SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 23, 1997
International Thoroughbred Breeders, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-9624 22-2332039
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
P.O. Box 1232
Cherry Hill, NJ 08034
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 609-488-3838
Item 5. Other Events.
On May 23, 1997, International Thoroughbred Breeders,
Inc. (the "Company") and certain of its direct and indirect
subsidiaries entered into a two-year $55 million credit facility
with Credit Suisse First Boston Mortgage Capital LLC ("CSFB"),
secured by a pledge of certain of the personal and real property
of the Company and its subsidiaries (the "CSFB Credit Facility").
The proceeds of the CSFB Credit Facility were used to repay in
full the Company's $30 million credit facility with Foothill
Capital Corporation and will also provide funds for working
capital and other general corporate purposes, including, but not
limited to, development of the former El Rancho Hotel and Casino
in Las Vegas, Nevada. Interest under the CSFB Credit Facility is
payable monthly in arrears at a margin over the London interbank
offered rate. The scheduled maturity date of the CSFB Credit
Facility is June 1, 1999, at which time all outstanding principal
and interest are payable in full.
The CSFB Credit Facility is evidenced by a Convertible
Promissory Note (the "Note") pursuant to which $10 million of the
aggregate principle amount of the Note can be converted under
certain conditions, at the option of CSFB, to an aggregate of
1,142,857 shares of the Company's Common Stock (subject to
adjustment in certain events) at a conversion price of $8.75 per
share. In addition, pursuant to the Loan Agreement dated May 23,
1997 (the "Loan Agreement") by and among CSFB, the Company and
certain of its direct and indirect subsidiaries, CSFB was granted
warrants to purchase 546,847 shares and 497,153 shares at an
exercise price of $4.375 per share (subject to adjustment in
certain events). The warrant for 546,847 shares is immediately
exercisable and the warrant for 497,153 shares becomes
exercisable at such time as CSFB delivers to the Company a
commitment for a construction loan or a permanent take-out loan
to provide certain additional funding to the Company.
In connection with the Loan Agreement, CSFB also
obtained the right to receive 232,652 shares upon the conversion
of a promissory note issued by the Company and its wholly-owned
subsidiary, Orion Casino Corporation, to a third party in
consideration of CSFB's consent to such transaction and the right
to receive further shares on consummation of a proposed related
acquisition by the Company equal to 10% of the consideration paid
by the Company for such acquisition. The Company has granted
CSFB certain registration rights with respect to the warrants and
the shares.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(c) Exhibits.
The following exhibits are filed as part of this
Report:
10.1 Loan Agreement dated May 23, 1997 by and
among CSFB and the Company and certain of its
subsidiaries.
10.2 Warrant dated May 23, 1997 to purchase
546,847 shares.
10.3 Warrant dated May 23, 1997 to purchase
497,153 shares.
10.4 Registration Rights Agreement dated as of May
23, 1997 between the Company and CSFB.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Dated: June 18, 1997 INTERNATIONAL
THOROUGHBRED BREEDERS,
INC.
By:/s/ Nunzio P. DeSantis
Nunzio P. DeSantis,
President and Chief
Executive Officer
EXHIBIT INDEX
Exhibit No. Description of Document
10.1 Loan Agreement dated May 23, 1997 by and
among CSFB and the Company and certain of its
subsidiaries.
10.2 Warrant dated May 23, 1997 to purchase
546,847 shares.
10.3 Warrant dated May 23, 1997 to purchase
497,153 shares.
10.4 Registration Rights Agreement dated as of May
23, 1997
between the Company and CSFB.
LOAN AGREEMENT
BY AND BETWEEN
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
AND
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
GARDEN STATE RACE TRACK, INC.
