor Engineer (Grader) 1
3. Roller Harrows Thbd. 3
4. Roller Harrows Stds. 3
5. Finish Harrows 3
6. Turf Rollers 1
7. Turf Aerator 1
8. 16" Floats W Rakes 3
9. Gang Mower 1
10. Fertilizer Trailer 1
11. Fuel Storage Tanks w/Pump
12. Hand Tools/Hoses
13. Welders 1
14. Horse Ambulance 1
15. Back Hoe 1 Used
16. Pickup Truck 1
17. Roto Rooter Equip. 1
18. Air Compressor/Battery Charger 1
16. Barn Area
1. Dump Trucks 1
2. Front End Loader
3. Winners/Viewers Circle/Misfence
4. Security Gate Building By Contractor
5. Barn Area Paging System
6. Signage
7. Post Mortem Barn By Contractor
8. Perimeter Fence By Contractor
9. Trailer Parking Storage By Contractor
10. Barn Area Fencing By Contractor
1. Racing Dept.
1. Scales 3
2. House Racing Color 2
3. Saddle Pads
4. Saddle Towels (Sets) 3
5. Miscellaneous Harness
6. Lead Weights 200 lb.
7. Head Numbers (Sets) 2
8. Rider Arm Numbers 2
9. Colors Rack 1
10. Linen Towels 1
11. Bunk Beds 4
12. Commercial Grade Washing Machine 2
<PAGE>
13. Commercial Grade Dryer 2
14. Sauna 2
15. Whirlpool 2
16. Valet Tables 6
17. Jockey Room Furniture
18. Paddock Stall Numbers
19. Claims Clock 1
20. Fireproof File Cabinet 3
21. Small Safe 1
22. Miscellaneous Office Supplies
1. Detention Barn
1. Commercial Chest Freezer 1
2. Water Hoses & Buckets 1
3. Hot Water Heater 1
4. Miscellaneous Hand Tools
5. P" Catcher Sticks 10
6. Miscellaneous Office Supplies
1. Mutuel
1. Currency Counters 8
2. Coin Counters/Rollers 2
3. Walk-in-Safe 1
4. Small Safe 3
5. Calculators 15
6. Paper Shredders 3
7. 4 Wheel Carts 6
8. Teller/Money Room Money Boxes 150
9. Teller Money Bags 300
10. Miscellaneous Money Bags 10
11. Mutuel Stools 135
12. Miscellaneous Office Supplies
1. Admissions/Parking
1. Traffic Counter 1
2. Traffic Cones/Barriers 30
3. Valet Parking Booth/Awning
4. Ticket Racks/Key Board
5. Money Box 10
6. Currency Counter 1
7. Coin Counter 1
8. Signage
<PAGE>
EXHIBIT A
DEVELOPMENT BUDGET
<TABLE>
<CAPTION>
To Be Paid From To Be Paid
Construction From Borrower's
Cost Category Loan Proceeds Equity Total Cost
------------- ------------- ------ ----------
<S> <C>
1. $ $ $
2.
3.
4.
5.
6.
7.
8.
9.
10. __________ __________ __________
TOTAL: $ $ $
</TABLE>
<PAGE>
EXHIBIT B
FORM OF REQUEST FOR DISBURSEMENT
Date _______________
REQUEST FOR DISBURSEMENT NO. __________
TO:
Re: Construction Loan Agreement (the "Agreement"), dated
__________, 1997, between Colonial Downs, L.P. ("Borrower")
and PNC Bank, National Association ("the Bank")
In accordance with the terms of the Agreement, you are hereby authorized and
requested to make disbursement of funds held by you in the amount shown by the
attached Cost Certificate [the form to be designated by the Bank], which is
incorporated herein by this reference and made a part hereof, and which
indicates the item number from the Development Budget from which funds are
requested. Attached hereto are invoices supporting the disbursement hereby
requested, and lien releases and waivers from the Contractor for the amounts
previously disbursed by the Bank for hard costs. All capitalized terms herein
have the meanings ascribed to them in this Agreement.
The undersigned hereby certify that:
(i) the labor, services and/or materials covered hereby have been performed upon
or furnished in connection with the Improvements;
<PAGE>
(ii) all construction of the Improvements to date has been performed in
accordance with recognized professional standards, in accordance with the Plans
and except as may be permitted under the Agreement, there have been no changes
in the Plans, except as have been approved by the Bank in writing;
Borrower hereby certifies that:
(i) to its knowledge, no default and no event or condition which, with the
passage of time or the giving of notice, or both, would constitute a default
under the Construction Contract has occurred or exists as of the date hereof;
(ii) there have been no changes in the scope or time of performance of the work
of construction, nor any extra work, labor or materials ordered or contracted
for, except as have been approved by you in writing;
B-1
<PAGE>
(iii) the Construction Loan proceeds hereby requested for construction costs
will pay all sums payable to date for any labor, materials and services
furnished in connection with construction of the Improvements;
(iv) all amounts previously disbursed by you for labor, services and/or
materials pursuant to previous Requests for Disbursement have been paid to the
parties entitled thereto with the proper designation of contract and account for
which payment was made;
(v) no change is required in the Development Budget or any category thereof; and
(vi) all conditions of the Agreement to the disbursement of the Construction
Loan proceeds hereby requested have been fulfilled, and no Remedies Event and no
Conditional Default under the Agreement has occurred or exists as of the date
hereof.
BORROWER
By: ________________________________
Title:
ARCHITECT
By: _______________________________
Title:
CONTRACTOR
By: ______________________________
Title:
B-2
<PAGE>
EXHIBIT C
FORMS OF ARCHITECT'S, CONTRACTOR'S [AND ENGINEER'S]
CONSENTS AND ARCHITECT'S [AND ENGINEER'S CERTIFICATES]
CONTRACTOR'S CONSENT
With respect to the project undertaken in connection with that certain
Construction Contract (the "Construction Contract"), dated as of
________________ between the undersigned and Colonial Downs, L.P. ("Borrower"),
the undersigned, intending to be legally bound, agrees as follows:
1. Unless otherwise defined herein, all capitalized terms shall have the
meanings ascribed to them in the Construction Loan Agreement (as hereinafter
defined).
2. The undersigned acknowledges that Borrower and PNC Bank, National Association
("Lender") have entered into a Construction Loan Agreement (the "Construction
Loan Agreement") in connection with the project described in the Construction
Contract. Notwithstanding any conflicting provisions of the Construction
Contract, Lender and Borrower may at any time or times establish additional or
different conditions to disbursement of loan proceeds under the Construction
Loan Agreement and may otherwise modify or amend the terms of the Construction
Loan Agreement without the consent of the undersigned and that the undersigned
does not and shall not have any right to enforce the Construction Loan Agreement
or otherwise to require Lender to disburse any moneys.
3. The undersigned agrees that it will give written notice to Lender of any
defaults of Borrower under the Construction Contract at least thirty (30) days
prior to suspending or terminating its obligations thereunder.
<PAGE>
4. The undersigned agrees that, notwithstanding any terms of the Construction
Contract to the contrary and without regard to any default of Borrower under the
Construction Contract or any dispute arising with Borrower, Lender or any other
person or entity, the undersigned will diligently continue the work of
construction of the Improvements so long as the undersigned shall be paid for
all actual work performed to the extent (i) such work shall have been approved
by the Architect and Inspecting Architect designated by Lender, (ii) such work
shall not be disputed by Borrower, (iii) Lender shall not have theretofore made
disbursements for such work, and (iv) the lien rights of the undersigned and the
lien rights of its subcontractors, sub-subcontractors and materialmen with
respect to such work shall have been effectively waived.
5. The undersigned agrees that all payments received from Borrower or from
Lender shall be (i) applied against payments due to the undersigned under the
Construction Contract and shall not be applied against any other debts of
Borrower to the undersigned; (ii) applied against payments due under the
Construction Contract in the order which such payments became due; (iii) applied
only against payments due and not contested by Borrower or Lender; and (iv)
applied to the obligations of undersigned to such subcontractor or materialmen
with regard to labor and materials supplied for the construction of the
Improvements and not to any other debt owed by undersigned to such
subcontractors or materialmen, and the undersigned shall make all payments to
its subcontractors and materialmen expressly conditioned upon such application.
6. Lender shall have the right, to the extent of the undersigned's rights
therein, to use the Plans prepared for the Improvements and the ideas, designs
and concepts contained therein in connection with any such completion of the
Improvements without payment of any additional fees or charges to the
undersigned for such use.
7. Except as may otherwise be provided in the Loan Agreement, the undersigned
shall not make any changes in the Plans or in the Construction Contract
(including change orders) without the prior written consent of Lender.
8. The undersigned acknowledges and consents to the collateral assignment of the
Construction Contract to Lender on such terms as may be provided in the
Construction Loan Agreement and related documents.
9. The undersigned, for itself and all its subcontractors, hereby waives and
releases all lien rights under the mechanics' lien laws in connection with all
work performed and to be performed on the Land or Improvements.
WITNESS/ATTEST:
By: ______________________________
Title:
Dated as of:
<PAGE>
CERTIFICATE OF ARCHITECT
The undersigned architect hereby certifies to PNC Bank, National Association(the
"Lender") and Colonial Downs, L.P. (the "Borrower") with respect to the "Land",
the "Improvements" and the "Plans" identified in the Construction Loan Agreement
(the "Agreement") between Lender and Borrower, relative to the financing of the
construction of the Improvements located in New Kent County, Virginia as
follows:
1. All governmental permits, licenses, approvals and the like ("Permits")
required for the construction of the Improvements and all off-site work,
including, without limitation, federal, state and local building, fire, safety,
energy, environmental and sanitation codes, have been validly issued by the
appropriate authorities and are now in full force and effect, or will be issued
at the appropriate stage of construction, as follows:
2. Upon completion of the Improvements in accordance with the Plans, the
Improvements (i) will comply in all material respects with all applicable
environmental, building, fire, health, sanitation and other similar codes and
regulations, including, without limitation, state and local building codes; (ii)
will constitute first-class construction; and (iii) will comply with
_______________ (the "Covenants").
3. Without limiting the generality of any of the foregoing, we further certify
as follows:
(a) We have examined the applicable zoning ordinance and have
determined that the Land lies entirely in a _______________ zoning district
under said ordinance. We have examined the Covenants and all applicable zoning
restrictions and requirements for such district, including use, dimensional,
bulk, parking and loading restrictions and requirements, and have determined
that the intended use of the Land and Improvements is permitted as a matter of
right and that the Improvements, when built according to the Plans, will comply
with all applicable zoning laws, ordinances and regulations and the Covenants.
<PAGE>
(b) Satisfactory methods of access to and egress from the Land and
Improvements and adjoining public ways are available and sufficient to meet the
reasonable needs thereof and to meet all applicable requirements of public
authorities. Sanitary water supply and storm sewer and sanitary sewer facilities
and other required utilities (gas, electricity, telephone, etc.) likewise are
available and sufficient to meet the reasonable needs of the Improvements and
all applicable requirements of public authorities and are within the lot lines
of the Land.
4. Without limiting the generality of the foregoing, we further certify as
follows:
(a) If constructed in accordance with the Plans, the Improvements will
have a total gross floor area of _______ square feet and ______ standard-size
parking spaces.
(b) When constructed in accordance with the Plans, the Improvements
will be served by off-street loading spaces, each space to be _______ feet in
width and ______ feet in length.
(c) If constructed in accordance with the Plans, emissions from the
Improvements will not result in a violation of New Source Performance Standards
or National Emission Standards for Hazardous Air Pollutants or any other
violation under CFR Title 40, Parts 60 and 61.
(d) If constructed in accordance with the Plans, discharge from the
Improvements will not result in a violation of effluent standards, prohibitions,
pretreatment or other standards under the provisions of the Federal Water
Pollution Act, 33 U.S.C. Sections 1251 et seq., or the regulations thereunder.
This certificate is being given to Lender and Borrower in connection with the
Agreement between Lender and Borrower for the purpose of financing the
construction of the Improvements. Lender may rely upon this certificate in
entering into the Agreement.
WITNESS:
_____________________________ By: ______________________________
Title:
<PAGE>
ARCHITECT'S CONSENT
With respect to the project undertaken in connection with that certain
Construction Loan Agreement (the "Construction Loan Agreement"), dated as of
___________ between PNC Bank, National Association (the "Lender") and Colonial
Downs, L.P. (the "Borrower"), the undersigned, intending to be legally bound,
agrees as follows:
1. Lender shall have the right to use the Plans and the ideas, designs and
concepts contained therein in connection with the completion of the Improvements
without payment of any additional fees or charges to the undersigned for such
use.
2. The undersigned hereby acknowledges and consents to the Collateral Assignment
from Borrower to Lender of that certain ________________ dated
___________________ between undersigned and the Borrower (the "Agreement").
3. The undersigned shall not make any changes in the Plans or the Agreement
without the prior written consent of Lender and shall immediately notify Lender
of any changes of which undersigned may become aware.
4. The undersigned hereby waives and releases all lien rights under the
mechanics' lien laws for services rendered in connection with all work performed
and to be performed on the Land, including the preparation of plans and
specifications for and supervision of said work.
5. Unless otherwise defined herein, all capitalized terms shall have the
meanings ascribed to them in the Construction Loan Agreement.
WITNESS/ATTEST:
______________________________ By: ______________________________
Title:
Dated as of:
<PAGE>
EXHIBIT D
REQUEST FOR EXTENSION
<PAGE>
EXHIBIT E
ITEMS TO BE SUPPLIED
1. Title and Collateral Matters
(a) a current in form acceptable to the Bank, land title survey of the
Land, certified by a registered surveyor approved by Bank, such
certification to be addressed to Bank and the title company issuing
Bank's title insurance policy and (i) to show the location and area
covered by all building lines affecting the Land, the location and area
of all easements encumbering and/or benefiting the Land, the relation
of the Land to public thoroughfares for access purposes, the location
and dimension of the Improvements and all other physical conditions on
the Land and any encroachments of the Improvements or other physical
conditions upon any easements, building lines or property boundary
lines, (ii) to state whether the Land or any portion thereof is located
in any federally designated flood plain area and, if so, to locate on
the survey such portion of the Land so designated (provided that such
flood certification need not be included to the extent a similar
certification is made in a letter from the Engineer delivered to the
Bank), and (iii) to show the dimension and location of all parking
areas, drives, easements and rights-of-way and the location of
adjoining streets and distances to the nearest intersecting street;
(b) a legal description of the Land and all easements, compatible with the
above-mentioned survey and sufficient for the purpose of the Deed of
Trust;
(c) evidence in such form as Bank may require of (i) satisfactory
subdivision of the Land and zoning for the Improvements; (ii) the
issuance of all necessary permits, licenses and approvals to occupy and
operate the Improvements, including, without limitation, all permits,
licenses and approvals required under federal, state or local laws or
regulations with respect to subdivision, highway access, drainage,
zoning, safety, building, occupancy, fire protection, environmental,
energy and similar matters; and (iii) the availability of means of
access to and from the Land by means of easements benefiting the same;
(d) evidence in such form as Bank may require, including without limitation
engineering and soils reports, environmental assessment reports,
reports and clearances from governmental agencies, chain of title
searches and certifications of Borrower, that the Property is free from
all asbestos and hazardous waste and all materials regulated by the
Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended, the Resource Conservation Recovery Act, as
amended, or by any other federal, state or local law, statute,
regulation, ordinance, code or order;
<PAGE>
(e) a title insurance binder, together with a specimen policy issued by a
title insurance company acceptable to Bank, pursuant to which said
title insurance company will on the Closing Date issue an ALTA 1992
lender's policy of title insurance insuring the Deed of Trust in the
principal sum secured thereby, and such portion thereof as shall be
advanced from time to time, as a first lien as aforesaid upon fee
simple title to the Project and all appurtenances thereto (including
such easements and appurtenances as may be required by Bank), subject
only to such exceptions as may be approved in writing by Bank, with
endorsements thereto as to such matters as Bank may designate,
including, without limitation, revolving credit, contiguity of the Land
with all easements and public roads, doing business requirements of
Bank and Borrower, and compliance with laws governing zoning,
subdivision and land use;
(f) evidence in such form as Bank may require (including the actual
policies and evidence of payment of premiums) that all types of hazard
and builders risk insurance (including business interruption insurance,
loss of rental income insurance, malicious mischief insurance and flood
insurance if in a federal flood prone area) available with respect to
the Improvements, public liability and property damage insurance with
respect to the Land and Improvements, and contractor's liability and
workmen's compensation insurance are in force and will continue in
force so long as the Loan is outstanding (the policies for such
insurance to be in form, in amounts and with companies satisfactory to
Bank, and all hazard policies to have attached to them mortgage clauses
in favor of Bank);
(g) an opinion or opinions of counsel acceptable to Bank and its counsel
(including local counsel), to be delivered on the closing date in form
and scope satisfactory to Bank, to the effect (in addition to other
matters which Bank may require to be favorably addressed) that (i)
Borrower and all Guarantors (other than individuals) are duly
organized, validly existing and in good standing under the laws of the
respective jurisdictions of their formation; (ii) Borrower and all
Guarantors (other than individuals) are duly qualified to do business
in the jurisdiction in which the Land is located, and Borrower and all
Guarantors have all requisite power and authority to operate the
Project and to enter into, perform and consummate all aspects of the
transactions contemplated hereby; (iii) neither the making of the Loan
nor the realization on Bank's collateral for the Loan in the
jurisdiction in which the Land is located is deemed to be the doing of
business by Bank in such jurisdiction; (iv) the Loans and the making
thereof are not subject to any state or local taxes; (v) all Loan
Documents and other documents to be executed by or on behalf of
Borrower or any Guarantor have been duly executed and are valid and
binding upon and enforceable against the Borrowers and Guarantors
parties thereto (other than Bank) in accordance with the respective
terms of each, except as the same may be limited by bankruptcy,
insolvency and similar laws affecting the rights of creditors
generally; (vi) there is no action, proceeding or investigation pending
or to the knowledge of counsel threatened (or any basis therefor known
to counsel) which questions the validity of the Loan or the
transactions contemplated hereby or the ability of Borrower or any
Guarantor from performing their respective obligations under the Loan
Documents; (vii) the performance of and compliance with the provisions
hereof and the other documents
<PAGE>
referred to herein will not result in or be in conflict with or
constitute a default under any agreement, instrument, document, decree,
order of which counsel is aware or any federal, state or local law,
statute, rule, regulation or ordinance applicable to or affecting
Borrower or any Guarantor; (viii) no consent, approval, order or
authorization of, or registration or filing with, any governmental or
public body or authority is required in connection with the acceptance
hereof, the Loan or the matters contemplated hereby; and (ix) the Loan
shall not violate the usury or other laws of the Commonwealth of
Virginia or of any other jurisdiction relating to the maximum rate of
interest;
(h) if Borrower or any Guarantor is a corporation, copies of the articles
of incorporation, by- laws and resolutions of each such entity, such
articles of incorporation to be certified as of a recent date by the
Secretary of State of the jurisdiction of formation of each such
entity, and such by-laws and resolutions to be certified as of the
closing date, in such manner as Bank may require, by the secretary of
each such entity;
(i) if Borrower or any Guarantor is a corporation or other entity, good
standing certificates (to the extent available with respect to such
entity) of a recent date and to be made by the Secretary of State of
the jurisdiction in which such entity was formed and of the
jurisdiction in which the Project is located;
(j) if Borrower or any Guarantor is a partnership, trust, association or
other entity, copies of all agreements, documents and instruments
pertaining to the formation of each such entity, including limited
partnership certificates in the case of limited partnerships, certified
as of the closing date in such manner and by such persons as Bank may
require;
(k) if Borrower or any Guarantor is a partnership, trust, corporation,
association or other entity, certificates, to be dated as of the
closing date, of the partners, trustees, officers or other members,
officials or persons, as the case may be, of each such entity as to the
identity and incumbency of partners, trustees, officers, members and
other persons pertaining to such entity and as to such other matters as
Bank may require;
(l) if Borrower or any Guarantor is any other type of entity or
association, a copy of all documents and agreements relating to the
formation or governance thereof, certified as of the closing date by
such representative and in such manner as may be designated by Bank;
(m) if any partner, trustee or other representative of Borrower or any
Guarantor is other than an individual, the documents referred to above
with respect to such entity;
(n) an estoppel certificate and subordination and attornment agreement from
each of the tenants of the Project;
<PAGE>
(o) copies of all leases and operating contracts affecting the Project;
(p) a report from a structural engineer with respect to the Improvements;
(q) a copy of any liquor license used in connection with the operation of
the Project;
(r) copies of any equipment leases with respect to personal property and
fixtures used in connection with the operation of the Project;
(s) copies of any franchise, advertising, concession, simulcasting, or
management agreements entered into by the Borrower with respect to the
Project;
(t) estoppel letters from any equipment lessors, franchisors, management
companies and parties to material operating contracts;
(u) all documentation relating to the off-track betting facilities of the
Borrower;
(v) copies of all licenses, permits and approvals required for the
operation of a horse racing track and the Borrower's off-track betting
facilities;
(w) any agreements entered into by Borrower with any horsemen's
organizations;
(x) evidence of the contribution of equity to Holdings from the net
proceeds of the sale of stock in an amount of at least $37,165,311;
(y) evidence of the contribution of convertible equity in the amount of at
least $5,500,000;
(z) evidence of the contribution of the Land to Holdings;
(aa) all documentation relating to the Equipment Financing.
2. Construction Documentation:
(a) Development Budget approved by the Bank and Inspecting Architect, to be
certified by Borrower as of the Closing Date to be true, correct and
complete, and in form, scope and content acceptable to the Bank, and
showing all costs of development of the Land, the
<PAGE>
construction and equipping of the Improvements, financing fees, and all
other items of cost incidental thereto, which costs shall be subject to
the approval of the Bank;
(b) a signed copy of the Construction Contract and all subcontracts
pursuant to which the Improvements will be constructed by the
Contractor, which Construction Contract shall be subject to review and
approval by the Bank, and the Construction Contract shall contain,
inter alia, the following provisions: (i) all labor, supervision,
materials, supplies and equipment necessary to complete the
Improvements in accordance with the Plans shall be furnished on or
before a date satisfactory to the Bank for a maximum sum acceptable to
the Bank, (ii) except as set forth in this Agreement, no changes in the
Construction Contract, the Improvements or the Plans shall be effective
unless approved in writing by the Bank, (iii) to the fullest extent
permitted by Law, waivers by Contractor and all subcontractors and
materialmen of the right to file mechanics' liens; (iv) prior to final
completion of the Improvements and the issuance of all occupancy
permits, retainage shall be withheld in connection with interim
payments thereunder in the amounts set forth in Section 6.6 of this
Agreement; (v) the Contractor shall furnish complete releases of liens
from the Contractor prior to each disbursement of Construction Loan
proceeds for all work done for which Loan proceeds have been previously
disbursed and prior to final payment under the Construction Contract;
and (vi) the Construction Contract shall be assigned to the Bank on the
terms specified by the Bank;
(c) a consent from the Contractor addressed to the Bank in the form
attached hereto as Exhibit C-1;
(d) payment and performance bonds with respect to the Construction Contract
in amounts, in form and from a surety or sureties as set forth in
Section 4.21 hereof, together with dual obligee riders naming the Bank;
(e) a copy of the Architect's Agreement between Borrower and the Architect
approved by the Bank with respect to the construction of the
Improvements;
(f) a consent from the Architect addressed to the Bank in the form attached
hereto as Exhibit C;
(g) a certificate to be dated as of the date of the Closing Date from the
Architect in the form attached hereto as Exhibit C (in addition to
other matters which the Bank may require to be favorably addressed);
(h) a copy of the Engineer's Agreement between Borrower and Engineer
approved by the Bank with respect to the construction of the
Improvements;
<PAGE>
(i) a consent from the Engineer addressed to the Bank in the form attached
hereto as Exhibit C; and
(j) a certificate to be dated as of the date of the Closing Date from the
Engineer in the form attached hereto as Exhibit C (in addition to other
matters which the Bank may require to be favorably addressed).
3. Plans and Permits:
(a) complete sets of the Plans designating manufacturer and model number of
all equipment and furnishings, all approved and signed for
identification purposes by Borrower, Architect and Engineer, and all
Plans shall be approved by the Bank and Inspecting Architect, and all
governmental authorities and other parties having a right of approval
in connection therewith;
(b) evidence in such form as the Bank may require of the valid issuance of
all necessary permits, except for such permits which are not
customarily issued until a later stage of construction, licenses and
approvals to construct and, to the extent generally available at such
stage, to occupy and operate the Improvements, including without
limitation all permits, licenses and approvals required under federal,
state or local laws or regulations with respect to subdivision, highway
access, drainage, zoning, safety, building, occupancy, fire protection,
environmental, energy and similar matters.
(c) such other instruments and documents as the Bank shall reasonably
require to evidence and secure the Loan and to comply with the
provisions hereof and the requirements of regulatory authorities to
which the Bank is subject, all of which shall be satisfactory in form,
content and substance to the Bank.
<PAGE>
EXHIBIT F
Exhibit 10.3
REVOLVING LINE OF CREDIT AGREEMENT
THIS REVOLVING LINE OF CREDIT AGREEMENT (the "Agreement"), is entered
into as of June 26, 1997, between COLONIAL DOWNS, L.P., a Virginia limited
partnership (the "Borrower"), and PNC BANK, NATIONAL ASSOCIATION, a national
banking association (the "Bank").
The Borrower and the Bank, with the intent to be legally bound, agree
as follows:
1. Loan. The Bank hereby agrees to make available to the Borrower a
$5,000,000 line of credit (the "Line of Credit"). The availability of the Line
of Credit is subject to the following terms and conditions:
1.1 Commitment. The Bank hereby agrees to make advances
("Loans") to the Borrower under the Line of Credit in an aggregate amount not to
exceed $5,000,000 at any one time outstanding, subject to reduction as set forth
in Section 1.15 hereof. The Line of Credit shall be available for a period of
three (3) years from the date hereof to June 30, 2000, subject to the Borrower's
extension options as set forth in Section 1.15 hereof (such date, as the same
may be extended in accordance with the provisions hereof, being hereinafter
called the "Expiration Date"). Subject to the terms and conditions hereof, the
Borrower shall have the right to borrow, repay and reborrow amounts hereunder
during the period of the Line of Credit; provided that principal amounts
outstanding and all accrued unpaid interest under the Line of Credit shall be
repaid in full on or before the Expiration Date. Notwithstanding anything
contained herein to the contrary, a portion of the Line of Credit, in the amount
of $300,000 (the "Restricted Amount") shall not be available for disbursement
until such time as the Borrower shall have been released from its obligations
under the Amended and Restated Performance Guaranty Agreement dated February 27,
1997 (the "Performance Guaranty") between the Borrower and the Virginia Racing
Commission (the "Commission"), provided that the Restricted Amount shall be
available for disbursement to Borrower, subject to the other terms and
conditions hereof, for the purpose of reimbursing Borrower for any amount paid
by Borrower to the Commission pursuant to the Performance Guaranty.
1.2 Note. The Borrower's obligation to repay the Loans shall
be evidenced by a promissory note substantially in the form of Exhibit "A"
hereto (the "Note").
1.3 Use of Proceeds. The proceeds of the Loans shall be used
by the Borrower as direct extensions of credit from the Bank to fund working
capital needs of the Borrower and other general partnership purposes.
1.4 Advance Procedures. The Borrower may request Loans
hereunder upon giving written notice to the Bank by 11:00 A.M. (Pittsburgh,
Pennsylvania time) (i) on the
<PAGE>
Business Day prior to the proposed advance, in the case of Loans bearing
interest at the Base Rate and (ii) two (2) Business Days (as hereinafter
defined) prior to the proposed Loan, in the case of Loans bearing interest at
the Euro-Based Rate (as hereinafter defined).
1.5 Interest Rate Options. All amounts outstanding under the
Note shall bear interest at a rate per annum selected by the Borrower from the
interest rate options set forth below; it being understood that the Borrower may
select different options (each such option to which the Euro-Based Rate shall
apply shall be hereinafter called a "Euro-Rate Option" and the option to which
the Base Rate shall apply shall be hereinafter called the "Base Rate Option") to
apply simultaneously to different portions of the Loans and may select up to six
(6) different interest periods to apply simultaneously to different portions of
the Loans bearing interest at the Base Rate or the Euro-Based Rate as set forth
below provided, however, that no more than five (5) Borrowing Tranches subject
to a Euro-Rate Option, shall be permitted.
(i) Base Rate. A rate per annum (computed on the basis of a
year of 365 or 366 days, as applicable), equal to the sum
of one and one-half percent (1.5%) plus the rate of
interest announced from time to time by the Bank at its
principal office as its prime rate, which rate may not be
the lowest interest rate then being charged commercial
borrowers by the Bank (the "Prime Rate"). If and when the
Prime Rate changes, the rate of interest on the Base Rate
Loan will change automatically without notice to the
Borrower, effective on the date of any such change.