FREEHOLD RACING ASSOCIATION
INTERNATIONAL THOROUGHBRED GAMING DEVELOPMENT CORPORATION
ORION CASINO CORPORATION
MAY 23, 1997
TABLE OF CONTENTS
ARTICLE 1 Definitions . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . 2
1.2 Accounting Terms. . . . . . . . . . . . . . . . . . 23
1.3 Construction. . . . . . . . . . . . . . . . . . . . 23
1.4 Schedules and Exhibits. . . . . . . . . . . . . . . 23
ARTICLE 2 The Loan. . . . . . . . . . . . . . . . . . . . . . 23
2.1 Funding . . . . . . . . . . . . . . . . . . . . . . 23
2.2 Loan Term . . . . . . . . . . . . . . . . . . . . . 24
2.3 Interest Rate . . . . . . . . . . . . . . . . . . . 24
2.4 Payments. . . . . . . . . . . . . . . . . . . . . . 27
2.5 Prepayments of Loan . . . . . . . . . . . . . . . . 29
2.6 Uses of Loan Proceeds . . . . . . . . . . . . . . . 30
2.7 Reserves. . . . . . . . . . . . . . . . . . . . . . 30
2.8 [Intentionally Omitted] . . . . . . . . . . . . . . 34
2.9 Liability for Obligations . . . . . . . . . . . . . 34
2.10 Conversion. . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 3 Security. . . . . . . . . . . . . . . . . . . . . . 40
3.1 Secured Obligations . . . . . . . . . . . . . . . . 40
3.2 Collateral. . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 4 Conditions Precedent to Loan. . . . . . . . . . . . 41
4.1 Delivery of Loan Documents. . . . . . . . . . . . . 41
4.2 Appraisals. . . . . . . . . . . . . . . . . . . . . 42
4.3 Engineering Reports . . . . . . . . . . . . . . . . 42
4.4 Title Policy and Endorsements . . . . . . . . . . . 43
4.5 Surveys . . . . . . . . . . . . . . . . . . . . . . 43
4.6 Environmental Reports . . . . . . . . . . . . . . . 44
4.7 Leases. . . . . . . . . . . . . . . . . . . . . . . 44
4.8 Contracts . . . . . . . . . . . . . . . . . . . . . 44
4.9 Insurance . . . . . . . . . . . . . . . . . . . . . 44
4.10 Compliance with Laws. . . . . . . . . . . . . . . . 44
4.11 Commission Orders . . . . . . . . . . . . . . . . . 45
4.12 Racing and Gaming Consents and Approvals. . . . . . 45
4.13 Adjacent Garden State Contract. . . . . . . . . . . 45
4.14 Counsel Opinions. . . . . . . . . . . . . . . . . . 45
4.15 Representations and Warranties. . . . . . . . . . . 45
4.16 No Default. . . . . . . . . . . . . . . . . . . . . 45
4.17 No Injunction . . . . . . . . . . . . . . . . . . . 45
4.18 Consents, Licenses, Approvals, etc. . . . . . . . . 45
4.19 Transaction Costs . . . . . . . . . . . . . . . . . 45
4.20 Mortgage Recording Tax. . . . . . . . . . . . . . . 45
4.21 [Intentionally Omitted] . . . . . . . . . . . . . . 45
4.22 Bankruptcy Remote Entities. . . . . . . . . . . . . 45
4.23 Intra-Company Debt. . . . . . . . . . . . . . . . . 47
4.24 Additional Items. . . . . . . . . . . . . . . . . . 47
ARTICLE 5 Representations and Warranties. . . . . . . . . . . 47
5.1 Borrower Existence; Status; Enforceability . . 47
5.2 Borrowers' Corporate Structure . . . . . . . . 48
5.3 ITB Lender Stock . . . . . . . . . . . . . . . 49
5.4 Borrower's Organizational Documents. . . . . . 49
5.5 Authorization; Conflict. . . . . . . . . . . . 50
5.6 Approvals. . . . . . . . . . . . . . . . . . . 50
5.7 Title. . . . . . . . . . . . . . . . . . . . . 50
5.8 Legal Compliance . . . . . . . . . . . . . . . 50
5.9 Project Access . . . . . . . . . . . . . . . . 51
5.10 Utilities. . . . . . . . . . . . . . . . . . . 51
5.11 Physical Condition . . . . . . . . . . . . . . 51
5.12 Flood Hazards/Wetlands . . . . . . . . . . . . 51
5.13 Taxes/Assessments. . . . . . . . . . . . . . . 51