(ii) Euro-Based Rate. A rate per annum (computed on the basis
of a year of 360 days and the actual number of days
elapsed) (the "Euro-Based Rate") equal to the sum of (A)
the Euro-Rate plus (B) three percent (3.0%) per annum,
for the Euro-Rate Interest Period in an amount equal to
the advance and having a comparable maturity as
determined at or about 9:30 a.m. Eastern time two (2)
Business Days prior to the commencement of the Euro-Rate
Interest Period. For the purpose hereof, the following
terms shall have the following meanings:
"Borrowing Tranche" shall mean (i) portions of
the Loans to which a Euro-Rate Option applies by reason
of the selection of, conversion to or renewal of such
Interest Rate Option on the same day and having the same
Interest Period, and (ii) the portion of the Loans to
which the Base Rate Option applies by reason of the
selection of or conversion to such interest rate option.
Each Loan subject to a Euro-Rate Option shall be in the
minimum amount of $500,000, and each Loan subject to the
Base Rate Option shall be in the minimum amount of
$100,000.
<PAGE>
"Business Day" shall mean any day other than a
Saturday or Sunday or a legal holiday on which commercial
banks are authorized or required to be closed for
business in Pittsburgh, Pennsylvania.
"Conditional Default" shall mean an event or
condition which, with the passage of time, the giving of
notice, or a determination by the Bank, as provided
herein, or any combination of the foregoing, would
constitute an Event of Default [as defined in the
Construction Loan Agreement of even date herewith between
the Borrower and the Bank (the "Construction Loan
Agreement")].
"Consequential Loss" shall mean an amount equal
to the present value (as determined by Bank) of the
product of (a) the positive difference resulting from
subtracting the interest rate for a portion of the Loans
subject to the Euro-Rate Option which would be applicable
to a similarly sized Borrowing Tranche determined on the
day of prepayment for a period of time commencing on the
date of prepayment and terminating on the last day of the
Euro-Rate Interest Period for the Borrowing Tranche being
prepaid from the interest rate for the Euro-Rate Option
actually in effect for the Borrowing Tranche being
prepaid; and (b) the amount of the Borrowing Tranche; and
(c) a fraction with a numerator equal to the number of
days remaining in the Euro-Rate Interest Period of the
Borrowing Tranche being prepaid and a denominator of 360.
Any certificate of Bank delivered to Borrower setting
forth the amount of Consequential Loss as provided herein
shall show the calculations required to determine such
Consequential Loss and shall be conclusive and binding,
absent manifest error, as to such amount and
determination.
"Euro-Rate" shall mean, with respect to any Loan
for any Euro-Rate Interest Period, the interest rate per
annum determined by the Bank by dividing (the resulting
quotient rounded upward to the nearest 1/16th of 1% per
annum) (i) the rate of interest determined by the Bank in
accordance with its usual procedures (which determination
shall be conclusive absent manifest error) to be the
"offered" eurodollar rate evidenced by Telerate display
page 4756 as quoted by Exco Noonan, Inc. or such other
display page on the Telerate System as may replace such
page (or appropriate successor or, if Exco Noonan, Inc.
or its successor ceases to provide such quotes, a
comparable replacement as determined by the Bank) two (2)
Business Days prior to the first day of such Euro-Rate
Interest Period for an amount comparable to such Loan and
having a borrowing date and a maturity comparable to such
Euro-Rate Interest Period by (ii) a number equal to 1.00
minus the Euro-Rate Reserve Percentage. The Euro-Rate may
also be expressed by the following formula:
<PAGE>
Telerate display page 4756 as quoted by Exco
Noonan, Euro-Rate = Inc. or appropriate successor 1.00 -
Euro-Rate Reserve Percentage
"Euro-Rate Interest Period" shall mean the
period of one, two, three, four, six or twelve months
selected by the Borrower commencing on the date of
disbursement of a Loan and each successive period
selected by the Borrower thereafter; provided, that if a
Euro-Rate Interest Period would end on a day which is not
a Business Day, it shall end on the next succeeding
Business Day, unless such day falls in the succeeding
calendar month in which case the Euro-Rate Interest
Period shall end on the next preceding Business Day. In
no event shall any Euro-Rate Interest Period end on a day
after the Expiration Date.
"Euro-Rate Reserve Percentage" shall mean the
maximum effective percentage (expressed as a decimal
rounded upward to the nearest 1/100th of 1%) applicable
to the Bank, which is in effect during any relevant
period, as specified by the Board of Governors of the
Federal Reserve System (or any successor) for determining
the reserve requirements (including, without limitation,
supplemental, marginal and emergency reserves) with
respect to eurocurrency funding (currently referred to as
"Eurocurrency Liabilities") of a member bank in such
system with deposits exceeding Five Billion Dollars
($5,000,000,000). Each determination by the Bank of a
Euro-Rate Reserve Percentage, in the absence of manifest
error, shall be conclusive and binding.
"Law" shall mean any law (including common law),
or constitution, statute, treaty, regulation, rule,
ordinance, or order, applicable to Borrower or the Bank,
as the context so indicates, or any injunction, writ,
decree or award of any Official Body having jurisdiction
over or otherwise applicable to the Borrower, or the Bank
as the context so indicates, or applicable to any of the
security for the Loans.
"Official Body" shall mean any national,
federal, state, local or other government or political
subdivision or any agency, authority, bureau, central
bank, commission, department or instrumentality of
either, or any court, tribunal, grand jury or arbitrator,
in each case whether foreign or domestic.
1.6 Payment of Interest. The Borrower shall pay accrued
interest on the unpaid principal balance of the Note in arrears at the
applicable rate or rates on (i) the first day of each month during the term
hereof, (ii) at maturity, whether by acceleration or otherwise of the Note,
and (iii) after maturity, on demand until paid in full.
1.7 Interest Rate Election. The Borrower shall notify the Bank
of each election of an interest rate option, each conversion from one interest
rate option to another, the
<PAGE>
amount of the Loans then outstanding to be allocated to each interest rate
option and where relevant the Euro-Rate Interest Periods. Any election of or
conversion to a Euro-Rate Option shall be made by oral or written notice by the
Borrower to the Bank by 11:00 A.M. (Pittsburgh, Pennsylvania time) two (2)
Business Days prior to the commencement of the applicable Euro-Rate Interest
Period followed promptly thereafter by the Borrower's written confirmation to
the Bank of any oral notice. Any such election shall be promptly confirmed in
writing by such method as the Bank may require.
1.8 Default Rate and Late Payment Charge. After the principal
amount of all or any part of the Loans shall have become due and payable,
whether by acceleration or otherwise, all the Loans shall thereafter bear
interest at a rate per annum which shall be four percent (4%) per annum above
the Prime Rate. In addition, Borrower shall pay upon demand by Bank a late
payment charge equal to five percent (5%) of the amount of any payment due under
the Line of Credit, which is not received by the Bank within ten (10) days after
the date such payment is due. The Borrower acknowledges that the increased
interest rate and the late payment charge provided for herein reflect, among
other things, the fact that the Line of Credit has become a substantially
greater risk given its default status and that the Bank is entitled to
additional compensation for such risk.
1.9 Fees.
(a) On even date herewith, the Borrower shall pay to the Bank
a commitment fee in the amount of $75,000.
(b) Upon the exercise of each Extension Option, the Borrower
shall pay to the Bank an extension fee (each being herein called an "Extension
Fee") in an amount equal to one-half of one percent (0.5%) of the maximum
principal amount of the Line of Credit outstanding and available to the Borrower
during the applicable Extension Period.
1.10 Euro-Rate Unascertainable.
(a) If, on any date on which a Euro-Rate would otherwise be
determined, the Bank shall have determined (which determination shall be
conclusive absent manifest error) that:
(i) adequate and reasonable means do not exist for
ascertaining such Euro-Rate, or
(ii) an event or condition has occurred which materially and
adversely affects the applicable U.S. eurodollar
markets, or
(b) If, at any time, Bank shall have determined (which
determination shall be conclusive absent manifest error) that:
(i) the making, maintenance or funding of any portion of the
Loans to which a Euro-Rate Option applies has been made
impracticable or
<PAGE>
unlawful if Bank complies in good faith with any Law or any interpretation or
application thereof by any Official Body or with any request or directive of any
such Official Body (whether or not having the force of Law), or
(ii) such Euro-Rate will not adequately and fairly reflect
the cost to the Bank of the establishment or maintenance
of any portion of the Loans to which a Euro-Rate Option
applies, or
(iii) after making all reasonable efforts, deposits of the
relevant amount in U.S. dollars for the relevant
Interest Period for any portion of the Loans to which a
Euro-Rate Option applies are not available to Bank in
the applicable U.S. eurodollar markets, hen, in the case
of any event specified in subsection (a) or (b) above,
the Bank shall promptly so notify the Borrower thereof.
Upon such date as shall be specified in any such notice
(which shall not be earlier than the date such notice is
given) the obligation of the Bank to allow the Borrower
to select, convert to or renew a Euro-Rate Option or, in
the case of an existing Euro-Rate Option which shall be
unlawful for the Bank to maintain, to continue such
Euro-Rate Option, shall be suspended until the Bank
shall have later notified the Borrower of the Bank's
determination (which determination shall be conclusive
absent manifest error) that the circumstances giving
rise to such previous determination no longer exist. If
at any time the Borrower receives notice from the Bank
as provided for in this Section 1.10 whether or not any
Euro-Rate Option has gone into effect, such notification
shall, subject to the Borrower's indemnification
obligations under Section 1.14, be deemed to provide for
selection of, conversion to or renewal of the Base-Rate
Option.
1.11 Selection of Interest Rate Options. If the Borrower fails
to select a Euro-Rate Interest Period in accordance with the provisions of
Section 1.7 in the case of a portion of the Loans to which a Euro-Rate Option
applies, the Borrower shall be deemed to have converted such portion of the
Loans to the Base Rate Option. If an Event of Default shall occur and be
continuing, the Bank may in its discretion limit the Borrower to the Default
Rate.
1.12 Optional Prepayments. The Borrower shall have the right
at its option from time to time to prepay the Loans in whole or part on the
dates set forth below without premium or penalty (except as provided below or in
Section 1.14(b) hereof):
(i) on any Business Day with respect to any portion of the
Loans to which the Base Rate Option applies;
(ii) on the last day of the applicable Euro-Rate Interest
Period with respect to any portion of the Loans to which
a Euro-Rate Option applies; or
<PAGE>
(iii) with the Bank's prior approval, on any Business Day of a
Euro-Rate Interest Period with respect to any portion of
the Loans to which a Euro-Rate Option applies, provided
such prepayment is accompanied by an amount sufficient
to compensate the Bank for all Consequential Loss and
other costs and losses reimbursable under Section
1.14(b).
Whenever the Borrower desires to prepay any part of the Loans, it shall
provide a prepayment notice to the Bank at least five (5) Business Days prior to
the date of prepayment setting forth the date, which shall be a Business Day, on
which the proposed prepayment is to be made, and the total principal amount of
such prepayment, which shall not be less than $100,000. All prepayment notices
shall be irrevocable. The principal amount of the portion of the Loans for which
a prepayment notice is given shall be due and payable on the date specified in
such prepayment notice.
1.13 Application Among Interest Rate Options. All payments
permitted or required pursuant to Section 1.12 shall be applied among the
interest rate options first to the principal amount of the Loans subject to a
Base Rate Option, then to the principal amount of the Loans subject to a
Euro-Rate Option. In accordance with Section 1.14(b), the Borrower shall
indemnify the Bank for any loss or expense including loss of margin incurred
with respect to any such prepayments applied against any portion of the Loans
subject to a Euro-Rate Option on any day other than the last day of the
applicable Euro-Rate Interest Period, provided that, to the extent that the
outstanding principal balance which is subject to the Base Rate Option is less
than the amount of the applicable payment, then, at the election of Borrower so
long as no Event of Default or Conditional Default shall then exist, such
payment and any interest earned thereon, if applicable, shall be applied against
such Borrowing Tranches subject to the Euro-Rate Option as Borrower may choose,
to the extent of such insufficiency, subject to Borrower's obligation to
indemnify the Banks pursuant to Section 1.14(b), or shall be held by Bank in an
interest-bearing escrow account pending the termination of the next Borrowing
Tranche subject to a Euro-Rate Option.
1.14 Additional Compensation in Certain Circumstances.
(a) Increased Costs or Reduced Return on Borrowing Tranches
Subject to a Euro-Rate Option Resulting From Taxes, Reserves, Capital Adequacy
Requirements, Expenses, Etc. With respect to Borrowing Tranches subject to the
Euro-Rate Option, if any future Law, guideline or interpretation or any change
in any Law, guideline or interpretation or application thereof by any Official
Body charged with the interpretation or administration thereof or compliance
with any request or directive (whether or not having the force of Law) of any
central bank or other Official Body:
<PAGE>
(i) subjects Bank to any tax or charge with respect to this
Agreement, the Note, the Loans or payments by the
Borrower of principal, interest, or other amounts due
from the Borrower hereunder or under the Note (except
for taxes on the overall net income of the Bank, any
corporate franchise tax imposed on the Bank or any
withholding tax imposed by the United States of
America),
(ii) imposes, modifies or deems applicable any reserve,
special deposit or similar requirement against credits
or commitments to extend credit extended by, or assets
(funded or contingent) of, deposits with or for the
account of, or other acquisition of funds by, any Bank,
or
(iii) imposes, modifies or deems applicable any capital
adequacy or similar requirement (A) against assets
(funded or contingent) of, or credits or commitments to
extend credit extended by, the Bank, or (B) otherwise
applicable to the obligations of the Bank under this
Agreement, and the result of any of the foregoing is to
increase the cost to, reduce the income receivable by,
or impose any expenses (including loss of margin) upon
the Bank with respect to this Agreement, the Note or the
making, maintenance or funding of any part of the Loans
(or, in the case of any capital adequacy or similar
requirement, to have the effect of reducing the rate of
return on the Bank's capital, taking into consideration
the Bank's customary policies with respect to capital
adequacy) by an amount which the Bank in its sole
discretion deems to be material, the Bank may from time
to time notify the Borrower of the amount determined in
good faith (using any averaging and attribution methods
employed in good faith) by the Bank (which determination
shall be conclusive absent manifest error) to be
necessary to compensate the Bank for such increase in
cost, reduction of income or additional expense. Such
notice shall set forth in reasonable detail the basis
for such determination. Such amount shall be due and
payable by Borrower to the Bank within ten (10) Business
Days after such notice is given; provided, however, that
if the Bank demands compensation under this Section
1.14, Borrower may at any time upon two (2) Business
Days' prior notice to the Bank (a) give notice to the
Bank that it is canceling such Borrowing Tranches
subject to a Euro-Rate Option, whereupon each such
Borrowing Tranche so canceled shall terminate and the
Borrower shall be obligated to compensate the Bank as
provided in this Section 1.14(a) above and to indemnify
the Bank as provided in subsection 1.14(b) below and to
pay the Bank upon demand an amount equal to all
Consequential Loss, if any, resulting therefrom, and (b)
convert such Borrowing Tranches subject to the Euro-Rate
Option to the Base Rate Option.
(b) Indemnity. In addition to the compensation required by
subsection (a) of this Section 1.14, the Borrower shall indemnify the Bank
against any loss or expense (including Consequential Loss, loss of margin, any
loss incurred in liquidating or employing deposits from third parties and any
loss or expense incurred in connection with funds acquired by the Bank to
<PAGE>
fund or maintain a portion of the Loans subject to the Euro-Rate Option) which
the Bank sustains or incurs as a consequence of any
(i) payment, prepayment, conversion or renewal of any
portion of the Loans to which the Euro-Rate Option
applies on a day other than the last day of an Euro-Rate
Interest Period (whether or not such payment or
prepayment is mandatory or automatic and whether or not
such payment or prepayment is then due), or
(ii) attempt by the Borrower to revoke (expressly, by later
inconsistent notices or otherwise) in whole or part any
notice relating to the selection of the Euro-Rate Option
under Section 1.11 or prepayments under Section 1.12.
If the Bank sustains or incurs any such loss or expense it shall from time to
time notify the Borrower of the amount determined in good faith by the Bank
(which determination shall be conclusive absent manifest error and may include
such assumptions, allocations of costs and expenses and averaging or attribution
methods as the Bank shall deem reasonable) to be necessary to indemnify the Bank
for such loss or expense within three (3) months of the Bank becoming aware of
such loss or expense. Such notice shall set forth in reasonable detail the basis
for such determination. Such amount shall be due and payable by the Borrower to
the Bank ten (10) Business Days after such notice is given.
1.15 Extension Option.
If the Conditions for Extension (as hereinafter defined) are satisfied
on the date of exercise of the applicable Extension Option (as hereinafter
defined) and remain satisfied on the date of the commencement of the applicable
Extension Period (as hereinafter defined), the Borrower shall have the right to
extend the Expiration Date for two (2) successive periods of twelve (12) months
each (each such twelve (12) month period being hereinafter called an "Extension
Period" and each right to so extend being hereinafter called an "Extension
Option"). Borrower shall provide the Bank with written notice of its election to
extend the then-applicable Expiration Date in the form attached hereto as
Exhibit B not more than one-hundred eighty (180) days nor less than thirty (30)
days prior to the then-applicable Expiration Date. If Borrower desires to
exercise an Extension Option but Condition for Extension (h) is not satisfied,
the Borrower may satisfy the failure of such condition by making a permanent
principal payment with respect to the Construction Loan (as hereinafter
defined), within thirty (30) days following the Bank's determination of such
failure, but in no event later than the then-applicable Expiration Date, in the
amount required to reduce the outstanding principal balances of the Construction
Loan and the Line of Credit to the amount where such condition is satisfied (the
"Reduced Availability Limit"), subject to Borrower's simultaneous payment of any
Consequential Loss caused thereby. For the purposes hereof, the term "Conditions
for Extension" shall mean the following conditions: (a) no Remedies Event (as
defined in the Construction Loan Agreement), shall have occurred and be
continuing; (b) no Conditional Default shall have occurred which shall remain
uncured on the date of the commencement of the applicable Extension Period; (c)
the applicable Extension Fee shall be paid by the Borrower to the Bank
simultaneously with the exercise of the applicable Extension Option; (d) on or
before
<PAGE>
the date of commencement of the applicable Extension Period, Borrower shall
reduce the outstanding principal balance to a maximum of (i) Four Million
Dollars ($4,000,000) following the exercise of the first Extension Option and
the aggregate principal amount available pursuant to the Line of Credit during
the first Extension Period shall be limited to such amount, and (ii) Three
Million Dollars ($3,000,000) following the exercise of the second Extension
Option, and the aggregate principal amount available pursuant to the Line of
Credit during the second Extension Period shall be limited to such amount; (e)
all licenses and permits of the Borrower shall remain in full force and effect;
(f) construction of the Improvements (as defined in the Construction Loan
Agreement) shall have been completed; (g) the Payment Guaranties (as defined in
the Construction Loan Agreement) shall remain in full force and effect, and
shall remain enforceable in accordance with their terms against the Guarantors
(as defined in the Construction Loan Agreement) and the Guarantors shall be in
compliance with their respective financial covenants, if any; and (h) the ratio
of EBITDA to Assumed Debt Service plus Capital Expenditures for Colonial Downs
Holdings, Inc., a Virginia corporation ("Holdings") shall be greater than 3.5 to
1. For the purposes hereof, the term "Assumed Debt Service" shall mean the sum
of all principal and interest payments for a twelve (12) month period with
respect to a loan equal to the sum of the maximum amount available under the
Line of Credit during the applicable Extension Period and the outstanding
principal balance of the Construction Loan on the date of exercise of the
applicable Extension Option which payments are based upon a twenty (20) year
mortgage-style amortization schedule of such sum, assuming an interest rate per
annum equal to two and one-half percent (2.5%) above the "weekly average yield"
on United States Treasury Securities adjusted to a constant maturity of ten (10)
years, as published in the Release five (5) Business Days prior to the date of
determination (in the event that the Release is no longer published, a
reasonable equivalent substitute therefor as may be selected by the Bank in its
reasonable discretion shall be utilized and further in the event that if the
Release is not published five (5) Business Days prior to the date of
determination, then the Release as published on the most recent date prior
thereto shall be utilized). For the purposes hereof, the term "Release" shall
mean the Federal Reserve Statistical Release H.15(519) titled "Selected Interest
Rates." For the purposes hereof, the term "Capital Expenditures" shall mean all
recurring capital expenditures in the ordinary course of business made by the
Borrower during the four (4) calendar quarters preceding the exercise of the
applicable Extension Option determined in accordance with GAAP and limited to
the amount of the annual capital expenditure budget prepared by Borrower and
approved by the Bank in accordance with Section 4.4 hereof.
2. Security. The security for repayment of the Loans shall include but
not be limited to the collateral, guaranties and other documents heretofore,
contemporaneously or hereafter executed and delivered to the Bank (the "Security
Documents"), which shall secure repayment of the Loans, and the Note and the
Construction Loan Agreement providing for the $10,000,000 Construction Loan made
by the Bank to the Borrower ( the "Construction Loan") as evidenced by that
certain Deed of Trust Note of even date herewith from Borrower to the Bank in
the principal amount of $10,000,000 the ("Deed of Trust Note"), and any
amendments, extensions, renewals or increases and all costs and expenses of the
Bank incurred in the documentation, negotiation, modification, enforcement,
collection or otherwise in connection with any of the foregoing, including but
not limited to reasonable attorneys' fees and expenses (hereinafter referred to
collectively as the "Obligations"). The Security Documents shall include,
without limitation, the following documents as defined in the Construction Loan
Agreement:
(a) the Deed of Trust;
(b) the Assignment of Leases and Rents;
(c) the Assignment of Construction and Development Documents;
(d) the Assignment of Development Agreement;
(e) the Pledge Agreements;
(f) the Environmental Indemnity;
(g) the Financing Statements;
(h) the Guaranties; and
(i) the Assignment of Management Agreement.
This Agreement, the Note and the Security Documents are collectively referred to
as the "Loan Documents."
3. Representations and Warranties. The Borrower hereby makes the
representations and warranties set forth in Article 8 of the Construction Loan
Agreement, which shall be continuing in nature and remain in full force and
effect until the Obligations are paid in full, and which shall be true and
correct.
4. Affirmative Covenants. The Borrower agrees that from the date of
execution of this Agreement until all Obligations have been fully paid and any
commitments of the Bank to the Borrower with respect to the Loans or
Construction Loan have been terminated, the Borrower will comply at all times
with the Affirmative Covenants set forth in Article 4 of the Construction Loan
Agreement.
5. Negative Covenants. The Borrower covenants and agrees that from the
date of execution of this Agreement until all Obligations have been fully paid
and any commitments of the Bank to the Borrower with respect to the Loans or the
Construction Loan have been terminated, the Borrower will comply at all times
with the Negative Covenants set forth in Article 5 of the Construction Loan
Agreement.
6. Remedies Event. For the purposes hereof, the term "Event of Default"
shall have the meaning ascribed thereto in the Construction Loan Agreement. Upon
the occurrence of a Remedies Event, the Bank will have all rights and remedies
specified in the Loan Documents and all rights and remedies (which are
cumulative and not exclusive) available under applicable law or in equity.
<PAGE>
7. Conditions. The Bank's obligation to make any advance under the Loans
is subject to the conditions that as of the date of the advance:
7.1 No Remedies Event. No Remedies Event or Conditional
Default shall have occurred and be continuing.
7.2 Receipt and Remedies of Loan Documents. The Bank shall
have received the Loan Documents and such other instruments and documents which
the Bank may reasonably request in connection with the transactions provided for
in this Agreement, duly executed by the appropriate parties, and, where
applicable, such documents shall have been recorded or filed in the appropriate
offices.
7.3 Additional Materials. The Borrower shall have furnished to
the Bank at the Borrower's sole cost and expense the items set forth on Exhibit
E to the Construction Loan Agreement, all of which shall be in form and content
reasonably satisfactory to the Bank and its legal counsel.
7.4 Closing on Construction Loan. The Borrower and the Bank
shall have executed and delivered the Construction Loan Agreement and all
conditions to the disbursement of funds thereunder shall have been satisfied.
8. Expenses. The Borrower agrees to pay the Bank, upon the closing of
this Agreement, and otherwise on demand, all reasonable costs and expenses
incurred by the Bank in connection with the (i) preparation, negotiation and
delivery of this Agreement and the other Loan Documents, and any modifications
thereto, and (ii) collecting the loan or instituting, maintaining, preserving,
enforcing and foreclosing the security interest in any of the collateral
securing the Loan, whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions or proceedings arising out of or relating
to this Agreement, including reasonable fees and expenses of counsel (which may
include costs of in-house counsel), expenses for auditors, appraisers and
environmental consultants, lien searches, recording and filing fees and taxes.
9. [Intentionally Omitted]
10. Miscellaneous.
10.1 Notices. All notices, demands, requests, consents,
approvals and other communications required or permitted hereunder must be given
in the manner set forth in Section 11.6 of the Construction Loan Agreement.
10.2 Preservation of Rights. No delay or omission on the part
of the Bank to exercise any right or power arising hereunder will impair any
such right or power or be considered a waiver of any such right or power or any
acquiescence therein, nor will the action or inaction of the Bank impair any
right or power arising hereunder. The Bank's rights and
<PAGE>
remedies hereunder are cumulative and not exclusive of any other rights or
remedies which the Bank may have under other agreements, at law or in equity.
10.3 Illegality. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
10.4 Changes in Writing. No modification, amendment or waiver
of any provision of this Agreement nor consent to any departure by the Borrower
therefrom, will in any event be effective unless the same is in writing and
signed by the Bank, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on the Borrower in any case will entitle the Borrower to any other or
further notice or demand in the same, similar or other circumstance.
10.5 Entire Agreement. This Agreement (including the documents
and instruments referred to herein) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
10.6 Counterparts. This Agreement may be signed in any number
of counterpart copies and by the parties hereto on separate counterparts, but
all such copies shall constitute one and the same instrument.
10.7 Successors and Assigns. This Agreement will be binding
upon and inure to the benefit of the Borrower and the Bank and their respective
heirs, executors, administrators, successors and assigns; provided, however,
that the Borrower may not assign this Agreement in whole or in part without the
prior written consent of the Bank and the Bank at any time may assign this
Agreement in whole or in part upon the terms and conditions set forth in Section
11.11 of the Construction Loan Agreement.
10.8 Interpretation. In this Agreement, unless the Bank and
the Borrower otherwise agree in writing, the singular includes the plural and
the plural the singular; words importing any gender include the other genders;
references to statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the word "or"
shall be deemed to include "and/or," the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Agreement unless otherwise indicated; and references to
agreements and other contractual instruments shall be deemed to include all
subsequent amendments and other modifications to such instruments, but only to
the extent such amendments and other modifications are not prohibited by the
terms of this Agreement. Whenever the Bank is granted the right herein to act in
its sole discretion or to grant or withhold consent or approval, such right
shall be exercised in good faith. Section headings in this Agreement are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose. Unless otherwise specified in this
Agreement, all accounting terms shall be interpreted and all accounting
determinations shall be
<PAGE>
made in accordance with GAAP. If this Agreement is executed by more than one
party as Borrower, the obligations of such persons or entities will be joint and
several.
10.9 Governing Law. This Agreement shall be deemed to be a
contract under the Laws of the Commonwealth of Pennsylvania and for all purposes
shall be governed by and construed and enforced in accordance with the Laws of
the Commonwealth of Pennsylvania without regard to its conflicts of laws
principles.
10.10 Indemnity. The Borrower agrees to indemnify each of the
Bank, its directors, officers and employees and each legal entity, if any, who
controls the Bank (the "Indemnified Parties") and to hold each Indemnified Party
harmless from and against any and all claims, damages, losses, liabilities and
expenses (including, without limitation, all fees of counsel with whom any
Indemnified Party may consult and all expenses of litigation or preparation
therefor) which any Indemnified Party may incur or which may be asserted against
any Indemnified Party in connection with or arising out of the matters referred
to in this Agreement or in the other Loan Documents by any person, entity or
governmental authority (including any person or entity claiming derivatively on
behalf of the Borrower), whether (a) arising from or incurred in connection with
any breach of a representation, warranty or covenant by the Borrower, or (b)
arising out of or resulting from any suit, action, claim, proceeding or
governmental investigation, pending or threatened, whether based on statute,
regulation or order, or tort, or contract or otherwise, before any court or
governmental authority, which arises out of or relates to this Agreement, any
other Loan Document, or the use of the proceeds of the Loan; provided, however,
that the foregoing indemnity agreement shall not apply to claims, damages,
losses, liabilities and expenses resulting from an Indemnified Party's gross
negligence or willful misconduct. The indemnity agreement contained in this
Section shall survive the termination of this Agreement, payment of any Loan and
assignment of any rights hereunder. The Borrower may participate at its expense
in the defense of any such action or claim.
10.11 CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY
CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURT OF COMMON PLEAS OF
ALLEGHENY COUNTY AND THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT
OF PENNSYLVANIA, AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND
AGREES THAT ALL SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL
DIRECTED TO THE BORROWER AT THE ADDRESSES PROVIDED FOR IN SECTION 11.6 OF THE
CONSTRUCTION LOAN AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED
UPON ACTUAL RECEIPT THEREOF. THE BORROWER WAIVES ANY OBJECTION TO JURISDICTION
AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES TO
ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE.