5.14 Tax Returns. . . . . . . . . . . . . . . . . . 52
5.15 Eminent Domain . . . . . . . . . . . . . . . . 52
5.16 Casualty Damage. . . . . . . . . . . . . . . . 52
5.17 Leases . . . . . . . . . . . . . . . . . . . . 52
5.18 Contracts. . . . . . . . . . . . . . . . . . . 52
5.19 Litigation . . . . . . . . . . . . . . . . . . 52
5.20 Investment Company Act . . . . . . . . . . . . 53
5.21 Public Utility Holding Company Act . . . . . . 53
5.22 Foreign Ownership. . . . . . . . . . . . . . . 53
5.23 Solvency . . . . . . . . . . . . . . . . . . . 53
5.24 Financial Statements/No Change . . . . . . . . 53
5.25 Accuracy . . . . . . . . . . . . . . . . . . . 53
5.26 Use of Credit. . . . . . . . . . . . . . . . . 54
5.27 No Broker. . . . . . . . . . . . . . . . . . . 54
5.28 Commission Orders. . . . . . . . . . . . . . . 54
5.29 Employee Benefits. . . . . . . . . . . . . . . 54
5.30 Compliance With The ADA . . . . . . . . . . . . . . 55
5.31 The El Rancho Property. . . . . . . . . . . . . . . 55
5.32 The Freehold Property . . . . . . . . . . . . . . . 55
5.33 The Garden State Property . . . . . . . . . . . . . 56
5.34 The Adjacent Garden State Property. . . . . . . . . 56
5.35 Atlantic City Harness, Inc. . . . . . . . . . . . . 56
5.36 Permits . . . . . . . . . . . . . . . . . . . . . . 56
5.37 Other Agreements. . . . . . . . . . . . . . . . . . 56
5.38 Due Diligence Materials . . . . . . . . . . . . . . 56
5.39 Qualification Investigation . . . . . . . . . . . . 57
ARTICLE 6 Affirmative Covenants . . . . . . . . . . . . . . . 57
6.1 Payment of Obligations. . . . . . . . . . . . . . . 57
6.2 Existence; Compliance with Law. . . . . . . . . . . 57
6.3 Insurance . . . . . . . . . . . . . . . . . . . . . 57
6.4 Maintenance of Properties . . . . . . . . . . . . . 60
6.5 Impositions and Other Claims. . . . . . . . . . . . 60
6.6 Inspection. . . . . . . . . . . . . . . . . . . . . 60
6.7 Books and Records/Audits. . . . . . . . . . . . . . 61
6.8 Financial Statements and Other Reporting
Requirements. . . . . . . . . . . . . . . . . . . . 61
6.9 Notice of Litigation or Default . . . . . . . . . . 66
6.10 Single Purpose Entity . . . . . . . . . . . . . . . 66
6.11 Foreign Ownership . . . . . . . . . . . . . . . . . 68
6.12 Tangible Consolidated Net Worth . . . . . . . . . . 68
6.13 Development of the El Rancho Property . . . . . . . 68
6.14 Sale of Adjacent Garden State Property. . . . . . . 68
6.15 Circa Property. . . . . . . . . . . . . . . . . . . 70
6.16 Gaming and Racing Applications. . . . . . . . . . . 71
6.17 ITB to Reserve Stock. . . . . . . . . . . . . . . . 71
6.18 Taxes on Conversion and Exercise. . . . . . . . . . 71
6.19 Borrower's Cooperation. . . . . . . . . . . . . . . 71
6.20 Amendment to ITB Organizational Documents . . . . . 72
6.21 Further Assurances. . . . . . . . . . . . . . . . . 72
6.22 Delivery of Garden State Survey . . . . . . . . . . 72
6.23 Documents for Other Subsidiaries. . . . . . . . . . 73
ARTICLE 7 Negative Covenants. . . . . . . . . . . . . . . . . 73
7.1 No Amendments . . . . . . . . . . . . . . . . . . . 73
7.2 No Additional Indebtedness; Liens . . . . . . . . . 73
7.3 Limitation on Fundamental Changes . . . . . . . . . 74
7.4 Limitation on Distributions . . . . . . . . . . . . 75
7.5 Transfer. . . . . . . . . . . . . . . . . . . . . . 75
7.6 Accounting Policies . . . . . . . . . . . . . . . . 75
7.7 Compliance with ERISA . . . . . . . . . . . . . . . 76
7.8 Limitation on Negative Pledge Clauses . . . . . . . 76