10.12 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK EACH
WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS RELATED TO ANY OF THE LOAN DOCUMENTS. THIS
WAIVER IS KNOWINGLY,
<PAGE>
INTENTIONALLY AND VOLUNTARILY MADE BY BORROWER AND THE BANK AND EACH
ACKNOWLEDGES THAT NONE OF THE BORROWER OR THE BANK NOR ANY PERSON ACTING ON
BEHALF OF EITHER OF THEM HAS OR HAVE MADE ANY REPRESENTATIONS OF FACT TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE
BORROWER AND THE BANK EACH FURTHER ACKNOWLEDGES THAT EACH OF THEM HAS BEEN
REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF
THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED BY ITS OWN FREE WILL, AND THAT BORROWER AND THE BANK EACH HAS HAD THE
OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. THE BORROWER AND THE BANK EACH
AGREES THAT THE OBLIGATIONS EVIDENCED BY THIS AGREEMENT ARE EXEMPTED
TRANSACTIONS UNDER THE TRUTH-IN-LENDING ACT, 15 U.S.C. SECTION 1061, ET SEQ. THE
BORROWER AND THE BANK EACH FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS
THE MEANING OF THIS WAIVER PROVISION.
[REMAINDER OF PAGE
LEFT INTENTIONALLY BLANK]
<PAGE>
WITNESS the due execution hereof as a document under seal, as of the
date first written above.
WITNESS / ATTEST: COLONIAL DOWNS, L.P., a Virginia limited
partnership
By: STANSLEY RACING CORP., a Virginia
corporation, its sole general partner.
By: /s/ Jeffrey P. Jacobs
--------------------------
Name: _____________________ Name: Jeffrey P. Jacobs
Title: _____________________ Title: CEO
[CORPORATE SEAL]
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Brad J. Carpenter
--------------------------
Name: Brad J. Carpenter
Title:
-----------------------
(SEAL)
<PAGE>
EXHIBIT A
FORM OF REVOLVING LINE OF CREDIT NOTE
<PAGE>
EXHIBIT B
REQUEST FOR EXTENSION
To: PNC Bank, National Association Borrower: Colonial Downs, L.P.
One PNC Plaza
249 Fifth Avenue Project: Colonial Downs
P1-POPP-19-2
Pittsburgh, Pennsylvania 15222-2707 Loan No. __________________
Attention: Real Estate Banking
The undersigned hereby requests that you extend the maturity date of the above
referenced loan ("Loan") to June 30, ____ pursuant to the provisions in the
Revolving Line of Credit ("Agreement") dated June 26, 1997, between COLONIAL
DOWNS, L.P. as "Borrower" and PNC BANK, NATIONAL ASSOCIATION as "Bank" (all
capitalized terms employed herein shall have the meanings ascribed thereto in
the Agreement unless defined to the contrary herein). This loan is evidenced
by a Revolving Line of Credit Note dated June 26, 1997 in the face amount of
$15,000,000, and other Loan Documents. The Borrower warrants and represents
that all Conditions for Extension have been satisfied and that the ratio of
EBITDA to Assumed Debt Service plus Capital Expenditures for Holdings as
calculated for the twelve (12) month period ending on the preceding December
31, is ____ to 1.
The undersigned agrees to execute whatever additional documents (including,
without limitation, an Extension Agreement) which may be required in order to
implement or to clarify the terms of this extension or to preserve and
maintain the security granted in connection with the Loan.
Pursuant to the terms of the Agreement, enclosed is the extension fee in the
amount of $______________.
Date: _______, 2000 COLONIAL DOWNS, L.P.,
a Virginia limited partnership
By: STANSLEY RACING CORP.,
a Virginia Corporation,
its sole general partner
ATTEST/WITNESS: By:
---------------------------
--------------------------- Title:
------------------------
Exhibit 10.4
DEED OF TRUST NOTE
$10,000,000 June 26, 1997
Pittsburgh, Pennsylvania
The undersigned, COLONIAL DOWNS, L.P., a Virginia limited partnership,
having its principal office at 3610 Courthouse Road, P.O. Box 456, Providence
Forge, Virginia 23140 (the "Borrower"), promises to pay to the order of PNC
BANK, NATIONAL ASSOCIATION, a national banking association (the "Bank"), at its
principal office located at One PNC Plaza, Real Estate Banking, P1-POPP-19-2,
249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707, the principal sum of TEN
MILLION DOLLARS ($10,000,000) lawful money of the United States of America, or
so much thereof as shall have been advanced under that certain Construction Loan
Agreement (the "Loan Agreement") of even date herewith by and between Borrower
and the Bank, and to pay interest from the date of the initial advance on the
unpaid balance of the principal sum hereof in like money at the rates per annum
hereinafter set forth, payable as follows:
A. Beginning on August 1, 1997 and on the first (1st) day of each
calendar month thereafter, Borrower shall pay interest on the outstanding
principal amount of advances evidenced hereby at the rates specified and subject
to the terms and conditions set forth in Article 3 of, and as otherwise provided
in, the Loan Agreement.
B. Beginning on the first (1st) day of each calendar quarter during the
Amortization Period and on the first day of each calendar quarter thereafter,
throughout the remaining term of the Construction Loan, the Borrower shall make
quarterly payments of the outstanding principal balance of the Construction Loan
in the amount of Five Hundred Thousand Dollars ($500,000) each.
C. Subject to the provisions of Section 2.4 of the Loan Agreement, the
entire outstanding principal hereof, together with all unpaid interest at the
aforesaid rate, shall be due and payable on June 30, 2000, which date is
thirty-six (36) months following the date hereof, exclusive of all duly
exercised extension options, unless earlier due by acceleration or otherwise
(the "Expiration Date").
All capitalized terms employed herein shall have the meanings ascribed
thereto in the Loan Agreement unless otherwise defined herein. Upon the
occurrence and during the continuation of any Remedies Event specified in the
Loan Agreement, Borrower shall pay interest on the entire principal amount then
outstanding and all other sums due at the Default
<PAGE>
Rate specified in Section 3.3 of the Loan Agreement. Said interest rate shall
accrue before and after any judgment has been entered. Borrower shall also pay a
late payment charge, upon demand, as specified in Section 3.3 of the Loan
Agreement on any payment due hereunder, or under the Loan Agreement which is not
received within ten (10) days after the date such payment is due.
This Note is secured, inter alia, by a certain Deed of Trust and
Security Agreement (the "Deed of Trust ") of even date herewith from Borrower
and Colonial Downs Holdings, Inc., a Virginia corporation to Lawyers Title
Realty Services, Inc., a Virginia corporation as Trustee for the benefit of the
Bank, covering certain property more particularly described therein. This Note
is the Deed of Trust Note referred to in, and is entitled to the benefits of,
the Loan Agreement and other Loan Documents, including the representations,
warranties, covenants, conditions, security interests and liens contained or
granted therein. The Loan Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments, in certain circumstances, on account of principal
hereof prior to maturity upon the terms and conditions therein specified.
Borrower may prepay this Note in whole or in part only in accordance
with the terms set forth in Sections 3.9 and 3.10 of the Loan Agreement. All
partial prepayments shall be applied in the manner set forth in Section 3.11 of
the Loan Agreement.
Notwithstanding any provision of this Note to the contrary, it is the
intent of Borrower and the Bank that the Bank shall not at any time be entitled
to receive, collect or apply, and Borrower and the Bank shall not be deemed to
have contracted for, as interest on the principal indebtedness evidenced hereby,
any amount in excess of the maximum rate of interest permitted to be charged by
applicable Law, and in the event the Bank ever receives, collects or applies as
interest any such excess, such excess shall be deemed partial payment of the
principal indebtedness evidenced hereby, and if such principal shall be paid in
full, any such excess shall forthwith be paid to Borrower.
No delay or omission on the part of the Bank or of any holder hereof in
exercising any right hereunder or under the Loan Agreement shall operate as a
waiver of such right or of any other right of such holder, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or waiver of the same
or any other right on any future occasion. Borrower and every endorser of this
Note, regardless of the time, order or place of signing, consent to any one or
more extensions or postponements of the time of payment or any other
indulgences, to any substitutions, exchanges, renewals or releases of collateral
for this Note, and to the additions or releases of any other parties or persons
primarily or secondarily liable.
The rights and obligations of the parties under this Note shall be
governed by and interpreted and enforced in accordance with the substantive laws
of the Commonwealth of Pennsylvania, without giving effect to the principles of
conflict of laws.
<PAGE>
The obligations and liability of the Borrower hereunder shall not be
subject to any counterclaim, recoupment, set-off, reduction or defense based
upon any claim that the Borrower may have against the Bank.
No change, modification or amendment to any term or provision of this
Note shall be valid unless consented to in writing by the Bank and the Borrower.
Borrower hereby waives presentment for payment, demand, protest, notice
of protest and notice of dishonor, and notice of non-payment.
CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NONEXCLUSIVE JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY
AND THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA,
AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE
BORROWER AT THE ADDRESSES PROVIDED FOR IN THE FIRST PARAGRAPH HEREOF AND SERVICE
SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. THE
BORROWER WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED
AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK
OF JURISDICTION OR VENUE.
WAIVER BY JURY TRIAL. EACH OF BORROWER AND BANK WAIVES THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON OR RELATED TO THE SUBJECT
MATTER OF THIS NOTE OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS RELATED TO ANY OF THE LOAN DOCUMENTS. THIS WAIVER IS KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY MADE BY BORROWER AND BANK AND BORROWER AND BANK
EACH ACKNOWLEDGES THAT NEITHER BORROWER NOR BANK NOR ANY PERSON ACTING ON BEHALF
OF BORROWER OR BANK HAS OR HAVE MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS
WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. EACH OF
BORROWER AND BANK FURTHER ACKNOWLEDGES THAT EACH PARTY HAS BEEN REPRESENTED (OR
HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND
IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN
FREE WILL, AND THAT EACH PARTY HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER
WITH COUNSEL. BORROWER AGREES THAT THE OBLIGATIONS EVIDENCED BY THIS NOTE ARE
EXEMPTED TRANSACTIONS UNDER THE TRUTH-IN-LENDING ACT, 15 U.S.C. SECTION 1061, ET
SEQ.
<PAGE>
Borrower shall have the right to assign this Note only in accordance
with Section 11.11 of the Loan Agreement.
This Note shall bind Borrower and Borrower's successors and assigns and
the benefits hereof shall inure to the benefit of the Bank and the Bank's
successors and assigns. All references herein to the "Borrower" and the "Bank"
shall be deemed to apply to the Borrower and the Bank, respectively, and their
respective successors and assigns.
This is a sealed instrument.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
WITNESS the due execution of this Note as of the day and year first
above written.
ATTEST: COLONIAL DOWNS, L.P.,
a Virginia limited partnership
By: STANSLEY RACING CORP.,
a Virginia corporation,
its sole general partner
___________________________ By: /s/ Jeffrey P. Jacobs
Name: --------------------------------
Title: Name: Jeffrey P. Jacobs
Title: CEO
<PAGE>
STATE OF )
)ss
COUNTY OF )
On this _____ day of ____________, 1997, before me, a notary public, personally
appeared ______________________________________, who acknowledged
himself/herself to be the _______________________ STANSLEY RACING CORP., a
Virginia corporation, the general partner of COLONIAL DOWNS, L.P., a Virginia
limited partnership, and that he/she, as such officer, being authorized to do
so, executed the foregoing instrument for the purposes therein contained by
signing the name of the corporation as the general partner of said limited
partnership by himself/herself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
--------------------------------
Notary Public
My Commission expires:
- -------------------------------
Exhibit 10.5
REVOLVING CREDIT NOTE
$5,000,000 June 26, 1997
Pittsburgh, Pennsylvania
FOR VALUE RECEIVED, the undersigned, COLONIAL DOWNS, L.P., a Virginia
limited partnership (herein called the "Borrower"), hereby promises to pay to
the order of PNC BANK, NATIONAL ASSOCIATION, a national banking association (the
"Bank") the lesser of (i) the principal sum of FIVE MILLION U.S. DOLLARS (U.S.
$5,000,000), or (ii) the aggregate unpaid principal balance of all Loans made by
the Bank to the Borrower pursuant to Section 1.1 of the Revolving Line of Credit
Agreement dated as of June 26, 1997 between the Borrower and the Bank (the
"Credit Agreement"), whichever is less, payable on the Expiration Date.
The Borrower shall pay interest on the unpaid principal balance hereof
from time to time outstanding from the date hereof at the rate or rates per
annum specified by the Borrower pursuant to Section 1 of, or as otherwise
provided in, the Credit Agreement.
Upon the occurrence and during the continuation of a Remedies Event,
the Borrower shall pay interest on the entire principal amount of the then
outstanding Loans evidenced by this Revolving Credit Note at a rate per annum
(based on a year of 360 days and actual days elapsed) equal to four percent (4%)
per annum above the rate of interest otherwise applicable with respect to such
Loans. Such interest rate will accrue before and after any judgment has been
entered.
Subject to the provisions of the Credit Agreement, interest on this
Revolving Credit Note will be payable on the first day of each calendar month
after the date hereof and on the Expiration Date.
If any payment or action to be made or taken hereunder shall be stated
to be or become 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 extension of
time may be included in computing interest or fees, if any, in connection with
such payment or action.
Subject to the provisions of the Credit Agreement, payments of both
principal and interest shall be made without setoff, counterclaim or other
deduction of any nature at the office of the Bank located at One PNC Plaza, 249
Fifth Avenue, P1-POPP-19-2, Pittsburgh, Pennsylvania 15222-2707, Attention: Real
Estate Banking, in lawful money of the United States of America in immediately
available funds.
This Note is the Revolving Credit Note referred to in, and is entitled
to the benefits of, the Credit Agreement and other Loan Documents, including the
representations, warranties, covenants, conditions, security interests or Liens
contained or granted therein. The Credit Agreement among other things contains
provisions for acceleration of the maturity hereof
<PAGE>
upon the happening of certain stated events and also for prepayment, in certain
circumstances, on account of principal hereof prior to maturity upon the terms
and conditions therein specified.
All capitalized terms used herein shall, unless otherwise defined
herein, have the same meanings given to such terms in the Credit Agreement.
Except as otherwise provided in the Credit Agreement, the Borrower
waives presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Credit Agreement.
This Note shall bind the Borrower and its successors and assigns
(provided, however, Borrower may not assign this Note without the prior written
consent of Bank), and the benefits hereof shall inure to the benefit of the Bank
and its successors and assigns. All references herein to the "Borrower" and the
"Bank" shall be deemed to apply to the Borrower and the Bank, respectively, and
their respective successors and assigns.
This Note and any other documents delivered in connection herewith and
the rights and obligations of the parties hereto and thereto shall for all
purposes be governed by and construed and enforced in accordance with the
internal laws of the Commonwealth of Pennsylvania without giving effect to its
conflicts of law principles.
This Note is secured, inter alia, by a certain Deed of Trust
and Security Agreement (the "Deed of Trust ") of even date herewith from
Borrower and Colonial Downs Holdings, Inc., a Virginia corporation to Lawyers
Title Realty Services, Inc., a Virginia corporation, as Trustee for the benefit
of the Bank, covering certain property more particularly described therein.
Notwithstanding any provision of this Note to the contrary, it is the
intent of Borrower and the Bank that the Bank shall not at any time be entitled
to receive, collect or apply, and Borrower and the Bank shall not be deemed to
have contracted for, as interest on the principal indebtedness evidenced hereby,
any amount in excess of the maximum rate of interest permitted to be charged by
applicable Law, and in the event the Bank ever receives, collects or applies as
interest any such excess, such excess shall be deemed partial payment of the
principal indebtedness evidenced hereby, and if such principal shall be paid in
full, any such excess shall forthwith be paid to Borrower.
No delay or omission on the part of the Bank or of any holder hereof in
exercising any right hereunder or under the Loan Agreement shall operate as a
waiver of such right or of any other right of such holder, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or waiver of the same
or any other right on any future occasion. Borrower and every endorser of this
Note, regardless of the time, order or place of signing, consent to any one or
more extensions or postponements of the time of payment or any other
indulgences, to any
<PAGE>
substitutions, exchanges, renewals or releases of collateral for this Note, and
to the additions or releases of any other parties or persons primarily or
secondarily liable.
The obligations and liability of the Borrower hereunder shall not be
subject to any counterclaim, recoupment, set-off, reduction or defense based
upon any claim that the Borrower may have against the Bank.
No change, modification or amendment to any term or provision of this
Note shall be valid unless consented to in writing by the Bank and the Borrower.
CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NONEXCLUSIVE JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY
AND THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA,
AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE
BORROWER AT THE ADDRESSES PROVIDED FOR IN THE FIRST PARAGRAPH HEREOF AND SERVICE
SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. THE
BORROWER WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED
AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK
OF JURISDICTION OR VENUE.
WAIVER OF JURY TRIAL. EACH OF BORROWER AND BANK WAIVES THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON OR RELATED TO THE SUBJECT
MATTER OF THIS NOTE OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS RELATED TO ANY OF THE LOAN DOCUMENTS. THIS WAIVER IS KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY MADE BY BORROWER AND BANK AND BORROWER AND BANK
EACH ACKNOWLEDGES THAT NEITHER BORROWER NOR BANK NOR ANY PERSON ACTING ON BEHALF
OF BORROWER OR BANK HAS OR HAVE MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS
WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. EACH OF
BORROWER AND BANK FURTHER ACKNOWLEDGES THAT EACH PARTY HAS BEEN REPRESENTED (OR
HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND
IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN
FREE WILL, AND THAT EACH PARTY HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER
WITH COUNSEL. BORROWER AGREES THAT THE OBLIGATIONS EVIDENCED BY THIS NOTE ARE
EXEMPTED TRANSACTIONS UNDER THE TRUTH-IN-LENDING ACT, 15 U.S.C. SECTION 1061, ET
SEQ.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Note by its duly
authorized officers with the intention that it constitute a sealed instrument.
ATTEST:
COLONIAL DOWNS, L.P.,
a Virginia limited partnership
By: STANSLEY RACING CORP., a Virginia
corporation, its sole general partner
By: By: /s/ Jeffrey P. Jacobs
----------------------- --------------------------
Name: Name: Jeffrey P. Jacobs
Title: Title: CEO
[SEAL]
Exhibit 10.6
DEED OF TRUST AND SECURITY AGREEMENT
from
COLONIAL DOWNS L.P., a Virginia limited partnership
and
COLONIAL DOWNS HOLDING, INC., a Virginia corporation
Trustor, to
LAWYERS TITLE REALTY SERVICES, INC., a Virginia corporation
the Trustee,
for the benefit of
PNC BANK, NATIONAL ASSOCIATION,
a national banking association
as Beneficiary
<PAGE>
DEED OF TRUST AND SECURITY AGREEMENT
NOTICE: THE FOLLOWING IS PROVIDED SOLELY TO COMPLY
WITH THE PROVISIONS OF SECTION 55.58.2 OF THE CODE OF VIRGINIA
OF 1950, AS AMENDED.
THIS IS A CREDIT LINE DEED OF TRUST
The name of the Noteholder secured hereby is PNC Bank, National Association. The
address to which communications to the Noteholder are to be sent is One PNC
Plaza, 249 Fifth Avenue, 19th Floor, P1-POPP-19-2, Pittsburgh, Pennsylvania
15222-2707, Attention: Real Estate Banking. The name of the Trustor is,
collectively, Colonial Downs, L.P., and Colonial Downs Holdings, Inc. the
("Grantors" for index purposes). The maximum aggregate amount of principal to be
secured hereby at any time is $15,000,000.
[This is a construction loan Deed of Trust given to secure a loan for real
estate construction within the meaning of Section 58.1-804 of the Code of
Virginia of 1950, as amended.]
THIS DEED OF TRUST AND SECURITY AGREEMENT ("Deed of Trust") IS MADE as of the
____ day of _____, 1997 by COLONIAL DOWNS HOLDINGS, INC., a Virginia
corporation, ("CDH") and COLONIAL DOWNS, L.P., a Virginia limited partnership
("CDLP") (collectively, "Trustor") with an address at 3610 N. Courthouse Road,
P.O. Box 456, Providence Forge, VA 23140, Attention: O. J. Peterson , and
Lawyers Title Realty Services, Inc., a Virginia corporation, which main office
is located in, Henrico County, Virginia (collectively, the "Trustee") for the
benefit of PNC BANK, NATIONAL ASSOCIATION, a national banking association,
("Beneficiary"), with an address at One PNC Plaza, P1-POPP-19-2, 249 Fifth
Avenue, Pittsburgh, Pennsylvania 15222-2707, Attention: Real Estate Banking.
WITNESSETH:
WHEREAS, CDH is the owner in fee simple of a certain tract or parcel of
land containing approximately 345 acres situate in the Cumberland District, New
Kent County, Virginia, as more fully described in Exhibit A attached hereto and
made a part hereof (the "Land"), and CDLP is the owner of a leasehold interest
in the Land, and owner of the improvements now or hereafter erected thereon,
including, without limitation, a horse racing track facility consisting of a
grandstand, turf and dirt race courses, barns, paddocks outbuildings and all
manner of related facilities and related equipment located on the Land known as
Colonial Downs (collectively, the "Improvements");
<PAGE>
WHEREAS, Beneficiary is making a construction loan to CDLP in an amount
not to exceed Ten Million Dollars ($10,000,000) (the "Construction Loan"), the
proceeds of which will be advanced to CDLP from time to time pursuant to the
terms and conditions of a Construction Loan Agreement of even date herewith (the
"Construction Loan Agreement") between CDLP and Beneficiary for the purposes set
forth in the Construction Loan Agreement;
WHEREAS, Beneficiary is making a revolving line of credit loan to CDLP
in an amount not to exceed ($5,000,000) (the "Line of Credit"), the proceeds of
which will be advanced to CDLP from time to time pursuant to the terms and
conditions of a Revolving Line of Credit Agreement of even date herewith (the
"Credit Agreement") between CDLP and Beneficiary for the purposes set forth in
the Credit Agreement;
WHEREAS, the Construction Loan and the Line of Credit are hereinafter
collectively referred to as the "Loans" and the Construction Loan Agreement and
the Credit Agreement are hereinafter collectively referred to as the "Loan
Agreements" (all capitalized terms used herein and not otherwise defined shall
have the meaning assigned to such terms in the Loan Agreements); and
WHEREAS, pursuant to an Agreement of Guaranty and Suretyship (Payment)
of even date herewith (the "Payment Guaranty") from CDH to Beneficiary, CDH has
guaranteed the obligations of CDLP under the Loan Agreements and pursuant to an
Agreement of Guaranty and Suretyship (Completion) of even date herewith (the
"Completion Guaranty") from CDH to Beneficiary, CDH has guaranteed certain
obligations of CDLP under the Construction Loan Agreement.
NOW, THEREFORE, in consideration of the making of the Loans and for the
purpose of securing the payment and performance of the following obligations
(collectively called the "Secured Obligations"):
(A) all obligations of CDH under the Payment Guaranty and the
Completion Guaranty;
(B) all principal indebtedness now or hereafter evidenced by that
certain Deed of Trust Note, of even date herewith, from CDLP to Beneficiary in
the principal face amount of Ten Million Dollars ($10,000,000) (said Deed of
Trust Note, as the same may be amended, supplemented or replaced from time to
time, hereinafter called the "Deed of Trust Note"), together with all interest
thereon, and any increases, renewals, modifications and extensions thereof, the
provisions of the Deed of Trust Note being incorporated herein by this
reference;
(C) all principal indebtedness now or hereinafter evidenced by that
certain Revolving Line of Credit Note, of even date herewith, from CDLP to
Beneficiary in the maximum principal amount of Five Million Dollars ($5,000,000)
(said Revolving Line of Credit Note, as the same may be amended, supplemented,
extended or replaced from time to time hereinafter called the "Credit Note"),
together with all interest thereon, and any increases, renewals, modifications
and exclusions thereof, the provisions of the Credit Note being incorporated
herein by this reference
<PAGE>
(the Deed of Trust Note and the Credit Note are hereinafter collectively
referred to as the "Notes");
(D) any sums advanced by Beneficiary or which may otherwise become due
pursuant to the provisions of the Notes or this Deed of Trust, the Loan
Agreements or pursuant to any other document or instrument at any time delivered
to Beneficiary to evidence or secure any of the Secured Obligations or which
otherwise related to any of the Secured Obligations (all such documents and
instruments, including the Notes, this Deed of Trust, the Loan Agreements and
any other agreements, documents or instruments hereinabove identified are
collectively referred to herein as the "Loan Documents"); and
(E) all other obligations of Trustor to Beneficiary now existing or
hereafter arising, whether or not pursuant to any other loan, line of credit,
letter of credit or other extension of credit made by Beneficiary to, or for the
account of, Trustor, or pursuant to any agreement, document or instrument at any
time given to evidence, secure or otherwise support, or in connection with any
of the foregoing, including, but not limited to, any guaranty made by Trustor to
Beneficiary of any loan or other extension of credit made by Beneficiary to any
other person or entity, whether or not made prior or subsequent to the date of
this Deed of Trust and whether or not currently contemplated or in any way
related to any of the other Secured Obligations, provided, nevertheless, that
this Deed of Trust shall not extend to or secure any obligation of Trustor which
is defined as "consumer credit" under Regulation Z promulgated by the Board of
Governors of the Federal Reserve System and which is not exempted from
application thereof.
Trustor, for good and valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound hereby, does hereby give,
grant, bargain, sell, convey, assign, transfer, mortgage, hypothecate, pledge,
set over and confirm unto Trustee, its, his or their successors and assigns in
trust with power of sale and right of entry and possession and does agree that
Beneficiary shall have a security interest in the following described property,
all accessions and additions thereto, all substitutions therefor and
replacements and proceeds thereof, and all reversions and remainders of such
property (collectively, the "Deed of Trust Property") now owned or held or
hereafter acquired, to wit:
(i) all of Trustor's fee simple estate in the premises
described in Exhibit A attached hereto, including all
right, title and interest of CDH as lessor and CDLP as
lessee under that certain Agreement of Lease dated as of
March 21, 1997, more specifically described on Exhibit B
attached hereto (the "Ground Lease"), together with all
of the easements, rights of way, privileges, liberties,
hereditaments, gores, streets, alleys, passages, ways,
waters, watercourses, rights and appurtenances thereunto
belonging or appertaining, and all of the estate, right,
title, interest, claim and demand whatsoever of Trustor
therein and in the public streets and ways adjacent
thereto, either in law or in equity, in possession or
expectancy (collectively, the "Realty");
<PAGE>
(ii) the Improvements including, without limitation, the
structures and buildings and all additions and
improvements thereto now or hereafter erected upon the
Realty (including all Equipment, as hereinafter defined,
constituting fixtures);
(iii) all building materials of every kind and nature intended
to be installed in or on the Realty or Improvements and,
other than Excluded Equipment, all machinery, apparatus,
equipment, fittings, appliances and fixtures of every
kind and nature whatsoever and regardless of whether the
same may now or hereafter be attached or affixed to the
Realty or Improvements, including, without limitation,
all electrical, antipollution, heating, lighting,
incinerating, power, air conditioning, plumbing,
lifting, cleaning, fire prevention, fire extinguishing,
refrigerating, ventilating and communication machinery,
apparatus, equipment, fittings, appliances and fixtures,
and all engines, pipes, pumps, tanks, motors, conduits,
ducts, compressors, elevators and escalators, and all
articles of personal property and goods of every kind
and nature whatsoever, including all shades, awnings and
carpets now or hereafter affixed to, attached to, placed
upon, or used or usable in any way in connection with
the use, enjoyment, occupancy or operation of the Realty
or Improvements (collectively, the "Equipment");
(iv) all leases and other agreements now or hereafter in
existence relating to the use, occupancy or possession
of the Realty, Improvements or Equipment or any part
thereof, and all right, title and interest of Trustor
thereunder, including cash and securities deposited
thereunder to secure performance by the tenants of their
obligations thereunder, and including further, the right
to amend or terminate the same or waive the provisions
thereof, and the right to receive and collect the rents
thereunder and all guaranties thereof (collectively, the
"Leases");
(v) all revenues, rents, issues and profits of the Realty,
Improvements, Equipment and Leases (collectively, the
"Rents"), including all proceeds of the conversion,
voluntary or involuntary, of the Realty, Improvements
and Equipment or any part thereof into cash or
liquidated claims, including proceeds of insurance and
condemnation awards or payments in lieu thereof;
(vi) all Trustor's rights and interests in all agreements now
or hereafter in existence providing for or relating to
the construction, alteration, maintenance, repair,
operation or management of the Deed of Trust Property or
any part thereof, as well as the plans and
specifications therefor, and all copies thereof
(together with the right to amend or terminate the same
or waive the provisions of the foregoing) and any
amendments, renewals and replacements thereof; to the
extent permitted by the relevant authorities, all
licenses, permits and approvals for the ownership,
construction, maintenance, operation, use and occupancy
of the Deed of Trust Property or any part thereof and
any amendments, renewals and replacements thereof; all
Trustor's rights and interests in all warranties and
guaranties from contractors, subcontractors, suppliers
and manufacturers to the maximum extent permissible
relating to the Deed of Trust Property or any part
thereof; all insurance policies covering or affecting
the Deed of Trust Property or any part thereof; all of
Trustor's now and hereafter arising or acquired
Accounts, General
<PAGE>
Intangibles, Goods, Inventory, Chattel Paper, Documents and Instruments
(as such terms are defined in Article 9 of the Virginia Uniform
Commercial Code) arising out of, used in connection with, or otherwise
relating to the Deed of Trust Property (collectively, the "Other
Property").
TO HAVE AND TO HOLD the Deed of Trust Property and all parts thereof
hereby given, granted, pledged or intended so to be unto Trustee, its successors
and assigns, to its own use forever in accordance with the provisions hereof.
1. REPRESENTATION AND WARRANTIES
Trustor represents and warrants to Beneficiary as follows:
1.1 Warranty of Title.
(a) CDH has good and marketable title to an estate in fee
simple in the Realty, free and clear of all liens and encumbrances, except as
may otherwise be set forth on Exhibit C attached hereto. CDLP has good and
marketable title to (i) a leasehold estate in the Realty, (ii) the Improvements
and has all right, title and interest in all other property constituting a part
of the Deed of Trust Property, free and clear of all liens and encumbrances
except as may otherwise be set forth on Exhibit C attached hereto;
(b) this Deed of Trust is a valid and enforceable first lien
on the Deed of Trust Property (except as aforesaid) and Beneficiary shall,
subject to Trustor's right of possession prior to a Remedies Event, quietly
enjoy and possess the Deed of Trust Property; and
(c) Trustor shall preserve such title as Trustor warrants
herein and the validity and priority of the lien hereof and shall forever
warrant and defend the same to Beneficiary against the claims of all persons and
parties whomsoever.
1.2 Accuracy of Information. The information, financial statements and
other financial data furnished to Beneficiary by Trustor or, to the best of
Trustor's knowledge, any other obligor or guarantor of all or any portion of the
Secured Obligations, including any information furnished pursuant to the Loan
Agreements or Guaranties or with respect to the Deed of Trust Property, are
accurate, correct and complete in all material respects.
1.3 No Litigation. Except is previously disclosed in writing to the
Beneficiary, there is no litigation or governmental investigation of any type
pending, or to the best of Trustor's knowledge threatened, which questions the
capacity or authority of Trustor to fulfill its obligations under this Deed of
Trust, the Notes, the Loan Agreements, or the other Loan Documents, or if
determined adversely, would reasonably be expected to materially and adversely
affect Trustor's use, ownership, control or occupancy of any portion of the Deed
of Trust Property.
<PAGE>
1.4 No Casualty or Taking. None of the Deed of Trust Property has been
damaged by fire or other casualty which is not now fully restored and no notice
of taking by eminent domain or condemnation of any of the Deed of Trust Property
has been received and Trustor has no knowledge that any taking is contemplated.
2. AFFIRMATIVE COVENANTS
Until all of the Secured Obligations shall have been fully paid,
satisfied and discharged, Trustor shall:
2.1 Payment and Performance of Secured Obligations. Subject to any
applicable grace periods, pay the principal and interest and all other sums due
or to become due under the Notes and Loan Agreements as provided therein and pay
and/or perform all other Secured Obligations when due, as provided in the Loan
Documents.
2.2 Legal Requirements. In all material respects, promptly comply with
and conform to all present and future laws, statutes, codes, ordinances, orders,
decrees, regulations and requirements, even if unforeseen or extraordinary, of
every governmental authority or agency and all covenants, restrictions and
conditions which may be applicable to Trustor or to any of the Deed of Trust
Property or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration, repair or reconstruction of any of the Deed of Trust
Property (collectively, the "Legal Requirements"), even if such compliance
necessitates structural changes or improvements or results in interference with
the use or enjoyment of any of the Deed of Trust Property, provided that no
material structural changes shall be made without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed,
subject to the right of good faith contest as set forth in Section 2.3(c) below.
2.3 Impositions.
(a) Before interest or penalties are due thereon and otherwise
when due, pay (with the benefit of any funds held by the Beneficiary under
Section 8.1 hereof to the extent available for such payment) all taxes of every
kind and nature (including real and personal property taxes on the Deed of Trust
Property, income, franchise, withholding, profits and gross receipts taxes, any
tax imposed directly or indirectly on Beneficiary with respect with respect to
the Deed of Trust Property or this Deed of Trust, the value of the equity of
Trustor therein, or the indebtedness evidenced by the Notes) assessed against
Trustor or any portion of the Deed of Trust Property, all charges for any
easement or agreement maintained for the benefit of any of the Deed of Trust
Property, all general and special assessments levies, permits, inspection and
license fees, all mortgages and other liens or encumbrances upon any portion of
the Deed of Trust Property, all water and sewer rents and charges, and all other
charges and liens, whether of a like or different nature, even if unforeseen or
extraordinary, now or hereafter imposed upon or assessed against Trustor or any
of the Deed of Trust Property or arising in respect of the ownership, occupancy,
use or possession thereof. In addition, Trustor shall pay promptly on demand all
taxes, assessments and charges which may now or hereafter be imposed upon
<PAGE>
Beneficiary by reason of its holding any of the Loan Documents, including
intangibles, business privilege and excise taxes, but excluding any taxes upon
the income derived by Beneficiary upon the interest or other sums collected by
Beneficiary pursuant to the Loan Documents. The obligations referred to in this
Section are hereinafter collectively referred to as the "Impositions". Within
forty-five (45) days after the payment of any Imposition, Trustor shall deliver
to Beneficiary evidence reasonably acceptable to Beneficiary of such payment.
Trustor shall also deliver to Beneficiary within ten (10) days of receipt
thereof copies of all settlements and notices pertaining to the Impositions
which may be issued by any governmental authority.
(b) Subject to the right of Trustor to contest the payment of
an Imposition as hereinafter provided, Beneficiary may pay or perform any
Imposition and add the amount so paid or the cost incurred to the Secured
Obligations, and all such amounts shall on demand be due and payable, together
with interest thereon, from the date of such demand at the Base Rate (as defined
in the Loan Agreements), provided that, if the Trustor shall fail to pay such
amount within ten (10) days following such demand, thereafter the Default Rate
(as defined in the Loan Agreements) shall be applicable thereto.
(c) Trustor may in good faith contest by proper legal
proceedings the validity of any Legal Requirement or the validity or amount of
any Imposition, provided, (i) a Remedies Event (as defined in the Construction
Loan Agreement) does not exist; (ii) Trustor provides Beneficiary with security
satisfactory to Beneficiary assuring compliance with or payment of the Legal
Requirement or Imposition and any additional charge, interest, penalty, expense
or other payment which may arise from or be incurred as a result of any delay in
such compliance or payment during the course of such contest, all as reasonably
estimated from time to time by Beneficiary; and (iii) such contest operates to
suspend enforcement of compliance with or collection of the Legal Requirement or
Imposition and is maintained and prosecuted with diligence.
2.4 Maintenance and Impairment of Security. Keep the Deed of Trust
Property in good condition and order and in a rentable and tenantable state of
repair and will make or cause to be made, as and when necessary, all repairs,
renewals, and replacements, structural and nonstructural, exterior and interior,
foreseen and unforeseen, ordinary and extraordinary, provided, however, that no
structural repairs, renewals or replacements shall be made without Beneficiary's
prior written consent, which consent shall not be unreasonably withheld or
delayed. Trustor shall not remove, demolish or alter the Deed of Trust Property
nor commit or suffer waste with respect thereto nor permit the Deed of Trust
Property to become deserted or abandoned. Trustor shall, upon reasonable notice
from Beneficiary, permit Beneficiary and its agents at any time and from time to
time to enter upon and visit the Deed of Trust Property for the purpose of
inspecting and appraising the same. Trustor covenants and agrees not to take or
permit any action with respect to the Deed of Trust Property which will, in any
material manner, impair the security of this Deed of Trust.
2.5 Use of Deed of Trust Property. Use, and permit others to use, the
Deed of Trust Property only for uses permitted under applicable Legal
Requirements.
<PAGE>
2.6 Books and Records. Comply with the record-keeping and property
inspection requirements contained in Sections 4.4 and 4.5 of the Construction
Loan Agreement.
2.7 Leases.
(a) With respect to leases covering more than 500 square feet
of rentable space, Trustor shall promptly (i) perform all of the provisions of
the Leases on the part of the landlord thereunder to be performed; (ii) appear
in and defend any action or proceeding in any manner connected with the Leases
or the obligations of Trustor thereunder; (iii) within thirty (30) days after
request by Beneficiary, deliver to Beneficiary a certificate from each tenant
under the Leases identifying such Lease with particularity and stating that no
default by Trustor or such tenant has occurred under the applicable Lease, that
no rent thereunder has been prepaid, except for the current month, and
addressing such other matters as Beneficiary may reasonably request; (iv) within
ten (10) days after request by Beneficiary, deliver a written statement
containing the names of all tenants, the terms of all Leases and the spaces
occupied and rentals payable thereunder and a statement of all Leases which are
then in default, including the nature of the default; (v) deliver to Beneficiary
promptly copies of any notices of default which Trustor may at any time forward
to or receive from a tenant of any Lease; and (vi) within ten (10) days after
execution, deliver to Beneficiary a fully executed counterpart of each Lease or
a copy thereof.
(b) Each Lease hereafter executed with respect to the Realty
or Improvements or any part thereof shall provide that (i) the tenant
thereunder, at the request of any transferee in foreclosure of this Deed of
Trust or in lieu thereof, shall attorn to such other transferee and shall
recognize such transferee as landlord under the Lease, (ii) neither Beneficiary
nor any such transferee or its successors or assigns shall be bound by (A) any
prepayment of an installment or rent or other obligation under any Lease, or (B)
any amendment or modification to any Lease made without the written consent of
Beneficiary or such transferee, or (C) any obligations under the Lease to have
been performed prior to the date that Beneficiary or such transferee shall have
acquired title to the Deed of Trust Property, (iii) such Lease shall not be
amended, extended or consensually terminated without the prior written consent
of Beneficiary, and (iv) such Lease shall incorporate the terms of Section 8.9
of this Deed of Trust. By the recordation of this Deed of Trust, the foregoing
provisions shall be binding upon each Lease hereafter executed with respect to
the Realty or Improvements, even if not contained expressly in such Leases. Each
tenant, upon request by Beneficiary or such successor in interest, shall execute
and deliver an instrument or instruments confirming the foregoing provisions.
3. NEGATIVE COVENANTS
Until all of the Secured Obligations shall have been fully paid,
satisfied and discharged:
3.1 Leases.
(a) Trustor shall not (i) execute an assignment or pledge of
the Rents and/or the Leases other than in favor of Beneficiary; or (ii) accept
any prepayment of an installment of any Rents prior to the due date of such
installment.
<PAGE>
(b) Trustor shall not, without the prior written consent of
Beneficiary, (i) amend, modify, extend or consent to the surrender of any Lease
or give any consent or waiver to any tenant pursuant to any Lease; or (ii) make
any Lease, except for Leases approved in writing by Beneficiary, it being the
express understanding of Beneficiary and Trustor that, unless waived in writing
by Beneficiary, Beneficiary shall have the right to approve all terms and
conditions of each Lease, except that none of the foregoing restrictions shall
apply to leases consisting of five hundred (500) square feet or less of rentable
space and except for Leases and other matters which do not require the
Beneficiary's approval under the Assignment of Leases and Rents of even date
herewith from CDLP to Beneficiary.
3.2 No Other Financing or Liens. Except as may otherwise be provided in
the Loan Agreements, without the prior written consent of Beneficiary, Trustor
shall not enter into any lease for any personal property as lessee which is to
be used in connection with the operation of Trustor's business at the Deed of
Trust Property or create or cause or permit to exist any lien on, or security
interest in, whether voluntary or involuntary, any part of the Deed of Trust
Property, other than in favor of Beneficiary, except as listed on Exhibit B
hereto and except for (a) televisions, (b) telephone systems, (c) data
processing equipment, (d) front desk office equipment, (e) satellite dishes and
related equipment, or (f) any other equipment attached to or used in connection
with (a) through (e) above which are leased or financed by Trustor.
3.3 Sale of Deed of Trust Property; Etc. Except as may otherwise be
permitted by this Deed of Trust or Section 5.2 of the Construction Loan
Agreement, Trustor shall not sell, assign, give, mortgage, pledge, hypothecate,
encumber, lease or otherwise transfer the Deed of Trust Property or any part
thereof or interest therein, voluntarily or involuntarily (except involuntary
conveyances in connection with condemnation proceedings), without Beneficiary's
prior written consent.
<PAGE>
3.4 Maintenance of Existence.
(a) Neither CDH nor CDLP will (i) dissolve or liquidate, (ii)
merge or consolidate with any other entity or (iii) permit any other entity to
merge into it. Neither CDH nor CDLP, without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed, will
amend, supplement or modify its articles of incorporation, bylaws, partnership
agreement or other document relating to its formation, structure or governance,
as the case may be. CDH and CDLP shall each do all things necessary to preserve
and keep in full force and effect its existence, franchises, rights and
privileges under the laws of the state of its formation and its right to own
property and transact business in each jurisdiction where any part of the Deed
of Trust Property is located.
(b) Unless Beneficiary gives its prior written consent, no
interests in CDLP or the general partner of CDLP will be sold, assigned,
transferred, pledged, mortgaged, hypothecated or otherwise encumbered, and all
such interests shall be maintained in the percentages existing as of the date of
this Deed of Trust.
3.5 Exceptions. The following are to be considered exceptions to the
restrictions set forth in this Article 3.
(a) The granting of the Deed of Trust;
(b) The granting of any Lease with the prior written consent
of Beneficiary;
(c) The entering into of any Management Agreement, provided
that the Beneficiary shall have approved such Management Agreement;
(d) Subject to the Subordination Agreement, the granting of
the Second Deed of Trust.
4. INSURANCE, CONDEMNATION AND RESTORATION
4.1 Insurance.
(a) Trustor shall maintain the insurance required under the
Loan Agreements, and such other insurance as may be reasonably required from
time to time by Beneficiary. The amounts, coverages and other terms and
conditions of the insurance policies shall at all times be satisfactory to
Beneficiary and shall satisfy any coinsurance requirements of Beneficiary.
Trustor shall pay as they become due all premiums for such insurance, shall keep
each policy in full force and effect, shall deliver to Beneficiary evidence of
the payment of the full premium therefor at least thirty (30) days prior to the
expiration date of each policy and shall deliver to Beneficiary Acord 27
Evidence of Insurance evidencing original policies of insurance with
noncontributory mortgagee clauses in favor of and acceptable to Beneficiary.
Trustor's liability insurance policy shall specifically name Beneficiary as an
additional insured. Each policy shall
<PAGE>
provide for written notice to Beneficiary at least thirty (30) days prior to any
cancellation, nonrenewal or amendment of such insurance.
(b) If the Deed of Trust Property is located in an area which
has been identified by any governmental agency, authority or body as a flood
hazard area or the like, then Trustor shall maintain a flood insurance policy
covering the Deed of Trust Property in an amount not less than the full
replacement value of the Deed of Trust Property or the maximum limit of coverage
available under the federal program, whichever amount is less.
(c) Trustor shall promptly comply with and conform to (i) all
provisions of each insurance policy and (ii) all requirements of the insurers
thereunder applicable to Trustor or any of the Deed of Trust Property or to the
use, manner of use, occupancy, possession, operation, maintenance, alteration or
repair of any of the Deed of Trust Property, even if such compliance
necessitates structural changes or improvements or results in interference with
the use or enjoyment of any of the Deed of Trust Property, provided, however,
Trustor shall obtain the prior written consent of Beneficiary prior to making
any structural changes or improvements or interfering with the use or enjoyment
of any of the Deed of Trust Property which consent shall not be unreasonably
withheld or delayed. Trustor shall not use or permit any party to use any of the
Deed of Trust Property in any manner which would permit the insurer to cancel
any insurance policy.
(d) Any separate insurance concurrent in form or contributing
in the event of loss with that required to be maintained under this Section
shall contain a non-contributory mortgagee clause in favor of and acceptable to
Beneficiary and a duplicate original policy (or a certificate evidencing such
original policy) shall be delivered promptly to Beneficiary, provided, however,
that no such concurrent or contributing insurance shall be maintained without
the prior written consent of Beneficiary.
4.2 Rights of Beneficiary to Proceeds. In the event of loss in excess
of $5,000,000, Beneficiary shall have the exclusive right to adjust, collect and
compromise all insurance claims, and Trustor shall not adjust, collect or
compromise any claims under said policies without the prior written consent of
Beneficiary. Each insurer is hereby authorized and directed to make payment
under said policies, including return of unearned premiums, directly to
Beneficiary instead of to Trustor and Beneficiary jointly, and Trustor appoints
Beneficiary as Trustor's attorney-in-fact to endorse any draft therefor. For
losses with respect to the Project in excess of $5,000,000, all insurance
proceeds shall be payable to Beneficiary and in the event of any loss in excess
of $5,000,000 or if an Event of Default or Conditional Default shall have
occurred and be continuing, such proceeds may, at Beneficiary's sole option, be
applied to all or any part of the Secured Obligations and in any order
(notwithstanding that such Secured Obligations may not then otherwise be due and
payable) or to the repair and restoration of any of the Deed of Trust Property
under such terms and conditions as are set forth in Section 4.4 or otherwise as
Beneficiary may reasonably impose. Beneficiary shall not be deemed to have
elected such option until such option is elected specifically in writing. Until
so elected, Beneficiary shall not in any circumstances be deemed to have waived
its right to make such election. If the conditions of Section 4.5 hereof are
satisfied at the time of such casualty and the loss is less than
<PAGE>
$5,000,000, Beneficiary shall apply the proceeds to the repair or restoration of
the Deed of Trust Property under such terms and conditions as are set forth in
Section 4.4 or such other terms and conditions supplemental thereto as
Beneficiary may reasonably impose.
4.3 Condemnation. Trustor, promptly after obtaining knowledge of the
institution of any proceedings for the condemnation or taking by eminent domain
of any of the Deed of Trust Property, shall notify Beneficiary of the pendency
of such proceedings. Beneficiary may participate in any such proceedings and
Trustor shall deliver to Beneficiary all instruments requested by it to permit
such participation. Any award or compensation in excess of $5,000,000 for
property taken or for damage to property not taken, whether as a result of such
proceedings or in lieu thereof, is hereby assigned to and shall for property
taken or for damage to property not taken, whether as a result of such
proceedings or in lieu thereof, is hereby assigned to and shall be received and
collected directly by Beneficiary, and any award or compensation shall be
applied, at Beneficiary's option, to any part of the Secured Obligations and in
any order (notwithstanding that any of such Secured Obligations may not then be
due and payable) or to the repair and restoration of any of the Deed of Trust
Property under such terms and conditions as are set forth in Section 4.4 or
otherwise as Beneficiary may reasonably impose, provided that if the conditions
set forth in Section 4.5 are satisfied at the time of condemnation, any award or
compensation less than $5,000,000 shall be applied by Beneficiary to the repair
and restoration of the Deed of Trust Property under such terms and conditions as
are set forth in Section 4.4 or such other terms and conditions supplemental
thereto as Beneficiary may reasonably impose. During the continuance of an Event
of Default or Conditional Default, any award or compensation shall be applied at
the Beneficiary's option to any part of the Secured Obligations as aforesaid or
to the repair and restoration of the Deed of Trust Property under such terms and
conditions as are set forth in Section 4.4 or otherwise as Beneficiary may
reasonably impose. Beneficiary shall not be deemed to have elected such option
until such option is elected specifically in writing. Until so elected,
Beneficiary shall not in any circumstances be deemed to have waived its right to
make such election.
4.4 Restoration.
(a) All amounts received by Beneficiary pursuant to this
Article and which are to be applied to the restoration of the Deed of Trust
Property may either be held in a restoration fund ("Restoration Fund") by
Beneficiary or, if it refuses to serve, a bank or trust company appointed by
Beneficiary which has a combined capital and surplus of not less than
$50,000,000 as restoration fund trustee (the "Restoration Fund Trustee") with
any additions thereto that may be required by Beneficiary as hereinafter
provided. The interest or income, if any, received on all deposits or
investments of any monies in the Restoration Fund shall be added to the
Restoration Fund. If Beneficiary consents to the deposit of such funds in an
interest-bearing account or otherwise consents to the investment of such funds,
neither Beneficiary nor the Restoration Fund Trustee shall be liable or
accountable for any loss resulting from any such deposit or investment or for
any withdrawal, redemption or sale of deposits or investments. Beneficiary and
the Restoration Fund Trustee may impose reasonable charges for services
performed in managing the Restoration Fund and may deduct such charges
therefrom. In the event of a loss of less than $5,000,000 and if the provisions
of Section 4.5 have been satisfied, or
<PAGE>
the Beneficiary elects to apply the proceeds to restoration as permitted
pursuant to the terms hereof, restoration shall be performed only in accordance
with the following conditions:
(i) prior to commencement of restoration and from time to
time during restoration, if Beneficiary reasonably
determines that the monies on deposit in the
Restoration Fund are insufficient to complete the
restoration, Beneficiary may require Trustor to deposit
additional monies into the Restoration Fund, or provide
evidence of the availability of such moneys in the
manner set forth in Section 6.8 of the Construction
Loan Agreement, in amounts which, in Beneficiary's
judgment, are sufficient to defray all costs to be
incurred to complete the restoration and all costs
associated therewith, including labor, materials,
architectural and design fees and expenses and
contractor's fees and expenses, and Beneficiary shall
have approved a budget and cost breakdown for the
restoration, together with a disbursement schedule, in
detail satisfactory to Beneficiary;
(ii) prior to commencement of restoration, the contracts,
contractors, plans and specifications for the
restoration shall have been approved by Beneficiary and
all governmental authorities having jurisdiction, and
Beneficiary shall be provided with satisfactory title
insurance and, if reasonably requested by Beneficiary,
acceptable surety bonds insuring satisfactory
completion of the restoration and the payment of all
subcontractors and materialmen;
(iii) all restoration work shall be done under contracts and
with contractors that are subject to the prior written
approval of Beneficiary which shall be fully or
partially bonded if reasonably requested by
Beneficiary;
(iv) at the time of any disbursement, no Remedies Event or
any event or conditions which with the passage of time
or the giving of notice, or both, would constitute a
Remedies Event shall have occurred, no mechanics' or
materialmen's liens shall have been filed and remain
undischarged and an endorsement satisfactory to
Beneficiary to its title insurance policy shall have
been delivered to Beneficiary;
(v) disbursements from the Restoration Fund shall be made
from time to time, but not more frequently than once
each calendar month, for completed work under the
aforesaid contracts (subject to retainage) and for
other costs associated therewith and approved by
Beneficiary upon receipt of evidence satisfactory to
Beneficiary of the stage of completion and of
performance of the work in a good and workmanlike
manner in accordance with the contracts, plans and
specifications as approved by Beneficiary;
(vi) Trustor will pay the cost of Beneficiary's inspecting
architect or engineer and the cost of any attorney's
fees and disbursements incurred by Beneficiary in
connection with such restoration;
<PAGE>
(vii) Beneficiary shall have the option to retain up to ten
percent (10%) of the cost of all work until the
restoration is fully completed, as determined by
Beneficiary, and all occupancy permits therefor have
been issued;
(viii) Beneficiary may impose such other reasonable
conditions, including a restoration schedule, as are
customarily imposed by construction lenders to assure
complete and lien-free restoration;
(ix) any sum remaining in the Restoration Fund upon
completion of restoration shall, at Beneficiary's
option, be applied to any part of the Secured
Obligations and in any order (notwithstanding that any
of such Secured Obligations may not then be due and
payable) or be paid to Trustor; provided that, in the
event that any funds have been deposited in the
Restoration Fund by Trustor other than insurance
proceeds, any sum remaining in the Restoration Fund
shall be paid to Trustor up to the amount of such funds
deposited therein by the Trustor.
(b) If within a reasonable period of time after the occurrence
of any loss or damage to the Deed of Trust Property, Trustor shall not have
submitted to Beneficiary and received Beneficiary's approval of plans and
specifications for the repair, restoration or rebuilding of such loss or damage
or shall not have obtained approval of such plans and specifications from all
governmental authorities whose approval is required or if, after such plans and
specifications are approved by Beneficiary and by all such governmental
authorities, Trustor shall fail to commence promptly such repair, restoration or
rebuilding or if thereafter Trustor fails to carry out diligently such repair,
restoration or rebuilding or is delinquent in the payment to mechanics,
materialmen or others of the costs incurred in connection with such work or if
any other condition of this paragraph is not satisfied within a reasonable
period of time after the occurrence of any such loss or damage, then
Beneficiary, in addition to all other rights herein set forth, and after giving
Trustor thirty (30) days written notice of the nonfulfillment of one or more of
the foregoing conditions, may, failing Trustor's fulfillment of said conditions
within said thirty (30)-day period, at Beneficiary's option, (A) declare all
Secured Obligations immediately due and payable, and/or (B) perform or cause to
be performed such repair, restoration or rebuilding and may take such other
steps as Beneficiary may elect to carry out such repair, restoration or
rebuilding and may enter upon the Deed of Trust Property for any of the
foregoing purposes, and Trustor hereby waives, for itself and all others holding
under it, any claim against Beneficiary and any receiver and their respective
agents (other than a claim based upon the alleged gross negligence or
intentional misconduct of Beneficiary or any such receiver or agent) arising out
of anything done by them or any of them pursuant to this paragraph and
Beneficiary may, in its discretion, apply any insurance or condemnation proceeds
held by it to reimburse itself and/or such receiver for all amounts expended or
incurred by it in connection with the performance of such work, including
reasonable attorneys' fees, and any excess costs shall be paid by Trustor to
Beneficiary, and Trustor's obligation to pay such excess costs shall be secured
by the lien of this Deed of Trust and shall bear interest at the Default Rate
until paid.
(c) Trustor waives any and all right to claim or recover
against Beneficiary, its officers, employees, agents and representatives for
loss of or damage to Trustor, the Deed of
<PAGE>
Trust Property, Trustor's property or the property of others under Trustor's
control from any cause insured against or required to be insured against by the
provisions of this Deed of Trust.
4.5 Proceeds Available for Restoration.
Notwithstanding the provisions of Sections 4.2 and 4.3 hereof,
Beneficiary agrees to make casualty and condemnation proceeds available for
reconstruction in accordance with and subject to the terms of Section 4.4 hereof
provided the following conditions are met to Beneficiary's satisfaction at the
time of such casualty or condemnation:
(a) No Remedies Event or Conditional Default (other than a
Conditional Default consisting of the applicable casualty or condemnation) shall
have occurred and be continuing;
(b) The Trustor provides evidence satisfactory to the
Beneficiary that construction of the Project can be completed by the Expiration
Date; and
(c) The Beneficiary determines, in its sole discretion, that
casualty or condemnation proceeds are sufficient to pay in full the cost of
reconstruction. In the event that the Beneficiary determines that such proceeds
are not sufficient, Beneficiary shall not be required to make any proceeds
available for reconstruction unless the Trustor complies with the provisions of
Section 4.4(a)(i) hereof.
5. DEFAULT
5.1 Events of Default. The occurrence of an Event of Default under the
Loan Agreement as such term is defined in the Loan Agreements shall constitute
an "Event of Default" hereunder.
5.2 Demand Obligation. Nothing in this Deed of Trust or any of the
other Loan Documents shall be construed to limit the applicability of any term
of the Loan Documents providing for the payment of any Secured Obligations on
demand.
<PAGE>
6. REMEDIES
6.1 Rights and Remedies of Beneficiary. If a Remedies Event occurs,
Beneficiary may, at its option and notwithstanding any contrary provisions in
the Loan Agreements or any of the other Loan Documents, without demand, notice
or delay, do one or more of the following:
(a) Beneficiary may declare the entire unpaid principal
balance of the Secured Obligations, together with all interest thereon, to be
due and payable immediately (and in the case of an Event of Default under
Section 10.1(h) of the Construction Loan Agreement, all such indebtedness shall
automatically and immediately become due and payable without notice or any other
act).
(b) Beneficiary may (i) institute and maintain an action of
mortgage foreclosure against the Deed of Trust Property and the interests of
Trustor therein, (ii) institute and maintain an action on any instruments
evidencing the Secured Obligations or any portion thereof, and (iii) take such
other action at law or in equity for the enforcement of any of the Loan
Documents as the law may allow, and in each such action Beneficiary shall be
entitled to all costs of suit and attorneys fees.
(c) Beneficiary may, in its sole and absolute discretion, and
without releasing Trustor or any other obligor or guarantor from any obligation
under any of the Loan Documents and without waiving any Remedies Event: (i)
collect any or all of the Rents, including any Rents past due and unpaid, (ii)
perform any obligation or exercise any right or remedy of Trustor under any
Lease, or (iii) enforce any obligation of any tenant of any of the Deed of Trust
Property. Beneficiary may exercise any right under this subsection (c) whether
or not Beneficiary shall have entered into possession of any of the Deed of
Trust Property, and nothing herein contained shall be construed as constituting
Beneficiary a "mortgagee in possession", unless Beneficiary shall have entered
into and shall continue to be in actual possession of the Deed of Trust
Property. Trustor hereby authorizes and directs each and every present and
future tenant of any of the Deed of Trust Property to pay all Rents directly to
Beneficiary and to perform all other obligations of that tenant for the direct
benefit of Beneficiary, as if Beneficiary were the landlord under the Lease with
that tenant, immediately upon receipt of a demand by Beneficiary to make such
payment or perform such obligations. Trustor hereby waives any right, claim or
demand it may now or hereafter have against any such tenant by reason of such
payment of Rents or performance of obligations to Beneficiary, and any such
payment or performance to Beneficiary shall discharge the obligations of the
tenant to make such payment or performance to Trustor. Trustor shall indemnify
Beneficiary and hold Beneficiary harmless from and against any and all claims,
liability, damage, cost and expense (including attorney's fees) which may be
asserted against or incurred by Beneficiary by reason of any obligations of
Trustor to perform any provision of any Lease. Beneficiary may apply the Rents
received by Beneficiary in accordance with Section 10.2(d) of the Construction
Loan Agreement. Beneficiary may, in its sole discretion, determine the method by
which, and extent to which, the Rents will be collected and obligations of
tenants enforced; and Beneficiary may waive or fail to perform or enforce any
<PAGE>
provision of any Lease. Beneficiary shall not be accountable for any Rents or
other sums it does not actually receive. Trustor hereby appoints Beneficiary as
its attorney-in-fact effective upon a Remedies Event to perform all acts which
Trustor is required or permitted to perform under any and all Leases.
(d) Beneficiary may, without releasing Trustor or any obligor
or guarantor of any of the Secured Obligations from any obligation under any of
the Loan Documents and without waiving any Remedies Event, enter upon and take
possession of the Deed of Trust Property or any portion thereof, with or without
legal action and by force if permitted by applicable Law, or have a receiver
appointed without proof of depreciation or inadequacy of the value of the Deed
of Trust Property, the insolvency of Trustor, or any other proof. Beneficiary or
said receiver may, subject to the terms and conditions of the Leases, manage and
operate the Deed of Trust Property, make, cancel, enforce or modify the Leases
or any of them, obtain and evict tenants, establish or change the amount of any
Rents, and perform any acts and advance any sums which Beneficiary deems proper
to protect the security of this Deed of Trust, all such sums to be payable on
demand, together with interest thereon at the Default Rate, from the date of
such demand, and such sums and interest to be secured by this Deed of Trust.
(e) Beneficiary may elect to cause the Deed of Trust Property,
or any part thereof to be sold as follows:
(i) Beneficiary may proceed as if all of the Deed of Trust
Property were real property in accordance with
subparagraph (iv) below, or Beneficiary may elect to
treat the Equipment, the Other Property or any property
which consists of a right in action or which is
property that can be severed from the Land or the
Improvements without causing structural damage thereto
as if the same were personal property, and dispose of
the same in accordance with subparagraph (iii) below,
separate and apart from the sale of real property, the
remainder of the Deed of Trust Property being treated
as real property.
(ii) Beneficiary may cause any such sale or other
disposition to be conducted immediately following the
expiration of any cure period, if any, herein provided
or Beneficiary may delay any such sale or other
disposition for such period of time as Beneficiary
deems to be in its best interest. Should Beneficiary
desire that more than one such sale or other
disposition be conducted, Beneficiary may, at its
option, cause the same to be conducted simultaneously,
or successively on the same day, or at such different
days or times and in such order as Beneficiary may deem
to be in its best interests.
<PAGE>
(iii) Should Beneficiary elect to cause any of the Deed of
Trust Property to be disposed of as personal property
as permitted by subparagraph (i) above, it may dispose
of any part thereof in any manner now or hereafter
permitted by Article 9 of the Virginia Uniform
Commercial Code or in accordance with any other remedy
provided by law. Any such disposition may be conducted
by an employee or agent of Beneficiary or Trustee. Both
Trustor and Beneficiary shall be eligible to purchase
any part or all of such property at any such
disposition. Any such disposition may be either public
or private as Beneficiary may so elect, subject to the
provisions of the Virginia Uniform Commercial Code.
Reasonable expenses of retaking, holding, preparing for
sale, selling or the like shall include Beneficiary's
and Trustee's reasonable attorneys' fees and legal
expenses. Trustor, upon demand of Beneficiary, shall
assemble such personal property and make it available
to Beneficiary at the Land, a place which is hereby
deemed reasonably convenient to Beneficiary and
Trustor. Beneficiary shall give Trustor at least ten
(10) days' prior written notice of the time and place
of any public sale or other disposition of such
property or of the day on or after which any private
sale or any other intended disposition is to be made,
and if such notice is sent to Trustor as provided in
Section 11.6 of the Construction Loan Agreement, it
shall constitute reasonable notice to Trustor.
(iv) Should Beneficiary elect to sell the Deed of Trust
Property or any part thereof which is real property or
which Beneficiary has elected to treat as real
property, upon such election, Beneficiary or Trustee
shall give such notice of default and election to sell
as may then be required by Law. Thereafter, upon the
expiration of such time and the giving of such notice
of sale as may then be required by Law, and without the
necessity of any demand on Trustor, Trustee or
substitute trustee shall have the power and duty to
sell and Trustor hereby consents to the passage of a
decree of the sale of the Deed of Trust Property or any
portion thereof specified by Beneficiary, subject,
however, to the provisions of Section 6.2, at public
auction at such time and place, and in such manner and
upon such terms and conditions, and after such previous
public notice, with such postponement of sale or
resale, as Trustee or substitute trustees, shall deem
best for the interest of all parties concerned, and
(the terms of sale being complied with) shall convey
the same in fee to the purchaser or purchasers at the
cost of Trustor or of the purchaser of the land,
premises and improvements so sold, such purchaser being
hereby discharged from all liability for the
application of the purchase money. Trustee may, and
upon request of Beneficiary shall, from time to time
postpone the sale by public announcement thereof at the
time and place noticed therefor. If the Deed of Trust
Property consists of several lots or parcels,
Beneficiary may direct that the same be sold as a unit
or be sold separately and, if to be sold separately,
Beneficiary may designate the order in which such lots
or parcels shall be offered for sale or sold. Any
person, including Trustor or Beneficiary, may purchase
at the sale. Upon the sale, Trustee shall execute and
deliver to the purchaser or purchasers a deed or deeds
conveying the property so sold, but without any
covenant or warranty whatsoever, express or implied,
whereupon such purchaser or purchasers shall be let
into immediate possession.
<PAGE>
(v) The acknowledgment of the receipt of the purchase money
contained in any deed or conveyance executed pursuant
to the terms of this Section 6.1(v) shall be sufficient
to discharge the grantee of all obligations to see to
the proper application of the consideration therefor as
hereinafter provided. The purchaser at any trustee's or
foreclosure sale hereunder may disaffirm any easement
granted or rental or lease contract made in violation
of any provision of this Deed of Trust or any of the
other Loan Documents and may take immediate possession
of the Deed of Trust Property free from, and despite
the terms of, such grant of easement or rental or lease
contract.
(vi) Upon the completion of any sale or sales made by
Trustee or Beneficiary, as the case may be, under or by
virtue of this Section 6.1. Trustee is hereby appointed
irrevocably the true and lawful attorney-in-fact of
Trustor in its name and stead to make all necessary
conveyances, assignments, transfers and deliveries of
the Deed of Trust Property or any party thereof and the
rights so sold and for that purpose and Trustee may
execute all necessary instruments of conveyance,
assignment and transfer, and may substitute one or more
persons with like power, Trustor hereby ratifying and
confirming all that its said attorney or any substitute
or substitutes shall lawfully do by virtue hereof.
Nevertheless, Trustor, if so requested by Trustee or
Beneficiary, shall ratify and confirm any such sale or
sales by executing and delivering to Trustee or to such
purchaser or purchasers all such instruments as may be
advisable in the request. Any such sale or sales made
under or by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale, shall
operate to divest all of the estate, right, title
interest, claim and demand whatsoever, whether at law
or in equity, of Trustee in and to the properties and
rights so sold, and shall be perpetual bar, both at law
and in equity, against Trustor and any all persons
claiming or who may claim the title, or any part
thereof, from, through or under Trustor.
(vii) Trustor hereby expressly waives any right which it may
have to direct the order in which any of the Deed of
Trust Property shall be sold in the event of any sale
or sales pursuant hereto.
6.2 Application of Proceeds. The purchase money, proceeds or
avails of any sale made under or by virtue of Section 6.1, together with all
other sums which may then be held by Trustee or Beneficiary under this Deed of
Trust, whether under the provisions of Section 6.1, or otherwise, shall be
applied as follows:
FIRST: To the payment of the reasonable costs and expenses of
the sale, including a reasonable trustees' commission not to exceed one percent
(1%) of the purchase price and actual attorneys' fee to the attorneys
representing Trustee or any substitute trustee and
<PAGE>
Beneficiary, and to the payment of all actual, out-of-pocket expenses,
liabilities and advances made by Trustee and all taxes or assessments, except
for any taxes, assessments or other charges subject to which the Deed of Trust
Property shall have been sold, and further including all costs of publishing,
recording, mailing and posting notice, the cost of any search and/or other
evidence of title procured in connection therewith and the cost of any revenue
stamps on any deed of conveyance.
SECOND: To the payment of any and all sums expended under the
terms hereof, not then repaid, with accrued interest at the Default Rate
specified in the Loan Agreements and all other sums required to be paid by
Trustor pursuant to any provisions of this Deed of Trust or of the Notes, Loan
Agreements, or any other Loan Documents, including all expenses, liabilities and
advances made or incurred by Beneficiary under this Deed of Trust or in
connection with the enforcement hereof, together with interest at the Default
Rate specified in the Loan Agreements on all advances.
THIRD: To the payment of the interest and principal then due,
owing and unpaid upon the Notes in the manner set forth in the Notes, with
interest on the unpaid principal at the Default Rate from the due date of any
such payment of principal until the same is paid.
FOURTH: The remainder, if any, to the person or persons
legally entitled thereto.
6.3 Purchase by Beneficiary. Upon any sale or sales made under or by
virtue of Section 6.1, whether made under the power of sale herein granted or
under or by virtue of judicial proceedings or of a judgment or decree of
foreclosure and sale, Beneficiary may bid for and acquire the Deed of Trust
Property or any part thereof and, in lieu of paying cash therefor, may make
settlement for the purchase price by crediting upon the Secured Obligations the
net sales price after deducting therefrom the expenses of sale and the costs of
the judicial proceedings, if any, and any other sums which Trustee or
Beneficiary is authorized to deduct under this Deed of Trust, and, in such
event, this Deed of Trust, the Notes and documents evidencing expenditures
secured hereby shall be presented to the person or persons conducting the sale
in order that the amount so used or applied may be credited upon said
indebtedness as having been paid.
6.4 Trustor's Possession of Deed of Trust Property. Upon the occurrence
of any Remedies Event and pending the exercise by Trustee or Beneficiary or
their agents or attorneys of their right to exclude Trustor from all or any part
of the Deed of Trust Property, Trustor agrees to vacate and surrender possession
of the Deed of Trust Property to Trustee or Beneficiary, as the case may be, or
to a receiver, if any, and in default thereof may be evicted by any summary
<PAGE>
action or proceeding for the recovery of possession of leased premises for
non-payment of rent, however designated. In the event that there be a trustees'
sale hereunder and if at the time of such sale Trustor, or its heir, executor,
administrator or assign, by occupying the Deed of Trust Property or any part
thereof so sold, each and all shall immediately become the tenant of the
purchaser at such sale, which tenancy shall be a tenancy from day to day,
terminable at the will of either tenant or landlord, at a reasonable rental per
day based upon the value of the Deed of Trust Property, such rental to be due
daily to the purchaser. An action of unlawful detainer shall lie if the tenant
holds over after a demand in writing for possession of said Deed of Trust
Property; and this agreement and the Trustee's deed shall constitute a lease and
agreement under which any such tenant's possession arose and continued.
6.5 No Release. If Trustee or Beneficiary (a) grants forbearance or an
extension of time for the payment of any sums secured hereby; (b) takes other or
additional security for the payment of any sums secured hereby; (c) waives or
does not exercise any right granted herein or in the Notes or in any other Loan
Document; (d) reconveys with or without consideration any of the Deed of Trust
Property or any other security for the Secured Obligations; (e) changes any of
the terms, covenants, conditions or agreements of the Notes or this Deed of
Trust or any other Loan Document; (f) consents to the filing of any map, plat or
replat or condominium declaration affecting the Deed of Trust Property; (g)
consents to the granting of any easement or other right affecting the Deed of
Trust Property; or (h) makes or consents to any agreement subordinating the lien
hereof; any such act or omission shall not release, discharge, modify, change or
affect except to the extent of the changes referred to in clause (e) above the
original liability under the Notes, the Loan Agreements, this Deed of Trust or
any other Loan Document or any other obligation of Trustor or any subsequent
purchaser of the Deed of Trust Property or any part thereof, or any maker,
co-signor, endorser, surety or guarantor of the Notes and the other Secured
Obligations, nor shall any such act or omission preclude Trustee or Beneficiary
from exercising any right, power or privilege granted herein or in any of the
other Loan Documents or intended to be granted in the event of any default then
made or of any subsequent default, nor shall the lien of this Deed of Trust or
the priority thereof be altered thereby, whether or not there are junior lienors
and whether or not they consent to any of the foregoing.
6.6 Remedies Cumulative. All remedies contained in this Deed of Trust
are cumulative and Beneficiary also has all other remedies provided by law or in
equity or in the Notes or in any of the other Loan Documents. No delay or
failure by Beneficiary to exercise any right or remedy under this Deed of Trust
will be construed to be a waiver of that right or remedy or a waiver of any
Remedies Event. Beneficiary may exercise any one or more of its rights and
remedies without regard to the adequacy of its security. One or more of the
other Loan Documents may contain provisions pursuant to which all or a part of
the Secured Obligations shall become immediately and automatically due and
payable upon the occurrence of certain events described therein. Nothing in this
Deed of Trust shall be construed as limiting the effectiveness of such
provisions, and in the event of any inconsistency with the terms of this Deed of
Trust, those provisions more advantageous to Beneficiary shall govern.
<PAGE>
6.7 No Merger.
(a) If Beneficiary or any other person or entity owning or
holding this Deed of Trust shall acquire or shall become vested with the fee
title to the Deed of Trust Property or any other estate or interest in the Deed
of Trust Property, such estates shall not merge as a result of such acquisition
and shall remain separate and distinct from all other estates and interests in
the Deed of Trust Property for all purposes after such acquisition. The lien and
security interest created hereby shall not be destroyed or terminated by the
application of the doctrine of merger and, in such event, Beneficiary or such
other person or entity shall continue to have and enjoy all of the rights and
privileges of Beneficiary hereunder as to each separate estate unless and until
Beneficiary or such other person or entity shall affirmatively elect in writing
to merge such estates.
(b) Upon the foreclosure of the lien created hereby on the
Deed of Trust Property, as herein provided, any Leases then existing shall not
be destroyed or terminated by application of the doctrine of merger or by
operation of law or as a result of such foreclosure unless Beneficiary or any
purchaser at a foreclosure sale shall so elect by written notice to the lessee
in question.
7. ENVIRONMENTAL MATTERS
7.1 Environmental Warranty and Indemnification. The Hazardous Materials
Certificate and Indemnity Agreement of even date herewith from Trustor and
Guarantors to Beneficiary is hereby incorporated herein in its entirety by this
reference.
8. ADDITIONAL RIGHTS AND OBLIGATIONS
8.1 Installments for Insurance, Taxes and Other Charges. Without
limiting the effect of any other provision of this Deed of Trust, Trustor shall,
if requested by Beneficiary, pay to Beneficiary monthly with its payments on the
Notes, an amount equal to one-twelfth (1/12) of the annual premiums for the
insurance policies referred to hereinabove and the annual Impositions and any
other item which at any time may be or become a lien upon the Deed of Trust
Property (the "Escrow Charges"), and on demand from time to time Trustor shall
pay to Beneficiary any additional sums necessary to pay when due all Escrow
Charges. The amounts so paid shall be security for the Secured Obligations and
shall be used in payment of the Escrow Charges so long as no Remedies Event
shall exist. No amount so paid to Beneficiary shall be deemed to be trust funds
but may be commingled with general funds of Beneficiary. Beneficiary
<PAGE>
may, in its sole discretion, invest amounts so paid in an interest bearing
account designated by Trustor, subject to the prior written approval of
Beneficiary, for the benefit of Trustor. Upon the occurrence of a Remedies
Event, Beneficiary shall have the right, at its election, to apply any amount so
held against the Secured Obligations due and payable in such order as
Beneficiary may deem fit, and Trustor hereby grants to Beneficiary a lien upon
and security interest in such amounts for such purpose. At Beneficiary's option,
Beneficiary from time to time may waive, and after any such waiver may
reinstate, the provisions of this Section 8.1. In the event the interest of
Trustor in the Deed of Trust Property is sold or otherwise transferred,
voluntarily or involuntarily, then all of the interest of Trustor in and to the
Escrow Charges shall vest in the successor to the interest of Trustor in the
Deed of Trust Property; subject, nevertheless, to the rights of Beneficiary
hereunder.
8.2 Beneficiary's Right to Protect Security. Beneficiary is hereby
authorized to do any one or more of the following irrespective of whether a
Remedies Event has occurred, but only after written notice from Beneficiary to
Trustor specifying the nature of the actions to be taken by Beneficiary: (a)
appear in and defend any action or proceeding purporting to affect the security
hereof or the rights or powers of Beneficiary hereunder; (b) subject to
Trustor's rights under Section 2.3(c), take such action as Beneficiary may
determine to pay, perform or comply with any Impositions or Legal Requirements,
to cure any Remedies Events and to protect its security in the Deed of Trust
Property, including the recordation or filing of financing statements and other
documents to further assure the enforceability or priority of Beneficiary's
liens and security interests, advance sums on behalf of Trustor to pay, perform
or comply with any Imposition, Legal Requirement, prohibited lien, claims, costs
and expenses in connection with the Deed of Trust Property, including payment
for utilities, fuel or any other necessary maintenance expenses, fees, insurance
and repairs; and for the purpose of exercising any such powers and all other
rights and powers granted by this Deed of Trust to Beneficiary, Beneficiary is
hereby appointed attorney-in-fact for Trustor. All sums paid by or otherwise
owing to Beneficiary under this Section shall be paid by Trustor to Beneficiary
on demand, and until paid such sums shall be added to the principal secured
hereby, shall be included as part of the Secured Obligations and shall bear
interest at the Default Rate from the date of demand.
8.3 Beneficiary's Costs and Expenses. In the event of a Remedies Event
or the exercise by Beneficiary of any of its rights hereunder, or if Beneficiary
shall become a party, either as plaintiff or defendant or otherwise, to any suit
or legal proceeding affecting any of the Deed of Trust Property or the Secured
Obligations, or if review and approval of any document, or any other matter
related to any of the Secured Obligations, is required by, or requested of,
Beneficiary, Trustor shall pay to Beneficiary on demand its reasonable costs,
expenses and attorneys fees incurred in connection therewith. If such amounts
are not paid, they shall be added to the principal secured hereby, shall be
included as part of the Secured Obligations and shall bear interest at the
Default Rate from the date of demand.
<PAGE>
8.4 Security Agreement Under Uniform Commercial Code. This Deed of
Trust is a Security Agreement as defined in the Virginia Uniform Commercial
Code. Notwithstanding the filing of a financing statement covering any of the
Deed of Trust Property in the records normally pertaining to personal property,
at Beneficiary's option all of the Deed of Trust Property, for all purposes and
in all proceedings, legal or equitable, shall be regarded (to the extent
permitted by law), as part of the Realty, whether or not any such item is
physically attached to the Realty or Improvements. The mention in any such
financing statement of any of the Deed of Trust Property shall not be construed
as in any way altering any of the rights of Beneficiary or adversely affecting
the priority of the lien granted hereby or by any other Loan Document, but such
mention in the financing statement is hereby declared to be for the protection
of Beneficiary in the event any court shall at any time hold that notice of
Beneficiary's priority of interest, to be effective against any third party,
must be filed in the Virginia Uniform Commercial Code records. This Deed of
Trust constitutes a fixture filing under the Virginia Uniform Commercial Code.
8.5 Assignment of Loan Documents; Estoppel Certificates. Subject to the
terms of the Loan Agreements, Trustor agrees that nothing herein shall be deemed
to prohibit the assignment or negotiation, with or without recourse, of any of
the Loan Documents or any interest of Beneficiary therein, or the assignment of
this Deed of Trust. Trustor further agrees that, if requested by Beneficiary,
Trustor shall certify to the assignee of this Deed of Trust, to Beneficiary, and
to such other persons as Beneficiary may request from time to time that this
Deed of Trust is in full force and effect, the amount or amounts of the Secured
Obligations, the terms of the Loan Documents, whether any offsets, claims,
counterclaims or defenses exist with respect to the payment of the Secured
Obligations or the performance of the Loan Documents and such other matters in
connection with the indebtedness secured hereby or any of the collateral for
such indebtedness as Beneficiary or any assignee may reasonably require.
8.6 Waivers by Trustor. Trustor, to the extent permitted by Law, hereby
waives all errors and imperfections in any proceedings instituted by Beneficiary
under any of the Loan Documents and all benefit of any present or future statute
of limitation or repose, or moratorium law, or any other present or future Law,
regulation or judicial decision which (a) exempts any of the Deed of Trust
Property or any other property, real or personal, or any part of the proceeds
arising from any sale thereof from attachment, levy or sale under execution, (b)
provides for any stay of execution, marshalling of assets, exemption from civil
process, redemption, extension of time for payment or valuation or appraisement
of any of the Deed of Trust Property, or (c) conflicts with any provision of any
of the Loan Documents.
8.7 Payment of Fees. The Trustor will pay all filing, registration and
recording fees, and all expenses incident to the preparation, execution,
acknowledgment, filing and recording of this Deed of Trust, any financing
statements, releases, continuation statements, and any instruments of further
assurance and all federal, state, county and municipal stamp taxes and
<PAGE>
other taxes, duties, imposts, assessments and charges arising out of or in
connection with the execution and delivery of this Deed of Trust and the other
Loan Documents.
8.8 Further Assurances. Trustor agrees to execute such further
assurances, documents and instruments as may be reasonably requested by
Beneficiary for the purposes of further evidencing, carrying out and/or
confirming this Deed of Trust and for all other purposes intended by this Deed
of Trust.
8.9 Subordination to Leases. At the option of Beneficiary, this Deed of
Trust shall become subject and subordinate, in whole or in part, (but not with
respect to the priority of entitlement to insurance proceeds or any award in
condemnation or with respect to any option to purchase) to any and all Leases,
upon the execution by Beneficiary and recording thereof, at any time hereafter,
in the office of the Clerk of the Circuit Court in and for the county wherein
the Realty is situate, of a unilateral declaration to that effect.
8.10 Subrogation. If the proceeds of any loan or other credit extended
by Beneficiary, the repayment of which is hereby secured, is used directly or
indirectly to pay off, discharge or satisfy, in whole or in part, any prior lien
or encumbrance upon the Deed of Trust Property or any part thereof, then
Beneficiary shall be subrogated to any additional security held by the holder of
such lien or encumbrance.
8.11 Restatement of Representations and Warranties. Each representation
or warranty made by Trustor in this Deed of Trust or in any other Loan Document
or certificate related thereto shall be deemed to be restated as of the date of
each advance made or credit extended by Beneficiary constituting a Secured
Obligation.
<PAGE>
8.12 Acceleration. In order to accelerate the maturity of the
indebtedness hereby secured because of the failure of Trustor to pay any tax
assessment, liability, obligation or encumbrance upon the Deed of Trust Property
as herein provided, it shall not be necessary that Beneficiary shall first pay
the same.
9. OBLIGATIONS OF TRUSTEE
(a) Trustee, by its acceptance hereof, covenants faithfully to
perform and fulfill the trusts herein created, being liable, however, only for
gross negligence or willful misconduct, and hereby waives any statutory fee and
agrees to accept reasonable compensation, in lieu thereof, for any services
rendered by it in accordance with the terms hereof.
(b) In the event of Trustee's death, removal, resignation,
refusal to act, or inability to act or, in the sole discretion of Beneficiary
for any reason whatsoever, Beneficiary may, at any time or from time to time
without notice and without specifying any reason therefor and without applying
to any court, select and appoint a successor trustee, and all powers, rights,
duties and authority of Trustee, as aforesaid, shall thereupon become vested in
such successor without conveyance from the predecessor trustee. Such substitute
trustee shall not be required to give bond for the faithful performance of these
duties unless required by Beneficiary. Such substitute trustee shall be
appointed by written instrument duly recorded in the county where the Land is
located, which appointment may be executed by an authorized agent of Beneficiary
and if Beneficiary is a business trust or corporation, such appointment shall be
conclusively presumed to have been executed with authority and shall be valid
and sufficient without proof of any action by the Board of Trustees or Board of
Directors or any superior officer of the business trust or corporation. Trustor
hereby ratifies and confirms any and all acts which the herein-named Trustee, or
its successor or successors in this trust, shall do lawfully by virtue hereof.
Trustor hereby agrees, on behalf of itself and of its heirs, executors,
administrators and assigns, that the recitals contained in any deed or deeds
executed in due form by Trustee or any substitute trustee, acting under the
provisions of this Deed of Trust, shall be prima facie evidence of the facts
recited, and that it shall not be necessary to prove in any court, otherwise
than by such recitals, the existence of the facts essential to authorize the
execution and delivery of such deed or deeds and the passing of title thereby.
In the event that two or more trustees are named herein, any one or more of the
trustees shall be clothed with the full power to act when action hereunder is
required.
<PAGE>
10. MISCELLANEOUS MATTERS
10.1 Notices. All notices hereunder shall be in writing and shall be
deemed to have been duly given for all purposes when delivered in the manner set
forth in Section 11.6 of the Construction Loan Agreement.
10.2 Governing Law. This Deed of Trust shall be interpreted in
accordance with the laws of Virginia, without regard to principles of conflicts
of law.
10.3 Status of Parties. It is understood and agreed that the
relationship of the parties is that of Trustor and Beneficiary and that nothing
herein shall be construed to constitute a partnership, joint venture or
co-tenancy between Trustor and Beneficiary.
10.4 Severability. In the event any one or more of the provisions
contained in this Deed of Trust shall for any reason be held to be inapplicable,
invalid, illegal, or unenforceable in any respect, such inapplicability,
invalidity, illegality or unenforceability shall not affect any other provision
of this Deed of Trust, but this Deed of Trust shall be construed as if such
inapplicable, invalid, illegal or unenforceable provision had never been
contained herein.
10.5 Successors and Assigns. All of the grants, covenants, terms,
provisions and conditions herein shall run with the land and shall apply to,
bind and inure to the benefit of, the successors and assigns of Trustor and
Beneficiary.
10.6 Time of Essence. Time is of the essence as to all of Trustor's
obligations hereunder and under the other Loan Documents, and under any and all
other documents relating in any manner to any of the Secured Obligations.
10.7 Section Headings. The section headings in this Deed of Trust are
used only for convenience in finding the subject matters and are not part of
this Deed of Trust or to be used in determining the intent of the parties or
otherwise interpreting this Deed of Trust.
10.8 Performance by Beneficiary. Any act which Beneficiary is permitted
to perform under the Loan Documents may be performed at any time and from time
to time by Beneficiary or any person or entity designated by Beneficiary.
<PAGE>
10.9 Attorney-in-Fact. Each appointment of Beneficiary as
attorney-in-fact for Trustor in this Deed of Trust is irrevocable and coupled
with an interest.
10.10 Refusal of Consent. Except as otherwise specified herein,
Beneficiary has the right to refuse to grant its consent whenever such consent
is required under this Deed of Trust.
10.11 Joint and Several Obligations. If there is more than one party
identified in this Deed of Trust as "Trustor," then each such party so
identified shall be liable, jointly and severally, for all obligations of
Trustor hereunder, and all references to "Trustor" herein shall refer to each
such party individually and to all, or any two or more, of such parties
collectively.
10.12 No Oral Modification. This Deed of Trust may be modified,
amended, discharged or waived only by an agreement in writing, signed by all of
the parties hereto.
10.13 Defeasance. If Trustor pays to Beneficiary in full the Secured
Obligations, then this Deed of Trust shall become void. Upon such payment,
Beneficiary shall promptly execute and deliver to Trustor a release of its Deed
of Trust in recordable form.
[REMAINDER OF PAGE
LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be duly
executed the day and year first above written.
WITNESS: COLONIAL DOWNS HOLDINGS, INC.
a Virginia corporation
By: /s/ Jeffrey P. Jacobs
---------------------------
Name: __________________ Name: Jeffrey P. Jacobs
Title: __________________ Title: CEO
COLONIAL DOWNS, L.P., a Virginia
limited partnership
By: STANSLEY RACING CORP., a Virginia
corporation, as its sole general partner
By: /s/ Jeffrey P. Jacobs
---------------------------
Name: ___________________ Name: Jeffrey P. Jacobs
Title: ___________________ Title: CEO
DRAFTED BY AND AFTER RECORDING RETURN TO:
Charles G. Knox, Esquire
Marcus & Shapira LLP
35th Floor, One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219-6401
<PAGE>
EXHIBIT A
Legal Description
ALL that certain tract or parcel of land lying and being in Cumberland District,
New Kent County, Virginia, containing 345.000 acres, more or less, as depicted
on a "Plat of a Parcel of Land Lying South of I-64, Cumberland District, New
Kent County", dated October 15, 1996, made by Resource International, Ltd.,
signed by Howard B. Weatherford, III, Land Surveyor, a true copy of which is
attached hereto and recorded herewith and which is incorporated herein by
reference for a complete and accurate description of the land conveyed hereby.
TOGETHER WITH a non-exclusive easement of right of way typically 60 feet in
width over, under and across the "60' Ingress/Egress Easement" as depicted on
the aforesaid plat for the purpose of ingress to and egress from the subject
land and State Route 155, as well as the placement of utilities to serve the
subject land.
BEING the same property conveyed to Colonial Downs Holdings, Inc., a Virginia
Corporation, by deed from Chesapeake Forest Products Company, a Virginia
corporation, dated March 19, 1997, recorded March 20, 1997, in the Clerk's
Office, Circuit Court, New Kent County, Virginia, in Deed Book 241, page 453.
<PAGE>
EXHIBIT C
Permitted Encumbrances
A. Easement granted Virginia Electric and Power Company dated February
19, 1997, recorded in Deed Book 241, Page 106 of New Kent County,
Virginia.
B. Easement granted Virginia Electric and Power Company dated
September 11, 1996, recorded in Deed Book 235, Page 504 of New Kent
County, Virginia.
<PAGE>
STATE OF
CITY/COUNTY OF ___________________
The foregoing document was acknowledged before me this ______ day ___,
1997, by Jeffrey P. Jacobs in his capacity as Chief Executive Officer of
COLONIAL DOWNS HOLDINGS, INC., a Virginia corporation.
[SEAL]
-----------------------------
Notary Public
My Commission Expires:
STATE OF
CITY/COUNTY OF ____________________
The foregoing document was acknowledged before me this day , 1997, by
Jeffrey P. Jacobs in his capacity as Chief Executive Officer of STANSLEY RACING
CORP., general partner of Colonial Downs, L.P., a Virginia limited partnership.
[SEAL]
-----------------------------
Notary Public
My Commission Expires:
- ----------------------------
Exhibit 10.7
ASSIGNMENT OF LEASES AND RENTS
NOTICE: This Document Is Exempt From Taxation Pursuant To Virginia Code
Section 58.1-809
Made as of the 26th day of June, 1997, by COLONIAL DOWNS, L.P., a
Virginia limited partnership (hereinafter the "Assignor"), with an address at
6201 North Courthouse Road, P.O. Box 456, Providence Forge, Virginia 23140,
Attn: O. J. Peterson, to PNC BANK, NATIONAL ASSOCIATION ("Assignee"), a national
banking association with an address at One PNC Plaza, P1-POPP-19-2, 249 Fifth
Avenue, Pittsburgh, PA 15222-2707.
FOR VALUE RECEIVED, and intending to be legally bound, Assignor hereby
grants, sells, assigns, transfers, sets over and delivers unto Assignee (as
additional collateral to further secure Assignee) all right, title and interest
of Assignor in and to all Leases (as hereinafter defined) covering all or any
part of those certain premises described in Exhibit A attached hereto and made a
part hereof or covering all or any part of the improvements now or hereafter
located thereon (hereinafter collectively called the "Premises"), together with
all the Rents (hereinafter defined) due and to become due to Assignor, and
together with all rights of Assignor to amend, modify, terminate, extend or
renew the Leases or to waive the Rents or the terms of the Leases.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
for the purpose of securing the performance and discharge by Assignor of the
Obligations (as hereinafter defined).
Assignor hereby covenants, promises and agrees as follows:
1. As used in this Assignment, the following terms shall have the
meanings indicated, unless the context otherwise requires:
(a) "Leases" shall mean (i) all present and future leases and
subleases covering all or any portion of the Premises, (ii) all agreements for
use or occupancy of any portion of the Premises, (iii) all modifications,
supplements, extensions and renewals of any such Lease and any and all further
Leases (including rights in respect of lessees and sublessees holding over and
tenancies following attornment) of all or any part of the Premises, and (iv) any
and all guaranties of the performance of any lessee or sublessee under any
Lease.
(b) "Obligations" shall mean (i) the prompt and punctual
payment of all principal and interest and other sums coming due under that
certain Deed of Trust Note of even date herewith, from Assignor to Assignee in
the principal amount of $10,000,000, as the same may be amended, supplemented,
renewed, increased or replaced from time to time (the "Deed of Trust Note"), the
proceeds of the loan evidenced by the Deed of Trust Note to be advanced in
accordance with the provisions of the Construction Loan Agreement of even date
herewith between Assignor and Assignee (such Construction Loan Agreement, as
same may be amended, supplemented, modified or restated from time to time, the
"Construction Loan Agreement"), (ii)
<PAGE>
the prompt and punctual payment of all principal and interest and other sums
coming due under that certain Revolving Credit Note of even date herewith from
Assignor to Assignee in the principal amount of $5,000,000, as the same may be
amended, supplemented, renewed, increased or replaced from time to time (the
"Credit Note"), the proceeds of the loan evidenced by the Credit Note to be
advanced in accordance with the provisions of the Revolving Line of Credit
Agreement of even date herewith between Assignor and Assignee (such Revolving
Line of Credit Agreement, as the same may be amended, supplemented, modified or
restated from time to time, the "Credit Agreement") (the Construction Loan
Agreement and the Credit Agreement are hereinafter collectively referred to as
the "Loan Agreements", and the Deed of Trust Note and the Credit Note are
hereinafter collectively referred to as the "Notes"); and (iii) the prompt and
punctual payment and performance of all obligations, liabilities, covenants and
sums now or hereafter to be paid or performed by Assignor under that certain
Deed of Trust and Security Agreement (the "Deed of Trust") of even date herewith
from Assignor and Colonial Downs Holdings, Inc., a Virginia corporation to
Lawyers Title Realty Services, Inc., a Virginia corporation, as Trustee for the
benefit of Assignee and under all other agreements, instruments and documents
given to Assignee to evidence, secure or otherwise support the indebtedness
evidenced by the Notes (all such agreements, instruments and documents,
including the Notes, the Deed of Trust, the Loan Agreements and this Assignment,
being hereinafter referred to as the "Loan Documents").
(c) "Rents" shall include all of the rents, income, receipts,
revenues, security deposits, issues and profits now due or which may hereafter
become due under any Lease and all other rents, income, receipts, revenues,
issues and profits now due or which may hereafter become due with respect to the
Premises, or any part thereof, or the use, occupancy or operation of the same;
and the proceeds of all such Rents, both cash and noncash, including, but not
limited to, any minimum rents, additional rents, percentage rents, parking,
maintenance, insurance proceeds, tax contributions, any damages following
default by a lessee or sublessee under any Lease, any penalties or premiums
payable by tenant under any Lease and the proceeds of any policy of insurance
covering loss of rents resulting from destruction or damage to any portion of
the Premises.
(d) "Major Leases" shall mean all Leases, but shall not
include any lease of less than five hundred (500) square feet, any lease of
space to the Virginia Racing Commission, any leases of stalls, dormitory rooms,
seats or skyboxes, any lease or license of office space to horsemen's groups, or
any license agreement with any concessionaire, provided that any such license
agreement shall be subject to termination by the Assignee within twelve (12)
months following Assignee's acquisition of the Premises.
2. The parties intend that this Assignment shall be a present, absolute
and unconditional assignment and shall, immediately upon execution, give
Assignee the right to collect the Rents and to apply them in payment of the
principal and interest and all other sums payable on the Obligations. However,
Assignee hereby grants to Assignor a license, subject to the provisions set
forth below, to collect the Rents as they become due for its own account so long
as no Remedies Event exists under the Loan Agreements and so long as there is no
default by Assignor in the performance of the terms, covenants or provisions of
the other Loan
<PAGE>
Documents. Nothing contained herein, nor any collection of Rents by Assignee or
by a receiver, shall be construed to make Assignee a "mortgagee-in-possession"
of the Premises so long as Assignee has not itself entered into actual
possession of the Premises.
3. Upon the occurrence of a Remedies Event (as defined in the
Construction Loan Agreement), this Assignment shall constitute an irrevocable
direction to and full authority to each lessee and sublessee under any Leases to
pay all Rents to Assignee without proof of the default relied upon. Assignor
hereby irrevocably authorizes each lessee, sublessee, guarantor, person and
entity to rely upon and comply with any notice or demand by Assignee for the
payment to Assignee of any Rents due or to become due.
4. Assignor represents and warrants that:
(a) the terms of each Major Lease have been fully disclosed to
and approved by Assignee, and each Major Lease is in full force and effect;
(b) no Lease or any interest therein has been previously
assigned or pledged;
(c) no lessee or sublessee under any Major Lease has any
defense, setoff or counterclaim against Assignor; and
(d) no Rents have been collected more than one (1) month in
advance.
All the foregoing warranties shall be deemed to be continuously
reaffirmed until all Obligations shall have been paid in full.
5. Assignor covenants and agrees that:
(a) If a Lease provides for a security deposit paid by the
lessee or sublessee, this Assignment transfers to Assignee, to the extent
permitted by Law, all of Assignor's right, title and interest in and to the
security deposit, provided that Assignor shall have the right to retain said
security deposit so long as Assignor is not in default under the Loan Documents
and provided further that Assignee shall have no obligation to the lessee or
sublessee with respect to such security deposit, unless and until Assignee comes
into actual possession and control of said deposit.
(b) Except as otherwise may be permitted by the Deed of Trust,
Assignor shall not terminate any Major Lease (except pursuant to the terms of
the Lease upon a default by the lessee or sublessee) or modify or amend any
Major Lease or any of the terms thereof or grant any concessions in connection
therewith or accept a surrender thereof without the prior written consent of
Assignee, which consent shall not be unreasonably withheld or delayed.
(c) Assignor shall not collect any Rents more than one (1)
month in advance.
(d) Assignor shall not discount any future accruing Rents.
<PAGE>
(e) Assignor shall not consent to any assignment of any Major
Lease or any subletting thereunder, whether or not in accordance with its terms,
without the prior written consent of Assignee, which consent shall not be
unreasonably withheld or delayed.
(f) Assignor shall not execute any further pledge or
assignment of its interest in any of the Leases or Rents or suffer or permit any
such assignment to occur by operation of law.
6. Assignor shall faithfully perform and discharge all obligations of
the lessor under the Leases and shall give prompt written notice to Assignee of
any notice of Assignor's default received from any lessee or sublessee or any
other person with respect to any Major Lease and furnish Assignee with a
complete copy of said notice. Assignor shall appear in and defend, at no cost to
Assignee, any action or proceeding arising under or in any manner connected with
any Lease. If requested by Assignee, Assignor shall take commercially reasonable
actions to enforce each Major Lease against the lessee or sublessee in the case
of default under the Major Lease by the lessee or sublessee.
7. Except as otherwise may be permitted by the Deed of Trust, Assignor
shall not enter into any Major Lease without Assignee's written consent, which
consent shall not be unreasonably withheld or delayed. Assignor shall promptly
provide to Assignee a true and correct copy of each executed Major Lease.
8. With respect to Major Leases covering more than five hundred (500)
square feet of rentable space, Assignor shall deliver to Assignee, promptly upon
request, but, absent the existence of a Remedies Event, not more often than once
per calendar year, duly executed estoppel certificates from any one or more
lessees or sublessees as required by Assignee attesting to such facts regarding
the Leases as Assignee may reasonably require, including, but not limited to,
attestations that each Major Lease covered thereby is in full force and effect,
that the lessee or sublessee is in occupancy and paying rent on a current basis
with no rental offsets or claims, that no rental has been paid more than one (1)
month in advance, and that there are no actions, whether voluntary or otherwise,
pending against the lessee or sublessee, as the case may be, under the
bankruptcy or insolvency laws of the United States or any state thereof.
9. Nothing contained herein shall be construed to impose any liability
or obligation on Assignee under or with respect to any Lease. Assignor shall
indemnify and hold Assignee harmless from and against any and all liabilities,
losses, damages, cost and expense which Assignee may incur under any Lease or by
reason of this Agreement and from and against any and all claims and demands
whatsoever which may be asserted against Assignee by reason of any alleged
obligations to be performed or discharged by Assignee under any Lease or this
Assignment, provided that the foregoing indemnification shall not be applicable
to any claims and demands which shall arise with respect to events occurring
after Assignee has acquired title to the Premises. Should Assignee incur any
liability, loss, damage, cost or expense under or by reason of any Lease or
under or by reason of this Assignment, Assignor shall immediately upon demand
reimburse Assignee for the amount thereof together with all costs, expenses and
reasonable attorneys' fees incurred by Assignee. All of the foregoing sums shall
bear interest
<PAGE>
until paid at the Default Rate set forth in the Loan Agreements. Any Rents
collected by Assignee may be applied by Assignee, in its discretion, in
satisfaction of any such liability, loss, damage, cost or expense.
10. Assignor hereby grants to Assignee the following rights:
(a) Assignee shall be deemed to be the creditor of each lessee
or sublessee, as the case may be, in respect of any assignments for the benefit
of creditors and any bankruptcy, arrangement, reorganization, insolvency,
dissolution, receivership or other debtor-relief proceedings affecting such
lessee (without obligation on the part of Assignee, however, to file timely
claims in such proceedings or otherwise pursue creditor's rights therein).
(b) Assignee shall have the right to assign Assignee's right,
title and interest in the Leases to any subsequent holder of the Deed of Trust
or any replacement or renewal thereof or any participating interest therein or
to any person acquiring title to all or any part of the Premises through
foreclosure or otherwise. Any subsequent assignee shall have all the rights and
powers herein provided to Assignee.
(c) Assignee shall have the right (but not the obligation),
upon any failure of Assignor to perform any of its agreements hereunder, to take
any action as Assignee may deem necessary or appropriate to protect its
security, including, but not limited to, appearing in any action or proceeding
and performing any obligations of the lessor under any Lease, and Assignor
agrees to pay, on demand, all costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred by Assignee in connection therewith,
together with interest thereon at the Default Rate set forth in the Loan
Agreements.
(d) Upon a Remedies Event as aforesaid and without notice to
or consent of Assignor, Assignee shall have the following rights (none of which
shall be construed to be obligations of Assignee):
(i) Assignee shall have the right to apply any of the Rents
to pay installments due for personal property rented or
purchased on credit, insurance premiums on personal
property, or other charges relating to personal
property on the Premises, provided, however, that this
Assignment shall not make Assignee responsible for the
control, care, management or repair of the Premises or
any personal property or for the carrying out of any of
the terms or provisions of the Leases;
(ii) Assignee shall have the right to apply the Rents and
any sums recovered by Assignee pursuant hereto to
outstanding Obligations and to all other charges for
taxes, insurance, improvements, maintenance and other
items relating to the Premises, all in such order as
Assignee shall, in its discretion, determine and
whether or not the same be then due;
(iii) Assignee shall have the right to execute new Leases;
(iv) Assignee shall have the right to cancel or alter any
existing Leases;
<PAGE>
(v) Assignee shall have the authority, as Assignor's
attorney-in-fact, such authority being coupled with an
interest and irrevocable, to sign the name of Assignor
and to bind Assignor on all papers and documents
relating to the operation, leasing and maintenance of
the Premises.
All of the foregoing rights and remedies of Assignee are
cumulative and Assignee shall also have, upon the occurrence of any such default
or Remedies Event, all other rights and remedies provided under the other Loan
Documents and any other agreement between Assignor and Assignee or otherwise
available at law or in equity or by statute.
11. This Assignment is intended to be supplementary to and not in
substitution for or in derogation of any assignment of rents contained in the
Deed of Trust or in any other document executed in connection with this
transaction.
12. Assignee may take or release other security, may release any party
primarily or secondarily liable for any Obligations secured hereby, may grant
extensions, renewals or indulgences with respect to such Obligations, may amend,
modify or cancel all or any of the terms of the Obligations, and may apply any
other security therefor held by Assignee to the satisfaction of such Obligations
without prejudice to any of Assignee's rights hereunder or under the other Loan
Documents. The rights of Assignee to collect the Obligations and to enforce any
other security therefor held by Assignee may be exercised by Assignee either
prior to, simultaneously with, or subsequent to any action by Assignee
hereunder. The failure of Assignee to avail itself of any of the terms,
covenants and conditions hereof shall not be construed or deemed to be a waiver
of any rights or remedies hereunder. Assignee shall have the full right, power
and authority to enforce this Assignment or any of the terms, covenants or
conditions hereof, at any time or times that Assignee shall deem fit.
13. Any change, amendment, modification, abridgement, cancellation, or
discharge of this Assignment or any term or provision hereof not permitted
hereby shall be invalid without the written consent of Assignee.
14. Upon payment to Assignee of the full amount of all Obligations,
this Assignment shall be void and of no further effect. Upon such payment and if
requested by Assignor, Assignee shall promptly execute and deliver to Assignor a
release of this Assignment in recordable form.
15. The terms and conditions of this Agreement shall be binding upon
Assignor, its successors and assigns, and shall inure to the benefit of Assignee
and its successors and assigns.
16. Notices required or permitted to be given hereunder shall be deemed
to have been given when sent in accordance with the terms of the Construction
Loan Agreement.
17. If any provision hereof is determined to be illegal or
unenforceable for any reason, the remaining provisions hereof shall not be
affected thereby.
18. This Assignment shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia.
<PAGE>
WITNESS the due execution hereof as of the day and year first above
written.
WITNESS: COLONIAL DOWNS, L.P., a Virginia
limited partnership
By: STANSLEY RACING CORP.,
a Virginia corporation,
its sole general partner
By: /s/ Jeffrey P. Jacobs
-------------------------------
Name: Jeffrey P. Jacobs
Title: CEO
DRAFTED BY AND AFTER RECORDING RETURN TO:
Charles G. Knox, Esquire
Marcus & Shapira LLP
301 Grant Street
One Oxford Centre, 35th Floor
Pittsburgh, PA 15219-6401
<PAGE>
STATE
CITY/COUNTY OF __________________
The foregoing document was acknowledged before me this ___ day of
__________, 1997 by Jeffrey P. Jacobs in his capacity as Chief Executive Officer
of Stansley Racing Corp., general partner of Colonial Downs, L.P., a Virginia
limited partnership.
{Seal}
--------------------------------
Notary Public
My Commission Expires:
- ----------------------------
<PAGE>
EXHIBIT A
Exhibit 10.8
AGREEMENT OF GUARANTY AND SURETYSHIP
(COMPLETION)
(STANSLEY RACING CORP.)
THIS AGREEMENT OF GUARANTY AND SURETYSHIP (COMPLETION) (this
"Agreement") is made as of the 26th day of June, 1997 by STANSLEY RACING CORP.,
a Virginia corporation ("Guarantor"), to and for the benefit of PNC BANK,
NATIONAL ASSOCIATION, a national banking association ("Lender").
WITNESSETH:
WHEREAS, as more fully set forth in a certain Construction Loan
Agreement (the "Construction Loan Agreement") of even date herewith by and
between Lender and Colonial Downs, L.P., a Virginia limited partnership, (the
"Borrower"), Lender has agreed to make a construction loan (the "Construction
Loan") to Borrower in the principal amount of $10,000,000;
WHEREAS, as more fully set forth in a certain Revolving Line of Credit
Agreement (the "Credit Agreement") of even date herewith between Borrower and
Lender, Lender has agreed to make a revolving line of credit (the "Line of
Credit") available to Borrower in a maximum principal amount not to exceed
$5,000,000 (the Construction Loan Agreement and the Credit Agreement are
sometimes hereinafter collectively referred to as the "Loan Agreements"); and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to Lender's making of the Construction Loan and the Line of Credit
(the Construction Loan and the Line of Credit are hereinafter collectively
referred to as the "Loans").
NOW, THEREFORE, to induce Lender to make the Loans and for other good
and valuable consideration, receipt of which is hereby acknowledged, and
intending to be legally bound, Guarantor hereby covenants and agrees as follows:
1. Unless otherwise defined herein, all capitalized terms herein shall
have the meanings ascribed to them in the Construction Loan Agreement.
2. (a) Guarantor hereby unconditionally guarantees and becomes surety
as though it were a primary obligor of all of the following (hereinafter
collectively referred to as the "Guaranteed Obligations"):
<PAGE>
(i) Borrower shall construct and complete the Improvements
in accordance with the Construction Loan Agreement and
the Plans on or before the Completion Date, and shall
pay all costs and expenses and shall pay, perform and
discharge all liabilities and obligations contained in
the Construction Loan Agreement with respect to the
construction and completion of the Improvements;
(ii) Borrower shall at all times keep the Deed of Trust
Property (as defined in the Deed of Trust and Security
Agreement of even date herewith from Borrower and
Guarantor to Lawyers Title Realty Services, Inc., a
Virginia corporation, as Trustee for the benefit of
Lender, [the "Deed of Trust"]) free and clear of all
Liens and claims which may arise from or in any way
relate to the construction and completion of the
Improvements, including, without limitation, liens and
claims of any and all persons and entities performing
labor or furnishing materials, or both, with respect to
the Improvements; and
(iii) Borrower shall promptly discharge all other
obligations, liabilities, costs and expenses relating
to the construction and completion of the Improvements.
(b) If Borrower does not do the matters specified in Paragraph
2 hereof on or before the times such matters are to be done by Borrower,
Guarantor unconditionally and irrevocably covenants and agrees that he shall at
his sole cost and expense:
(i) construct and complete the Improvements on or before
the times required by, and otherwise in accordance
with, the Construction Loan Agreement and the Plans,
and pay all costs and expenses and discharge all
liabilities with respect to such construction and
completion;
(ii) remove all Liens and satisfy all claims which may arise
from or in any way relate to the construction or
completion of the Improvements, including, without
limitation, the liens and claims of any and all persons
and entities performing labor or furnishing materials,
or both, with respect to the Improvements;
(iii) discharge the obligations, liabilities, costs and
expenses referred to in Paragraphs 2(a)(i) and
2(a)(ii); and
(iv) pay all other costs and expenses related to the
construction and completion of the Improvements,
including all expenses incurred by or on behalf of
Lender and all monies advanced by Lender, at its
option, to secure, protect, partially complete or fully
complete the Improvements.
3. Lender shall have and may exercise, in addition to all other rights,
privileges or remedies available to it hereunder and by Law, the specific rights
and remedies, exercisable by Lender in its discretion, to sue for and obtain
specific performance by Guarantor of Guarantor's covenants set forth herein, all
at the sole cost of Guarantor.
4. In the event of any default by Guarantor hereunder, Guarantor shall
indemnify and defend Lender against and hold Lender harmless from all liability,
damage, cost and expense,
<PAGE>
including costs of suit and attorneys' fees, which Lender may incur by reason of
such default by Guarantor.
5. Lender may, at its option, proceed to enforce this Agreement against
Guarantor in the first instance without first proceeding against Borrower or any
other person and without first resorting to any security held by Lender as
security or to any other remedies, and the liability of Guarantor hereunder
shall be in no manner affected or impaired by any failure, delay, neglect,
omission or election by Lender not to realize upon or pursue any persons or
security liable for the Secured Obligations (as defined in the Deed of Trust) or
the other obligations of Borrower under the Loan Agreements or other Loan
Documents.
6. Lender, from time to time and before or after any Event of Default
by Borrower under the Loan Agreements and with or without further notice to or
assent from Guarantor and without in any manner affecting the liability of
Guarantor and upon such terms and conditions as it may deem advisable, may: (a)
extend in whole or in part (by renewal or otherwise), modify, accelerate, change
or release (or consent to any of the foregoing) the Loan Documents and any other
agreements, documents or instruments in any way related to the Guaranteed
Obligations and any other indebtedness, liability or obligation of Borrower or
of any other person secondarily or otherwise liable for any such indebtedness,
liability or obligation of Borrower, or waive any default with respect thereto;
(b) sell, release, surrender, modify, impair, exchange, substitute or extend any
and all security at any time held by Lender as security for the payment or
performance of the Secured Obligations and any other indebtedness, liability or
obligation of Borrower to Lender; and (c) settle, adjust or compromise any claim
of Lender against Borrower or any other person secondarily or otherwise liable
for the Secured Obligations or Guaranteed Obligations or any other indebtedness,
liability or obligation of Borrower. Guarantor hereby ratifies and confirms any
such extension, renewal, change, release, waiver, surrender, exchange,
modification, impairment, substitution, settlement, adjustment, compromise or
consent and agrees that the same shall be binding upon Guarantor, and Guarantor
hereby expressly waives any and all defenses, counterclaims or offsets which
Guarantor might or could have by reason thereof, it being understood that
Guarantor shall at all times be bound by this Agreement and remain liable to
Lender hereunder until all of the Guaranteed Obligations hereunder shall have
been performed in full. Guarantor agrees that its obligations hereunder shall
not be discharged, limited or otherwise affected by any circumstances which
otherwise would constitute an equitable discharge of Guarantor as surety or
guarantor.
7. Lender may, without the consent of Guarantor, at any time and from
time to time, (a) agree with Borrower to amend any provisions of the Loan
Agreements, any other Loan Documents and any other agreements, instruments or
documents relating in any way to the Secured Obligations, including any change
in the interest rate therein, any change in the time or manner of payment
thereunder and any change in the obligations to be performed thereunder, (b)
make any agreement with Borrower for the extension, renewal, modification,
payment, compounding, compromise, discharge, exchange, settlement, waiver or
release of any provision of the Loan Agreements, Loan Documents and any other
agreements, documents or instruments relating in any way to the Secured
Obligations, or of any person liable for or any security for the performance of
any of the Secured Obligations or Guaranteed Obligations, without notice to or
the consent of Guarantor, and (c) without limiting the generality of the
foregoing, surrender to
<PAGE>
Borrower, or deal with or modify the form of, any security which Lender may at
any time hold to secure the performance of any of the Secured Obligations or
Guaranteed Obligations, and the obligations herein undertaken by Guarantor shall
not be impaired or affected by any of the foregoing, but shall include any other
obligations thereby undertaken by the Borrower.
8. Guarantor hereby waives all requirements that Lender shall institute
any action or proceedings at law or in equity against Borrower or anyone else or
with respect to any other security held by Lender as a condition precedent to
bringing an action against Guarantor upon this Agreement, and Guarantor further
agrees to make and perform his obligations hereunder whether or not any one or
more of the following events have occurred: (a) Lender has made any demand on
Borrower; (b) Lender has taken any action of any nature against or has pursued
any rights which Lender has against any other person, partnership, corporation,
association or entity who may be liable for performance of the Guaranteed
Obligations; (c) Lender holds or has resorted to any security for the Secured
Obligations or Guaranteed Obligations; or (d) Lender has invoked any other
remedies or rights Lender has available with respect to the Secured Obligations
or the Guaranteed Obligations. Guarantor's obligations hereunder as guarantor
and surety are unconditional, and Guarantor agrees to perform the same even if
the Loan Agreements, any other Loan Document or any other agreement, document or
instrument relating in any way to the Secured Obligations or Guaranteed
Obligations is for any reason invalid or unenforceable. All remedies afforded to
Lender by reason of this Agreement are separate and cumulative remedies, and
none of such remedies, whether exercised by the Lender or not, shall be deemed
to be in exclusion of any one of the other remedies available to Lender, and
shall not in any way limit or prejudice any other legal or equitable remedy
available to Lender.
9. Guarantor shall not be released by any act or thing which might, but
for this provision of this Agreement, be deemed to be an equitable discharge of
a surety or guarantor, or by reason of any waiver, extension, modification,
forbearance or delay of Lender or its failure to proceed promptly or otherwise
in the enforcement of the Loan Agreements, any other Loan Document or any other
agreement, document or instrument relating in any way to the Guaranteed
Obligations, and Guarantor hereby expressly waives and surrenders any defense to
its liability under this Agreement based upon any of the foregoing acts, things,
agreements or waivers.
10. Guarantor hereby waives presentment for payment, demand, protest,
notice of protest and of dishonor, notice of acceptance hereof, and all other
notices now or hereafter provided by Law.
11. Guarantor represents and warrants to Lender that until the
Guaranteed Obligations are performed and paid for in full, Guarantor shall not
sell, assign, give, mortgage, pledge, transfer or otherwise dispose of a
material portion of his assets for less than adequate consideration.
12. Guarantor hereby agrees that this instrument contains the entire
agreement between the parties and there is and can be no other oral or written
agreement or understanding whereby the provisions of this instrument have been
or can be affected, varied, waived or modified in any manner unless the same be
set forth in writing and signed by Lender, and then
<PAGE>
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
13. This Agreement is and shall be deemed to be a contract entered into
under and pursuant to the laws of the Commonwealth of Pennsylvania and shall be
binding upon Guarantor and its heirs, personal representatives, successors and
assigns. Guarantor agrees that the Court of Common Pleas of Allegheny County,
Pennsylvania and the United States District Court for the Western District of
Pennsylvania shall have nonexclusive jurisdiction and venue with respect to all
actions by or against Guarantor under or pursuant to this Agreement and hereby
consents to the jurisdiction of such courts and to service of process, effective
upon receipt by personal service, overnight express delivery or registered or
certified mail to Guarantor at the address given below Guarantor's signature
hereto. Guarantor shall promptly notify Lender in writing of any change in
Guarantor's address. This Agreement shall not be recorded by either the
Guarantor or Lender.
14. Guarantor shall not, by reason of the performance of the terms and
provisions of this Agreement, succeed to or be subrogated to the rights and
privileges of Lender against Borrower or be deemed to be the successor or assign
of Lender, unless and until each and every indebtedness, liability and
obligation of Borrower to Lender shall have been fully paid, performed and
discharged.
15. No delay on the part of Lender in exercising any rights hereunder
or failure to exercise the same shall operate as a waiver of such rights. All of
the rights, powers and remedies hereunder and under any other agreement entered
into between Guarantor and Lender, and notwithstanding whether such rights,
powers and remedies arise by virtue of nonpayment of the indebtedness, liability
and obligations or otherwise, shall be cumulative and not alternative; and such
rights, powers and remedies shall be in addition to all of Lender's rights,
powers and remedies provided by Law.
16. Guarantor agrees to pay all costs and expenses which may be
incurred by Lender, its successors and assigns in the successful enforcement of
this Agreement or otherwise relating to this Agreement, including, but not
limited to, attorneys' fees through and including the costs of any appeals and
any appellate costs and regardless of whether any specific legal proceedings
shall be commenced in connection therewith.
17. To the extent disclosed in the opinion letters delivered to Lender
in connection with the Loans, Guarantor hereby represents and warrants that this
Agreement constitutes the legal, valid and binding obligation of Guarantor,
enforceable against it and its successors and assigns in accordance with its
terms.
18. This Agreement is irrevocable.
19. Guarantor waives all exemption rights which it may have under or by
virtue of the Constitution or the Laws of the United States of America or of any
state against this Agreement, any renewal hereof, or any indebtedness or
liability represented hereby.
<PAGE>
20. This Agreement shall not be deemed to affect, limit, modify or
otherwise have any impact or effect upon, or be affected, limited or modified
by, any other agreement of guaranty or suretyship given by Guarantor with
respect to the Loan or other obligations under the Loan Documents.
Notwithstanding anything to the contrary herein contained, this Agreement shall
be deemed supplemental to, and not in derogation of, any such agreement of
guaranty or suretyship or any other instrument now or hereafter executed by
Guarantor in favor of Lender.
21. In case any one or more of the provisions of this Agreement shall
be invalid, illegal or unenforceable in any respect, the validity of the
remaining provisions shall be in no way affected, prejudiced or disturbed
thereby.
22. Guarantor recognizes that this Agreement when executed constitutes
a sealed instrument and, as a result, will be enforceable as such without regard
to any statute of limitations which might otherwise be applicable and without
any consideration.
23. GUARANTOR WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON OR RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS RELATED TO ANY OF THE
LOAN DOCUMENTS. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY
GUARANTOR, AND GUARANTOR ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING
ON BEHALF OF LENDER HAS OR HAVE MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS
WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. GUARANTOR
FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO
BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT
HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. GUARANTOR AGREES
THAT THE OBLIGATIONS EVIDENCED BY THIS AGREEMENT ARE EXEMPTED TRANSACTIONS UNDER
THE TRUTH-IN-LENDING ACT, 15 U.S.C. SECTION 1061 ET SEQ.
24. In no event will the Guarantor's obligations and liabilities under
this Agreement be released or in any way affected by the exercise of any rights
of Chesapeake Forest Products Company ("Chesapeake") or Delmarva Properties,
Inc. ("Delmarva"), under the Deed, including, without limitation, any rights
which Chesapeake or Delmarva may have to cause a conveyance or reconveyance of
the Project to one or both of them or to assume the Loans.
[REMAINDER OF PAGE
LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, Guarantor, intending to be legally bound, has
executed this Agreement as of the 26th day of June, 1997.
WITNESS: STANSLEY RACING CORP.,
a Virginia corporation
By: /s/ Jeffrey P. Jacobs
--------------------------
Name: Jeffrey P. Jacobs
Title: CEO
Address:
3610 N. Courthouse Road
P.O. Box 456
Providence Forge, VA 23140
Attn: O. J. Peterson
<PAGE>
STATE OF )
)SS
COUNTY OF )
On this _______ day of _________________, 1997, before me, a notary
public, personally appeared _____________________, who acknowledged himself to
be the __________________ of STANSLEY RACING CORP., a Virginia corporation, and
that he, as such officer, executed the foregoing instrument on behalf of such
corporation for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
----------------------------
Notary Public
My Commission expires:
- ---------------------------
Exhibit 10.9
AGREEMENT OF GUARANTY AND SURETYSHIP
(COMPLETION)
(COLONIAL DOWNS HOLDINGS, INC.)
THIS AGREEMENT OF GUARANTY AND SURETYSHIP (COMPLETION) (this
"Agreement") is made as of the 26th day of June, 1997 by COLONIAL DOWNS
HOLDINGS, INC., a Virginia corporation ("Guarantor"), to and for the benefit of
PNC BANK, NATIONAL ASSOCIATION, a national banking association ("Lender").
WITNESSETH:
WHEREAS, as more fully set forth in a certain Construction Loan
Agreement (the "Construction Loan Agreement") of even date herewith by and
between Lender and Colonial Downs, L.P., a Virginia limited partnership, (the
"Borrower"), Lender has agreed to make a construction loan (the "Construction
Loan") to Borrower in the principal amount of $10,000,000;
WHEREAS, as more fully set forth in a certain Revolving Line of Credit
Agreement (the "Credit Agreement") of even date herewith between Borrower and
Lender, Lender has agreed to make a revolving line of credit (the "Line of
Credit") available to Borrower in a maximum principal amount not to exceed
$5,000,000 (the Construction Loan Agreement and the Credit Agreement are
sometimes hereinafter collectively referred to as the "Loan Agreements"); and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to Lender's making of the Construction Loan and the Line of Credit
(the Construction Loan and the Line of Credit are hereinafter collectively
referred to as the "Loans").
NOW, THEREFORE, to induce Lender to make the Loans and for other good
and valuable consideration, receipt of which is hereby acknowledged, and
intending to be legally bound, Guarantor hereby covenants and agrees as follows:
1. Unless otherwise defined herein, all capitalized terms herein shall
have the meanings ascribed to them in the Construction Loan Agreement.
2. (a) Guarantor hereby unconditionally guarantees and becomes surety
as though it were a primary obligor of all of the following (hereinafter
collectively referred to as the "Guaranteed Obligations"):
<PAGE>
(i) Borrower shall construct and complete the Improvements
in accordance with the Construction Loan Agreement and
the Plans on or before the Completion Date, and shall
pay all costs and expenses and shall pay, perform and
discharge all liabilities and obligations contained in
the Construction Loan Agreement with respect to the
construction and completion of the Improvements;
(ii) Borrower shall at all times keep the Deed of Trust
Property (as defined in the Deed of Trust and Security
Agreement of even date herewith from Borrower and
Guarantor to Lawyers Title Realty Services, Inc., a
Virginia corporation, as Trustee for the benefit of
Lender, [the "Deed of Trust"]) free and clear of all
Liens and claims which may arise from or in any way
relate to the construction and completion of the
Improvements, including, without limitation, liens and
claims of any and all persons and entities performing
labor or furnishing materials, or both, with respect to
the Improvements; and
(iii) Borrower shall promptly discharge all other
obligations, liabilities, costs and expenses relating
to the construction and completion of the Improvements.
(b) If Borrower does not do the matters specified in Paragraph
2 hereof on or before the times such matters are to be done by Borrower,
Guarantor unconditionally and irrevocably covenants and agrees that he shall at
his sole cost and expense:
(i) construct and complete the Improvements on or before
the times required by, and otherwise in accordance
with, the Construction Loan Agreement and the Plans,
and pay all costs and expenses and discharge all
liabilities with respect to such construction and
completion;
(ii) remove all Liens and satisfy all claims which may arise
from or in any way relate to the construction or
completion of the Improvements, including, without
limitation, the liens and claims of any and all persons
and entities performing labor or furnishing materials,
or both, with respect to the Improvements;
(iii) discharge the obligations, liabilities, costs and
expenses referred to in Paragraphs 2(a)(i) and
2(a)(ii); and
(iv) pay all other costs and expenses related to the
construction and completion of the Improvements,
including all expenses incurred by or on behalf of
Lender and all monies advanced by Lender, at its
option, to secure, protect, partially complete or fully
complete the Improvements.
3. Lender shall have and may exercise, in addition to all other rights,
privileges or remedies available to it hereunder and by Law, the specific rights
and remedies, exercisable by Lender in its discretion, to sue for and obtain
specific performance by Guarantor of Guarantor's covenants set forth herein, all
at the sole cost of Guarantor.
4. In the event of any default by Guarantor hereunder, Guarantor shall
indemnify and defend Lender against and hold Lender harmless from all liability,
damage, cost and expense,
<PAGE>
including costs of suit and attorneys' fees, which Lender may incur by reason of
such default by Guarantor.
5. Lender may, at its option, proceed to enforce this Agreement against
Guarantor in the first instance without first proceeding against Borrower or any
other person and without first resorting to any security held by Lender as
security or to any other remedies, and the liability of Guarantor hereunder
shall be in no manner affected or impaired by any failure, delay, neglect,
omission or election by Lender not to realize upon or pursue any persons or
security liable for the Secured Obligations (as defined in the Deed of Trust) or
the other obligations of Borrower under the Loan Agreements or other Loan
Documents.
6. Lender, from time to time and before or after any Event of Default
by Borrower under the Loan Agreements and with or without further notice to or
assent from Guarantor and without in any manner affecting the liability of
Guarantor and upon such terms and conditions as it may deem advisable, may: (a)
extend in whole or in part (by renewal or otherwise), modify, accelerate, change
or release (or consent to any of the foregoing) the Loan Documents and any other
agreements, documents or instruments in any way related to the Guaranteed
Obligations and any other indebtedness, liability or obligation of Borrower or
of any other person secondarily or otherwise liable for any such indebtedness,
liability or obligation of Borrower, or waive any default with respect thereto;
(b) sell, release, surrender, modify, impair, exchange, substitute or extend any
and all security at any time held by Lender as security for the payment or
performance of the Secured Obligations and any other indebtedness, liability or
obligation of Borrower to Lender; and (c) settle, adjust or compromise any claim
of Lender against Borrower or any other person secondarily or otherwise liable
for the Secured Obligations or Guaranteed Obligations or any other indebtedness,
liability or obligation of Borrower. Guarantor hereby ratifies and confirms any
such extension, renewal, change, release, waiver, surrender, exchange,
modification, impairment, substitution, settlement, adjustment, compromise or
consent and agrees that the same shall be binding upon Guarantor, and Guarantor
hereby expressly waives any and all defenses, counterclaims or offsets which
Guarantor might or could have by reason thereof, it being understood that
Guarantor shall at all times be bound by this Agreement and remain liable to
Lender hereunder until all of the Guaranteed Obligations hereunder shall have
been performed in full. Guarantor agrees that its obligations hereunder shall
not be discharged, limited or otherwise affected by any circumstances which
otherwise would constitute an equitable discharge of Guarantor as surety or
guarantor.
7. Lender may, without the consent of Guarantor, at any time and from
time to time, (a) agree with Borrower to amend any provisions of the Loan
Agreements, any other Loan Documents and any other agreements, instruments or
documents relating in any way to the Secured Obligations, including any change
in the interest rate therein, any change in the time or manner of payment
thereunder and any change in the obligations to be performed thereunder, (b)
make any agreement with Borrower for the extension, renewal, modification,
payment, compounding, compromise, discharge, exchange, settlement, waiver or
release of any provision of the Loan Agreements, Loan Documents and any other
agreements, documents or instruments relating in any way to the Secured
Obligations, or of any person liable for or any security for the performance of
any of the Secured Obligations or Guaranteed Obligations, without notice to or
the consent of Guarantor, and (c) without limiting the generality of the
foregoing, surrender to
<PAGE>
Borrower, or deal with or modify the form of, any security which Lender may at
any time hold to secure the performance of any of the Secured Obligations or
Guaranteed Obligations, and the obligations herein undertaken by Guarantor shall
not be impaired or affected by any of the foregoing, but shall include any other
obligations thereby undertaken by the Borrower.
8. Guarantor hereby waives all requirements that Lender shall institute
any action or proceedings at law or in equity against Borrower or anyone else or
with respect to any other security held by Lender as a condition precedent to
bringing an action against Guarantor upon this Agreement, and Guarantor further
agrees to make and perform his obligations hereunder whether or not any one or
more of the following events have occurred: (a) Lender has made any demand on
Borrower; (b) Lender has taken any action of any nature against or has pursued
any rights which Lender has against any other person, partnership, corporation,
association or entity who may be liable for performance of the Guaranteed
Obligations; (c) Lender holds or has resorted to any security for the Secured
Obligations or Guaranteed Obligations; or (d) Lender has invoked any other
remedies or rights Lender has available with respect to the Secured Obligations
or the Guaranteed Obligations. Guarantor's obligations hereunder as guarantor
and surety are unconditional, and Guarantor agrees to perform the same even if
the Loan Agreements, any other Loan Document or any other agreement, document or
instrument relating in any way to the Secured Obligations or Guaranteed
Obligations is for any reason invalid or unenforceable. All remedies afforded to
Lender by reason of this Agreement are separate and cumulative remedies, and
none of such remedies, whether exercised by the Lender or not, shall be deemed
to be in exclusion of any one of the other remedies available to Lender, and
shall not in any way limit or prejudice any other legal or equitable remedy
available to Lender.
9. Guarantor shall not be released by any act or thing which might, but
for this provision of this Agreement, be deemed to be an equitable discharge of
a surety or guarantor, or by reason of any waiver, extension, modification,
forbearance or delay of Lender or its failure to proceed promptly or otherwise
in the enforcement of the Loan Agreements, any other Loan Document or any other
agreement, document or instrument relating in any way to the Guaranteed
Obligations, and Guarantor hereby expressly waives and surrenders any defense to
its liability under this Agreement based upon any of the foregoing acts, things,
agreements or waivers.
10. Guarantor hereby waives presentment for payment, demand, protest,
notice of protest and of dishonor, notice of acceptance hereof, and all other
notices now or hereafter provided by Law.
11. Guarantor represents and warrants to Lender that until the
Guaranteed Obligations are performed and paid for in full, Guarantor shall not
sell, assign, give, mortgage, pledge, transfer or otherwise dispose of a
material portion of his assets for less than adequate consideration.
12. Guarantor hereby agrees that this instrument contains the entire
agreement between the parties and there is and can be no other oral or written
agreement or understanding whereby the provisions of this instrument have been
or can be affected, varied, waived or modified in any manner unless the same be
set forth in writing and signed by Lender,
<PAGE>
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
13. This Agreement is and shall be deemed to be a contract entered into
under and pursuant to the laws of the Commonwealth of Pennsylvania and shall be
binding upon Guarantor and its heirs, personal representatives, successors and
assigns. Guarantor agrees that the Court of Common Pleas of Allegheny County,
Pennsylvania and the United States District Court for the Western District of
Pennsylvania shall have nonexclusive jurisdiction and venue with respect to all
actions by or against Guarantor under or pursuant to this Agreement and hereby
consents to the jurisdiction of such courts and to service of process, effective
upon receipt by personal service, overnight express delivery or registered or
certified mail to Guarantor at the address given below Guarantor's signature
hereto. Guarantor shall promptly notify Lender in writing of any change in
Guarantor's address. This Agreement shall not be recorded by either the
Guarantor or Lender.
14. Guarantor shall not, by reason of the performance of the terms and
provisions of this Agreement, succeed to or be subrogated to the rights and
privileges of Lender against Borrower or be deemed to be the successor or assign
of Lender, unless and until each and every indebtedness, liability and
obligation of Borrower to Lender shall have been fully paid, performed and
discharged.
15. No delay on the part of Lender in exercising any rights hereunder
or failure to exercise the same shall operate as a waiver of such rights. All of
the rights, powers and remedies hereunder and under any other agreement entered
into between Guarantor and Lender, and notwithstanding whether such rights,
powers and remedies arise by virtue of nonpayment of the indebtedness, liability
and obligations or otherwise, shall be cumulative and not alternative; and such
rights, powers and remedies shall be in addition to all of Lender's rights,
powers and remedies provided by Law.
16. Guarantor agrees to pay all costs and expenses which may be
incurred by Lender, its successors and assigns in the successful enforcement of
this Agreement or otherwise relating to this Agreement, including, but not
limited to, attorneys' fees through and including the costs of any appeals and
any appellate costs and regardless of whether any specific legal proceedings
shall be commenced in connection therewith.
17. To the extent disclosed in the opinion letters delivered to Lender
in connection with the Loans, Guarantor hereby represents and warrants that this
Agreement constitutes the legal, valid and binding obligation of Guarantor,
enforceable against it and its successors and assigns in accordance with its
terms.
18. This Agreement is irrevocable.
19. Guarantor waives all exemption rights which it may have under or by
virtue of the Constitution or the Laws of the United States of America or of any
state against this Agreement, any renewal hereof, or any indebtedness or
liability represented hereby.
<PAGE>
20. This Agreement shall not be deemed to affect, limit, modify or
otherwise have any impact or effect upon, or be affected, limited or modified
by, any other agreement of guaranty or suretyship given by Guarantor with
respect to the Loan or other obligations under the Loan Documents.
Notwithstanding anything to the contrary herein contained, this Agreement shall
be deemed supplemental to, and not in derogation of, any such agreement of
guaranty or suretyship or any other instrument now or hereafter executed by
Guarantor in favor of Lender.
21. In case any one or more of the provisions of this Agreement shall
be invalid, illegal or unenforceable in any respect, the validity of the
remaining provisions shall be in no way affected, prejudiced or disturbed
thereby.
22. Guarantor recognizes that this Agreement when executed constitutes
a sealed instrument and, as a result, will be enforceable as such without regard
to any statute of limitations which might otherwise be applicable and without
any consideration.
23. GUARANTOR WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON OR RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS RELATED TO ANY OF THE
LOAN DOCUMENTS. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY
GUARANTOR, AND GUARANTOR ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING
ON BEHALF OF LENDER HAS OR HAVE MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS
WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. GUARANTOR
FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO
BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT
HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. GUARANTOR AGREES
THAT THE OBLIGATIONS EVIDENCED BY THIS AGREEMENT ARE EXEMPTED TRANSACTIONS UNDER
THE TRUTH-IN-LENDING ACT, 15 U.S.C. SECTION 1061 ET SEQ.
24. In no event will the Guarantor's obligations and liabilities under
this Agreement be released or in any way affected by the exercise of any rights
of Chesapeake Forest Products Company ("Chesapeake") or Delmarva Properties,
Inc. ("Delmarva"), under the Deed, including, without limitation, any rights
which Chesapeake or Delmarva may have to cause a conveyance or reconveyance of
the Project to one or both of them or to assume the Loans.
[REMAINDER OF PAGE
LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, Guarantor, intending to be legally bound, has
executed this Agreement as of the 26th day of June, 1997.
WITNESS: COLONIAL DOWNS HOLDINGS, INC.,
a Virginia corporation
By: /s/ Jeffrey P. Jacobs
--------------------------
Name: Jeffrey P. Jacobs
Title: CEO
Address:
3610 N. Courthouse Road
P.O. Box 456
Providence Forge, VA 23140
Attn: O.J. Peterson
<PAGE>
STATE OF )
)SS
COUNTY OF )
On this _______ day of _________________, 1997, before me, a notary
public, personally appeared _____________________, who acknowledged himself to
be the __________________ of COLONIAL DOWNS HOLDINGS, INC., a Virginia
corporation, and that he, as such officer, executed the foregoing instrument on
behalf of such corporation for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
---------------------------
Notary Public
My Commission expires:
- --------------------------
Exhibit 10.10
AGREEMENT OF GUARANTY AND SURETYSHIP
(PAYMENT)
(STANSLEY RACING CORP.)
THIS AGREEMENT OF GUARANTY AND SURETYSHIP (PAYMENT) (this "Agreement")
is made as of the 26th day of June, 1997 by STANSLEY RACING CORP., a Virginia
corporation ( "Guarantor") to and for the benefit of PNC BANK, NATIONAL
ASSOCIATION, a national banking association (the "Lender").
W I T N E S S E T H:
WHEREAS, as more fully set forth in a certain Construction Loan
Agreement (the "Construction Loan Agreement") of even date herewith by and
between Colonial Downs, L.P., a Virginia limited partnership, (the "Borrower"),
and Lender, Lender has agreed to make a construction loan (the "Construction
Loan") to Borrower in the principal amount of $10,000,000; and
WHEREAS, as more fully set forth in a certain Revolving Line of Credit
Agreement (the "Credit Agreement") of even date herewith between Borrower and
Lender, Lender has agreed to make a revolving line of credit (the "Line of
Credit") available to Borrower in a maximum principal amount not to exceed
$5,000,000; and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to Lender's making of the Construction Loan and extending the Line of
Credit (the Construction Loan and the Line of Credit are hereinafter
collectively referred to as the "Loans").
NOW, THEREFORE, to induce the Lender to make the Loans and for other
good and valuable consideration, receipt of which is hereby acknowledged, and
intending to be legally bound hereby, Guarantor hereby covenants and agrees as
follows:
1. Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings ascribed to such terms in the Loan Agreements (as
hereinafter defined).
2. Guarantor unconditionally guarantees and becomes surety for the full
and timely payment, whether by declaration, acceleration or otherwise, by
Borrower of the principal of and interest on all the following (hereinafter
collectively referred to as the "Guaranteed Obligations"):
<PAGE>
(i) all principal, interest and other sums due or to become
due under that certain Deed of Trust Note, of even date
herewith, given by Borrower to Lender in the principal
amount of $10,000,000, as the same may be amended,
supplemented, renewed or replaced from time to time
(the "Deed of Trust Note"); and
(ii) all principal, interest and other sums due or to become
due under that certain Revolving Credit Note of even
date herewith, given by Borrower to Lender in a maximum
principal amount of $5,000,000, as the same may be
amended, supplemented, renewed or replaced from time to
time (the "Credit Note") (the Deed of Trust Note and
the Credit Note are hereinafter collectively referred
to as the "Notes"); and
(iii) the prompt and punctual payment of all sums due or to
become due under the Construction Loan Agreement and
the Credit Agreement, as the same may be amended,
supplemented, renewed, extended or replaced from time
to time (collectively, the "Loan Agreements"); and
(iv) all sums now or hereafter to be paid to Borrower under
all other agreements, instruments and documents given
to Lender to evidence, secure or otherwise support the
indebtedness evidenced by the Notes (all such
agreements, instruments and documents, including the
Notes and the Loan Agreements as the same may be
amended, supplemented, renewed or replaced from time to
time, being hereinafter referred to as the "Loan
Documents").
3. Guarantor agrees to pay the Guaranteed Obligations immediately when
due, irrespective of whether or not any one or more of the following events have
occurred: (i) Lender has made any demand on Borrower; (ii) Lender has taken any
action of any nature against Borrower; (iii) Lender has pursued any rights which
Lender has against any other person who may be liable for any of the Guaranteed
Obligations; (iv) Lender holds or has resorted to any security for any of the
Guaranteed Obligations; or (v) Lender has invoked any other remedies or rights
Lender has available with respect to any of the Guaranteed Obligations. The
liability of Guarantor as surety and guarantor is unconditional. Guarantor
therefore agrees to pay the Guaranteed Obligations even if any of the Loan
Documents, or any part thereof, are for any reason invalid or unenforceable.
Guarantor further agrees to make full payment to Lender even if circumstances
exist which otherwise constitute an equitable discharge of Guarantor as surety
or guarantor.
4. Guarantor waives and agrees not to enforce any of the rights of
Guarantor against Borrower unless and until Borrower is no longer liable in any
respect to Lender, including, but not limited to: (i) any right of Guarantor to
be subrogated in whole or in part to any right or claim with respect to any of
the Guaranteed Obligations or any portion thereof to Lender which might
otherwise arise from partial payment or performance by Guarantor to Lender on
account of the Guaranteed Obligations or any portion thereof; and (ii) any right
of Guarantor to require the marshalling of assets of Borrower which might
otherwise arise from partial payment or performance by Guarantor to Lender on
account of the Guaranteed Obligations or any portion thereof.
<PAGE>
5. Guarantor waives any and all notice with respect to: (i) acceptance
by Lender of this Agreement or any of the Loan Documents; and (ii) the
provisions of any of the Loan Documents or any other instrument or agreement
relating to the Guaranteed Obligations.
6. Guarantor waives any presentment, demand, notice of dishonor or
nonpayment, protest, notice of protest and notice of non-payment in connection
with the Guaranteed Obligations.
7. Guarantor agrees that Lender may do any of the following without
notice to Guarantor and without adversely affecting the validity or
enforceability of this Agreement or any other agreement, document or instrument
given by Guarantor to Lender in connection with this Agreement or that certain
Agreement of Guaranty and Suretyship (Completion) of even date herewith given by
Guarantor to Lender: (i) release, surrender, exchange, compromise or settle the
Guaranteed Obligations, or any part thereof; (ii) change, renew or waive the
terms of the Guaranteed Obligations, or any part thereof; (iii) change, renew or
waive the terms of any of the Loan Documents or any other note, instrument or
agreement relating to the Guaranteed Obligations, such rights of Lender to
include, without limitation, the right to change the rate of interest charged to
Borrower (in which event the Guaranteed Obligations shall be deemed also to
include all interest at such changed rate); (iv) grant any extension or
indulgence with respect to the payment or performance of the Guaranteed
Obligations or any part thereof; (v) enter into any agreement of forbearance
with respect to the Guaranteed Obligations or any part thereof; (vi) release,
surrender, exchange or compromise any security held by Lender for any of the
Guaranteed Obligations; (vii) release any person who is a guarantor or surety or
who has agreed to purchase the Guaranteed Obligations or any part thereof; and
(viii) release, surrender, exchange or compromise any security or lien held by
Lender for the liabilities of any person who is guarantor or surety for the
Guaranteed Obligations or any part thereof. Guarantor agrees that Lender may do
any of the above as Lender deems necessary or advisable, in Lender's sole
discretion, without giving any notice to Guarantor, and that Guarantor will
remain liable for full payment of the Guaranteed Obligations. If at any time all
or any part of any payment theretofore applied by Lender to any of the
liabilities is or must be rescinded or returned by Lender for any reason
whatsoever (including, without limitation, the insolvency, bankruptcy or
reorganization of Borrower), such liability shall, for the purposes of this
Agreement, to the extent that such payment is or must be rescinded or returned,
be deemed to have continued in existence, notwithstanding such application by
Lender, and this Agreement shall continue to be effective or be reinstated, as
the case may be, as to such liabilities, all as though such application by
Lender had not been made.
8. Guarantor agrees that no failure on the part of Lender to exercise
any of its rights under this Agreement shall be a waiver of such rights or a
waiver of any default by Guarantor. Guarantor further agrees that no waiver or
modification of any rights of Lender under this Agreement shall be effective
unless in writing and signed by an authorized officer of Lender. Guarantor
further agrees that each written waiver shall extend only to the specific
instance actually recited in such written waiver and shall not impair the rights
of Lender in any other respect.
<PAGE>
9. Guarantor agrees to pay all costs and expenses, including reasonable
attorneys' fees, incurred by Lender in successfully enforcing this Agreement
against Guarantor. Guarantor further agrees to pay all reasonable costs and
expenses, including reasonable attorneys' fees, incurred by Lender in collecting
or enforcing the Guaranteed Obligations.
10. [RESERVED]
11. Guarantor shall furnish quarterly to the Bank a certificate signed
by Guarantor that to the best of its knowledge, Guarantor has kept, observed,
complied with, fulfilled and performed in all material respects every term,
covenant and condition in this Agreement on its part to be kept and performed;
that no Conditional Default or Event of Default exists under this Agreement or
under any unsecured Indebtedness of Guarantor (or if one exists, specifying the
nature thereof); that no event has occurred or is threatened which if continued
would permit the holder of any unsecured Indebtedness of Guarantor to accelerate
the maturity thereof; that no material litigation or administrative proceeding
has been instituted by or against the Guarantor (or, if such should not be the
fact, then the facts and circumstances relating to such event or litigation in
detail) and covering such other matters relating to the Guarantor, the Loan or
the Collateral as the Lender may reasonably require.
12. [RESERVED]
13. Guarantor represents and warrants to Lender that:
(a) the Guarantor is duly organized, validly existing and in good
standing under the laws of the State of jurisdiction of its formation and
Guarantor has full power and authority to own or lease and operate its
properties, and to conduct its affairs as now being conducted and as proposed to
be conducted;
(b) Guarantor has full corporate power and Guarantor has full authority
to enter into, execute, deliver and carry out this Agreement and the other Loan
Documents and the Construction and Development Documents to which it is a party,
and to perform its obligations hereunder and thereunder and all such actions
have been duly authorized by all necessary corporate proceedings on each such
corporate Guarantor's part;
(c) this Agreement, the other Loan Documents and the Construction and
Development Documents which are required to be executed and delivered prior to
the Closing Date pursuant to the terms of the Loan Agreements, have been duly
and validly executed and delivered by Guarantor, to the extent Guarantor is a
party thereto, and, to the best knowledge of Guarantor, by all other parties
thereto. This Agreement, the Environmental Indemnity Agreement and the
Completion Guaranty executed by it constitute legal, valid and binding
obligations of Guarantor, enforceable against it in accordance with their
respective terms;
(d) neither the execution and delivery of this Agreement, or the
execution of the Completion Guaranty executed by it, nor the consummation of the
transactions herein or therein contemplated, nor compliance with the terms and
provisions hereof or thereof, will conflict with, constitute a default under or
result in any breach of (i) the terms and conditions of the formation
<PAGE>
documents relating to Guarantor or (ii) any Governmental Approval, any
applicable Law or any material agreement or instrument to which Guarantor is a
party or by which it is bound;
(e) Guarantor is not a party to any agreement or instrument that
materially and adversely affects its present or proposed business, properties or
assets, operation or conditions, financial or otherwise and Guarantor is not in
default of the performance, observance, or fulfillment of any of the material
obligations, covenants or conditions set forth in any material agreement or
instrument to which it is a party;
(f) except as previously disclosed to the Lender in writing, there is
no pending or, to Guarantor's knowledge, threatened litigation or governmental
investigation (or any basis therefor known to Guarantor) which questions the
capacity, ability or authority of Guarantor to execute, deliver and perform the
provisions of this Agreement or the other Loan Documents or the Construction and
Development Documents to which it is a party, or if determined adversely to
Guarantor, would reasonably be expected to cause a Material Adverse Change;
(g) the information, financial statements and other financial data
furnished by Guarantor to the Lender are true and correct in all material
respects and present fairly the financial condition of Guarantor as of the date
of such statements or data. All other information given to the Lender by and
with respect to the Guarantor is accurate, correct and complete in all material
respects, as of the date such information is given; and
(h) Guarantor is Solvent as of the Closing Date and will be Solvent
after giving effect to the transactions contemplated by this Agreement.
14. Guarantor covenants and agrees that, until the Guaranteed
Obligations are paid in full, Guarantor:
(a) shall not sell, assign, give, mortgage, pledge, transfer
or otherwise dispose of a material portion of its assets for less than adequate
consideration;
(b) shall maintain its existence and its license or
qualification and goodstanding in each jurisdiction in which the nature of its
business make such licensing or qualification necessary or appropriate;
(c) shall not amend or modify, or permit the amendment or
modification of, in any material respect, its organizational documents without
providing prior written notice of to the Lender and obtaining the prior written
consent of the Lender, which prior written consent shall not be unreasonably
withheld or delayed;
(d) shall not liquidate, dissolve, consolidate or merge with
or into any other corporation, partnership or other entity or permit any other
corporation, partnership or other entity to consolidate or merge with or into it
without the prior written consent of the Lender; and
<PAGE>
(e) shall not permit any final judgment obtained against it in
excess of $50,000 to remain unpaid for a period of thirty (30) days following
the entry thereof without obtaining a stay of execution or bonding or causing
such judgment to be bonded.
15. Guarantor acknowledges that Lender may, in its sole discretion,
elect to enforce this Agreement for the Guaranteed Obligations or any part
thereof against Guarantor without any duty or responsibility to pursue any other
person or entity, and that such an election by Lender shall not be a defense to
any action Lender may elect to take against Guarantor.
16. Guarantor agrees that this Agreement shall be binding upon
Guarantor and Guarantor's respective heirs, executors, administrators,
successors or assigns and that the death or disability of any person shall in no
way impair or affect this Agreement, either with respect to the estate of the
person so dying, which shall continue to be bound, or otherwise. Guarantor
further agrees that this Agreement shall inure to the benefit of Lender, its
successors and assigns. This Agreement shall not be recorded by either the
Guarantor or the Lender.
17. Guarantor agrees that this Agreement shall be governed by and
construed in accordance with the Laws of the Commonwealth of Pennsylvania.
Guarantor agrees that the Court of Common Pleas of Allegheny County,
Pennsylvania and the United States District Court for the Western District of
Pennsylvania shall have nonexclusive jurisdiction and venue with respect to all
actions by or against Guarantor under or pursuant to this Agreement and
Guarantor hereby consents to the jurisdiction of such courts and to service of
process, effective upon receipt by personal service, overnight express delivery
or registered or certified mail to Guarantor at the address given below
Guarantor's signature hereto. Guarantor shall promptly notify Lender in writing
of any change in Guarantor's address.
18. Guarantor recognizes that this Agreement when executed constitutes
a sealed instrument and, as a result, the instrument will be enforceable as such
without regard to any statute of limitations which might otherwise be applicable
and without any consideration.
19. This Agreement may be executed in several counterparts, each of
which shall be an original and all of which together shall constitute but one
and the same instrument.
20. In the event that any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, and this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein.
21. GUARANTOR WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON OR RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS RELATED TO ANY OF THE
LOAN DOCUMENTS. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY
GUARANTOR, AND GUARANTOR ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING
ON BEHALF OF LENDER HAS OR HAVE MADE ANY REPRESENTATIONS OF
<PAGE>
FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY
ITS EFFECT. GUARANTOR FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS
HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN
THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE
WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
GUARANTOR AGREES THAT THE OBLIGATIONS EVIDENCED BY THIS AGREEMENT ARE EXEMPTED
TRANSACTIONS UNDER THE TRUTH-IN-LENDING ACT, 15 U.S.C. SECTION 1061 ET SEQ.
22. In no event will the Guarantor's obligations and liabilities under
this Agreement be released or in any way affected by the exercise of any rights
of Chesapeake Forest Products Company ("Chesapeake") or Delmarva Properties,
Inc. ("Delmarva"), under the Deed, including, without limitation, any rights
which Chesapeake or Delmarva may have to cause a conveyance or reconveyance of
the Project to one or both of them or to assume the Loans.
<PAGE>
IN WITNESS WHEREOF, Guarantor intending to be legally bound, has
executed this Agreement as of the 26th day of June, 1997.
ATTEST: STANSLEY RACING CORP.,
a Virginia corporation
By: /s/ Jeffrey P. Jacobs
- ------------------------- --------------------------
Name: Name: Jeffrey P. Jacobs
Title: Title: CEO
Address:
3610 N. Courthouse Road
P.O. Box 456
Providence Forge, VA 23140
Attn: O. J. Peterson
<PAGE>
STATE OF OHIO )
)SS
COUNTY OF CUYAHOGA )
On this ____ day of _______________, 1997, before me, a notary public,
personally appeared , who acknowledged himself to be the of STANSLEY RACING
CORP., and that he, as such officer, executed the foregoing instrument on behalf
of such corporation for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
------------------------------
Notary Public
My Commission expires:
- --------------------------
Exhibit 10.11
AGREEMENT OF GUARANTY AND SURETYSHIP
(PAYMENT)
(COLONIAL DOWNS HOLDINGS, INC.)
THIS AGREEMENT OF GUARANTY AND SURETYSHIP (PAYMENT) (this "Agreement")
is made as of the 26th day of June, 1997 by COLONIAL DOWNS HOLDINGS, INC., a
Virginia corporation ( "Guarantor") to and for the benefit of PNC BANK, NATIONAL
ASSOCIATION, a national banking association (the "Lender").
W I T N E S S E T H:
WHEREAS, as more fully set forth in a certain Construction Loan
Agreement (the "Construction Loan Agreement") of even date herewith by and
between Colonial Downs, L.P., a Virginia limited partnership, (the "Borrower"),
and Lender, Lender has agreed to make a construction loan (the "Construction
Loan") to Borrower in the principal amount of $10,000,000; and
WHEREAS, as more fully set forth in a certain Revolving Line of Credit
Agreement (the "Credit Agreement") of even date herewith between Borrower and
Lender, Lender has agreed to make a revolving line of credit (the "Line of
Credit") available to Borrower in a maximum principal amount not to exceed
$5,000,000; and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to Lender's making of the Construction Loan and extending the Line of
Credit (the Construction Loan and the Line of Credit are hereinafter
collectively referred to as the "Loans").
NOW, THEREFORE, to induce the Lender to make the Loans and for other
good and valuable consideration, receipt of which is hereby acknowledged, and
intending to be legally bound hereby, Guarantor hereby covenants and agrees as
follows:
1. Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings ascribed to such terms in the Loan Agreements (as
hereinafter defined).
2. Guarantor unconditionally guarantees and becomes surety for the full
and timely payment, whether by declaration, acceleration or otherwise, by
Borrower of the principal of and interest on all the following (hereinafter
collectively referred to as the "Guaranteed Obligations"):
(i) all principal, interest and other sums due or to become
due under that certain Deed of Trust Note, of even date
herewith, given by Borrower to Lender in the principal
amount of $10,000,000, as the same may be amended,
supplemented, renewed or replaced from time to time
(the "Deed of Trust Note"); and
<PAGE>
(ii) all principal, interest and other sums due or to become
due under that certain Revolving Credit Note of even
date herewith, given by Borrower to Lender in a maximum
principal amount of $5,000,000, as the same may be
amended, supplemented, renewed or replaced from time to
time (the "Credit Note") (the Deed of Trust Note and
the Credit Note are hereinafter collectively referred
to as the "Notes"); and
(iii) the prompt and punctual payment of all sums due or to
become due under the Construction Loan Agreement and
the Credit Agreement, as the same may be amended,
supplemented, renewed, extended or replaced from time
to time (collectively, the "Loan Agreements"); and
(iv) all sums now or hereafter to be paid to Borrower under
all other agreements, instruments and documents given
to Lender to evidence, secure or otherwise support the
indebtedness evidenced by the Notes (all such
agreements, instruments and documents, including the
Notes and the Loan Agreements as the same may be
amended, supplemented, renewed or replaced from time to
time, being hereinafter referred to as the "Loan
Documents").
3. Guarantor agrees to pay the Guaranteed Obligations immediately when
due, irrespective of whether or not any one or more of the following events have
occurred: (i) Lender has made any demand on Borrower; (ii) Lender has taken any
action of any nature against Borrower; (iii) Lender has pursued any rights which
Lender has against any other person who may be liable for any of the Guaranteed
Obligations; (iv) Lender holds or has resorted to any security for any of the
Guaranteed Obligations; or (v) Lender has invoked any other remedies or rights
Lender has available with respect to any of the Guaranteed Obligations. The
liability of Guarantor as surety and guarantor is unconditional. Guarantor
therefore agrees to pay the Guaranteed Obligations even if any of the Loan
Documents, or any part thereof, are for any reason invalid or unenforceable.
Guarantor further agrees to make full payment to Lender even if circumstances
exist which otherwise constitute an equitable discharge of Guarantor as surety
or guarantor.
4. Guarantor waives and agrees not to enforce any of the rights of
Guarantor against Borrower unless and until Borrower is no longer liable in any
respect to Lender, including, but not limited to: (i) any right of Guarantor to
be subrogated in whole or in part to any right or claim with respect to any of
the Guaranteed Obligations or any portion thereof to Lender which might
otherwise arise from partial payment or performance by Guarantor to Lender on
account of the Guaranteed Obligations or any portion thereof; and (ii) any right
of Guarantor to require the marshalling of assets of Borrower which might
otherwise arise from partial payment or performance by Guarantor to Lender on
account of the Guaranteed Obligations or any portion thereof.
5. Guarantor waives any and all notice with respect to: (i) acceptance
by Lender of this Agreement or any of the Loan Documents; and (ii) the
provisions of any of the Loan Documents or any other instrument or agreement
relating to the Guaranteed Obligations.
<PAGE>
6. Guarantor waives any presentment, demand, notice of dishonor or
nonpayment, protest, notice of protest and notice of non-payment in connection
with the Guaranteed Obligations.
7. Guarantor agrees that Lender may do any of the following without
notice to Guarantor and without adversely affecting the validity or
enforceability of this Agreement or any other agreement, document or instrument
given by Guarantor to Lender in connection with this Agreement or that certain
Agreement of Guaranty and Suretyship (Completion) of even date herewith given by
Guarantor to Lender: (i) release, surrender, exchange, compromise or settle the
Guaranteed Obligations, or any part thereof; (ii) change, renew or waive the
terms of the Guaranteed Obligations, or any part thereof; (iii) change, renew or
waive the terms of any of the Loan Documents or any other note, instrument or
agreement relating to the Guaranteed Obligations, such rights of Lender to
include, without limitation, the right to change the rate of interest charged to
Borrower (in which event the Guaranteed Obligations shall be deemed also to
include all interest at such changed rate); (iv) grant any extension or
indulgence with respect to the payment or performance of the Guaranteed
Obligations or any part thereof; (v) enter into any agreement of forbearance
with respect to the Guaranteed Obligations or any part thereof; (vi) release,
surrender, exchange or compromise any security held by Lender for any of the
Guaranteed Obligations; (vii) release any person who is a guarantor or surety or
who has agreed to purchase the Guaranteed Obligations or any part thereof; and
(viii) release, surrender, exchange or compromise any security or lien held by
Lender for the liabilities of any person who is guarantor or surety for the
Guaranteed Obligations or any part thereof. Guarantor agrees that Lender may do
any of the above as Lender deems necessary or advisable, in Lender's sole
discretion, without giving any notice to Guarantor, and that Guarantor will
remain liable for full payment of the Guaranteed Obligations. If at any time all
or any part of any payment theretofore applied by Lender to any of the
liabilities is or must be rescinded or returned by Lender for any reason
whatsoever (including, without limitation, the insolvency, bankruptcy or
reorganization of Borrower), such liability shall, for the purposes of this
Agreement, to the extent that such payment is or must be rescinded or returned,
be deemed to have continued in existence, notwithstanding such application by
Lender, and this Agreement shall continue to be effective or be reinstated, as
the case may be, as to such liabilities, all as though such application by
Lender had not been made.
8. Guarantor agrees that no failure on the part of Lender to exercise
any of its rights under this Agreement shall be a waiver of such rights or a
waiver of any default by Guarantor. Guarantor further agrees that no waiver or
modification of any rights of Lender under this Agreement shall be effective
unless in writing and signed by an authorized officer of Lender. Guarantor
further agrees that each written waiver shall extend only to the specific
instance actually recited in such written waiver and shall not impair the rights
of Lender in any other respect.
9. Guarantor agrees to pay all costs and expenses, including reasonable
attorneys' fees, incurred by Lender in successfully enforcing this Agreement
against Guarantor. Guarantor further agrees to pay all reasonable costs and
expenses, including reasonable attorneys' fees, incurred by Lender in collecting
or enforcing the Guaranteed Obligations.
<PAGE>
10. Guarantor agrees to furnish to Lender, or to cause to be furnished
to Lender, the financial statements specified on Schedule I attached hereto at
the times specified thereon, which relate to it and its subsidiaries.
11. Guarantor shall furnish quarterly to the Bank a certificate signed
by Guarantor that to the best of its knowledge, Guarantor has kept, observed,
complied with, fulfilled and performed in all material respects every term,
covenant and condition in this Agreement on its part to be kept and performed;
that no Conditional Default or Event of Default exists under this Agreement or
under any unsecured Indebtedness of Guarantor (or if one exists, specifying the
nature thereof); that no event has occurred or is threatened which if continued
would permit the holder of any unsecured Indebtedness of Guarantor to accelerate
the maturity thereof; that no material litigation or administrative proceeding
has been instituted by or against the Guarantor (or, if such should not be the
fact, then the facts and circumstances relating to such event or litigation in
detail) and covering such other matters relating to the Guarantor, the Loan or
the Collateral as the Lender may reasonably require.
12. The Guarantor shall comply with all of the financial covenants set
forth on Schedule II attached hereto, provided that, Guarantor shall not be
required to comply with the covenants set forth in (ii) and (iii) of Schedule II
until September 30, 1998.
13. Guarantor represents and warrants to Lender that:
(a) the Guarantor is duly organized, validly existing and in good
standing under the laws of the State of jurisdiction of its formation and
Guarantor has full power and authority to own or lease and operate its
properties, and to conduct its affairs as now being conducted and as proposed to
be conducted;
(b) Guarantor has full corporate power and Guarantor has full authority
to enter into, execute, deliver and carry out this Agreement and the other Loan
Documents and the Construction and Development Documents to which it is a party,
and to perform its obligations hereunder and thereunder and all such actions
have been duly authorized by all necessary corporate proceedings on each such
corporate Guarantor's part;
(c) this Agreement, the other Loan Documents and the Construction and
Development Documents which are required to be executed and delivered prior to
the Closing Date pursuant to the terms of the Loan Agreements, have been duly
and validly executed and delivered by Guarantor, to the extent Guarantor is a
party thereto, and, to the best knowledge of Guarantor, by all other parties
thereto. This Agreement, the Environmental Indemnity Agreement and the
Completion Guaranty executed by it constitute legal, valid and binding
obligations of Guarantor, enforceable against it in accordance with their
respective terms;
(d) neither the execution and delivery of this Agreement, or the
execution of the Completion Guaranty executed by it, nor the consummation of the
transactions herein or therein
<PAGE>
contemplated, nor compliance with the terms and provisions hereof or thereof,
will conflict with, constitute a default under or result in any breach of (i)
the terms and conditions of the formation documents relating to Guarantor or
(ii) any Governmental Approval, any applicable Law or any material agreement or
instrument to which Guarantor is a party or by which it is bound;
(e) Guarantor is not a party to any agreement or instrument that
materially and adversely affects its or his present or proposed business,
properties or assets, operation or conditions, financial or otherwise and
Guarantor is not in default of the performance, observance, or fulfillment of
any of the material obligations, covenants or conditions set forth in any
material agreement or instrument to which it is a party;
(f) except as previously disclosed to the Lender in writing, there is
no pending or, to Guarantor's knowledge, threatened litigation or governmental
investigation (or any basis therefor known to Guarantor) which questions the
capacity, ability or authority of Guarantor to execute, deliver and perform the
provisions of this Agreement or the other Loan Documents or the Construction and
Development Documents to which it is a party, or if determined adversely to
Guarantor, would reasonably be expected to cause a Material Adverse Change;
(g) the information, financial statements and other financial data
furnished by Guarantor to the Lender are true and correct in all material
respects and present fairly the financial condition of Guarantor as of the date
of such statements or data. All other information given to the Lender by and
with respect to the Guarantor is accurate, correct and complete in all material
respects, as of the date such information is given; and
(h) Guarantor is Solvent as of the Closing Date and will be Solvent
after giving effect to the transactions contemplated by this Agreement.
14. Guarantor covenants and agrees that, until the Guaranteed
Obligations are paid in full, Guarantor:
(a) shall not sell, assign, give, mortgage, pledge, transfer
or otherwise dispose of a material portion of its assets for less than adequate
consideration; (b) shall maintain its existence and its license or qualification
and goodstanding in each jurisdiction in which the nature of its business make
such licensing or qualification necessary or appropriate;
(c) shall not amend or modify, or permit the amendment or
modification of, in any material respect, its organizational documents without
providing prior written notice of to the Lender and obtaining the prior written
consent of the Lender, which prior written consent shall not be unreasonably
withheld or delayed;
(d) shall not liquidate, dissolve, consolidate or merge with
or into any other corporation, partnership or other entity or permit any other
corporation, partnership or other entity to consolidate or merge with or into it
without the prior written consent of the Lender; and
<PAGE>
(e) shall not permit any final judgment obtained against it in
excess of $50,000 to remain unpaid for a period of thirty (30) days following
the entry thereof without obtaining a stay of execution or bonding or causing
such judgment to be bonded.
15. Guarantor acknowledges that Lender may, in its sole discretion,
elect to enforce this Agreement for the Guaranteed Obligations or any part
thereof against Guarantor without any duty or responsibility to pursue any other
person or entity, and that such an election by Lender shall not be a defense to
any action Lender may elect to take against Guarantor.
16. Guarantor agrees that this Agreement shall be binding upon
Guarantor and Guarantor's respective heirs, executors, administrators,
successors or assigns and that the death or disability of any person shall in no
way impair or affect this Agreement, either with respect to the estate of the
person so dying, which shall continue to be bound, or otherwise. Guarantor
further agrees that this Agreement shall inure to the benefit of Lender, its
successors and assigns. This Agreement shall not be recorded by either the
Guarantor or the Lender.
17. Guarantor agrees that this Agreement shall be governed by and
construed in accordance with the Laws of the Commonwealth of Pennsylvania.
Guarantor agrees that the Court of Common Pleas of Allegheny County,
Pennsylvania and the United States District Court for the Western District of
Pennsylvania shall have nonexclusive jurisdiction and venue with respect to all
actions by or against Guarantor under or pursuant to this Agreement and
Guarantor hereby consents to the jurisdiction of such courts and to service of
process, effective upon receipt by personal service, overnight express delivery
or registered or certified mail to Guarantor at the address given below
Guarantor's signature hereto. Guarantor shall promptly notify Lender in writing
of any change in Guarantor's address.
18. Guarantor recognizes that this Agreement when executed constitutes
a sealed instrument and, as a result, the instrument will be enforceable as such
without regard to any statute of limitations which might otherwise be applicable
and without any consideration.
19. This Agreement may be executed in several counterparts, each of
which shall be an original and all of which together shall constitute but one
and the same instrument.
20. In the event that any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, and this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein.
21. GUARANTOR WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON OR RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS RELATED TO ANY OF THE
LOAN DOCUMENTS. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY
GUARANTOR, AND GUARANTOR ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING
ON BEHALF OF LENDER HAS OR HAVE MADE ANY REPRESENTATIONS OF
<PAGE>
FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY
ITS EFFECT. GUARANTOR FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS
HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN
THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE
WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
GUARANTOR AGREES THAT THE OBLIGATIONS EVIDENCED BY THIS AGREEMENT ARE EXEMPTED
TRANSACTIONS UNDER THE TRUTH-IN-LENDING ACT, 15 U.S.C. SECTION 1061 ET SEQ.
22. In no event will the Guarantor's obligations and liabilities under
this Agreement be released or in any way affected by the exercise of any rights
of Chesapeake Forest Products Company ("Chesapeake") or Delmarva Properties,
Inc. ("Delmarva"), under the Deed, including, without limitation, any rights
which Chesapeake or Delmarva may have to cause a conveyance or reconveyance of
the Project to one or both of them or to assume the Loans.
[REMAINDER OF PAGE
LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, Guarantor intending to be legally bound, has
executed this Agreement as of the 26th day of June, 1997.
ATTEST: COLONIAL DOWNS HOLDINGS, INC.,
a Virginia corporation
By: /s/ Jeffrey P. Jacobs
- ---------------------- ----------------------
Name: Name: Jeffrey P. Jacobs
Title: Title: CEO
Address:
3610 N. Courthouse Road
P.O. Box 456
Providence Forge, VA 23140
Attn: O. J. Peterson
<PAGE>
STATE OF OHIO )
)SS
COUNTY OF CUYAHOGA )
On this ____ day of _______________, 1997, before me, a notary public,
personally appeared , who acknowledged himself to be the of COLONIAL DOWNS
HOLDINGS, INC., and that he, as such officer, executed the foregoing instrument
on behalf of such corporation for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
----------------------------
Notary Public
My Commission expires:
- ---------------------------
<PAGE>
SCHEDULE I
FINANCIAL REPORTS
Until the Guaranteed Obligations are repaid in full, the Guarantor
shall furnish or cause to be furnished to the Lender, within the time periods
specified below, the financial reports and information, which relate to it and
its subsidiaries:
(a) As soon as available, but in no event later than forty-five (45)
days after each calendar quarter ending March 31, June 30 and September 30, for
the Guarantor, balance sheets and statements of income (including statements of
cash flow) of Guarantor for such quarter and for the year to date. The foregoing
quarterly reports and statements shall be prepared in detail satisfactory to the
Lender, and shall be certified by an officer of Guarantor as having been
prepared in accordance with GAAP;
(b) As soon as available, but in no event later than one hundred twenty
(120) days after each fiscal year ending December 31, balance sheets, statements
of income, retained earnings and cash flow for Guarantor. Such annual statements
shall be prepared in accordance with GAAP and shall be audited and certified by
an independent certified public accountant selected by Guarantor and approved by
the Lender, whose certification or opinion accompanying such statements shall
not contain any material qualification or exception not satisfactory to the
Lender;
(c) At least thirty (30) days prior to the commencement of each fiscal
year, during the term of the Construction Loan, annual budgets, annual forecasts
and annual capital expenditure projections for the Project in form reasonably
acceptable to the Lender;
(d) All filings made by the Guarantor with the Securities Exchange
Commission, including, without limitation, all Forms 10-K and 10-Q, within ten
(10) days after the filing thereof;
(e) As soon as available, but in no event later than forty-five (45)
days after each quarter ending March 31, June 30, and September 30 and in no
event later than one hundred and twenty (120) days after the quarter ending
December 31 for the Guarantor, certificates of the Guarantor, each as certified
by the Chief Financial Officer of such entity, certifying that no Conditional
Default, and no Remedies Event shall have occurred and be continuing as of such
date and setting forth, in sufficient detail reasonably acceptable to the
Lender, calculations substantiating compliance, as of the date of the financial
statements, with all financial covenants in this Agreement, including, without
limitation, Financial Covenants set forth in Section 12 hereof;
(f) Information as reasonably requested by the Lender to enable the
Lender to perform a review of the financial condition, cash positions and
contingent liabilities of the Guarantor;
<PAGE>
(g) Evidence of payment of real estate taxes within forty-five (45)
days after the due date thereof;
(h) Evidence satisfactory to the Lender of the renewal of such
insurance policies as are required under the Construction Loan Agreement thirty
(30) days prior to the expiration of such insurance policies;
(i) As soon as available, and in any event, within one hundred fifty
(150) days after September 30 of each calendar year, evidence of the net worth
of Jeffrey P. Jacobs as of September 30 of such calendar year, which shall be
prepared on a basis consistent with that governing the preparation of statements
previously delivered to Lender, and shall fairly present the financial condition
of Jeffrey P. Jacobs as of September 30 of such calendar year; and
(j) As soon as available, and, in any event, within one hundred fifty
(150) days after the end of each calendar year, statements of the net worth of
Richard E. Jacobs as of the end of each calendar year, which shall be prepared
on a basis consistent with that governing the preparation of statements for
Richard E. Jacobs previously delivered to Lender and shall fairly present the
financial condition of Richard E. Jacobs as of the end of such calendar year.
<PAGE>
SCHEDULE II
FINANCIAL COVENANTS
(i) The Guarantor will maintain at all times a Net Worth of
at least $40,000,000 which includes the Land having a
value of $5,000,000 as agreed to by the Lender and the
Guarantor;
(ii) The Guarantor will maintain at all times a ratio of
Total Debt to EBITDA of no more than 1.7 to 1
(calculated on a quarterly basis for the preceding four
(4) calendar quarters beginning on September 30, 1998);
and
(iii) The Guarantor will maintain at all times a ratio of
EBITDA to Assumed Debt Service plus Capital
Expenditures of at least 3.5 to 1 (calculated on a
quarterly basis for the preceding four (4) calendar
quarters beginning on September 30, 1998 provided that
the principal amount used in the calculation of Assumed
Debt Service shall be equal to the maximum amount
available under the Line of Credit plus the outstanding
principal balance of the Construction Loan on the last
day of the applicable period).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF OPERATIONS AND
CONSOLIDATED STATEMENT OF CASH FLOWS INCLUDED IN THE COMPANY'S FORM 10-Q FOR
THE PERIOD ENDING JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001027430
<NAME> COLONIAL DOWNS HOLDINGS, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1.000
<CASH> 24,396
<SECURITIES> 0
<RECEIVABLES> 342
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,338
<PP&E> 33,569
<DEPRECIATION> 239
<TOTAL-ASSETS> 63,511
<CURRENT-LIABILITIES> 15,153
<BONDS> 9,200
0
0
<COMMON> 73
<OTHER-SE> 37,685
<TOTAL-LIABILITY-AND-EQUITY> 63,511
<SALES> 0
<TOTAL-REVENUES> 5,044
<CGS> 0
<TOTAL-COSTS> 4,649
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 763
<INCOME-TAX> 290
<INCOME-CONTINUING> 473
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 473
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