7.9 Lienable Work . . . . . . . . . . . . . . . . . . . 76
7.10 Property Management . . . . . . . . . . . . . . . . 76
7.11 Use of Properties . . . . . . . . . . . . . . . . . 76
7.12 Corporate Changes . . . . . . . . . . . . . . . . . 76
7.13 Prepayments . . . . . . . . . . . . . . . . . . . . 76
7.14 Change of Control . . . . . . . . . . . . . . . . . 77
7.15 The El Rancho Property. . . . . . . . . . . . . . . 77
7.16 Transactions with Affiliates. . . . . . . . . . . . 77
7.17 No Additional Shares. . . . . . . . . . . . . . . . 77
7.18 New Contracts; Amendments to Existing Contracts . . 78
7.19 Use of Proceeds . . . . . . . . . . . . . . . . . . 78
ARTICLE 8 Events of Default; Acceleration of Obligations;
Remedies. . . . . . . . . . . . . . . . . . . . . . 78
8.1 Events of Default . . . . . . . . . . . . . . . . . 78
8.2 Acceleration; Remedies. . . . . . . . . . . . . . . 83
8.3 Waiver of Stay, Extension and Moratorium Laws,
Appraisal and Valuation, Redemption and
Marshaling. . . . . . . . . . . . . . . . . . . . . 84
8.4 Preferences . . . . . . . . . . . . . . . . . . . . 85
ARTICLE 9 Exit Fee. . . . . . . . . . . . . . . . . . . . . . 85
9.1 Payment of Exit Fee . . . . . . . . . . . . . . . . 85
9.2 Characterization of Exit Fee. . . . . . . . . . . . 85
ARTICLE 10 Miscellaneous. . . . . . . . . . . . . . . . . . . 86
10.1 Expenditures and Expenses. . . . . . . . . . . . . 86
10.2 Servicing. . . . . . . . . . . . . . . . . . . . . 86
10.3 Disclosure of Information. . . . . . . . . . . . . 86
10.4 Sale of Loan . . . . . . . . . . . . . . . . . . . 87
10.5 Forbearance by Lender Not a Waiver . . . . . . . . 87
10.6 Governing Law; Severability. . . . . . . . . . . . 87
10.7 Relationship . . . . . . . . . . . . . . . . . . . 88
10.8 Indemnity. . . . . . . . . . . . . . . . . . . . . 88
10.9 Notice . . . . . . . . . . . . . . . . . . . . . . 88
10.10 Successors and Assigns Bound; Agents; and
Captions . . . . . . . . . . . . . . . . . . . . . 89
10.11 Lender's Consents and Approvals. . . . . . . . . . 90
10.12 Time of Essence. . . . . . . . . . . . . . . . . . 90
10.13 Venue. . . . . . . . . . . . . . . . . . . . . . . 90
10.14 Jury Trial Waiver. . . . . . . . . . . . . . . . . 90
10.15 Counterparts . . . . . . . . . . . . . . . . . . . 91
10.16 Final Agreement/Modification . . . . . . . . . . . 91
10.17 Survival . . . . . . . . . . . . . . . . . . . . . 91
10.18 Injunctive Relief. . . . . . . . . . . . . . . . . 92
10.19 Consequential Damages. . . . . . . . . . . . . . . 92
10.20 Construction . . . . . . . . . . . . . . . . . . . 92
10.21 Recitals . . . . . . . . . . . . . . . . . . . . . 92
10.22 No Fees for Waivers and Modifications. . . . . . . 92
10.23 Confidentiality. . . . . . . . . . . . . . . . . . 92
10.24 Lender Representations . . . . . . . . . . . . . . 93
10.25 Characterization of Fees and Other Consideration
to Lender . . . . . . . . . . . . . . . . . . . . 94
EXHIBITS
EXHIBIT A-1 Description of Garden State Property
EXHIBIT A-2 Description of Freehold Property
EXHIBIT A-3 Description of El Rancho Property
EXHIBIT A-4 Description of Adjacent Garden State Property
EXHIBIT A-5 Description of Circa Property
EXHIBIT B Structural Chart of Borrower
SCHEDULES
SCHEDULE 1 Contracts
SCHEDULE 2 Pending Litigation
SCHEDULE 3 Permits
SCHEDULE 4 Preliminary Document Request List
SCHEDULE 5.2(a) ITB Warrants and Stock Options
SCHEDULE 5.2(i) List of Other Subsidiaries
SCHEDULE 7.1 Indebtedness
SCHEDULE P-1 Liens
LOAN AGREEMENT
LOAN AGREEMENT dated this 23rd day of May, 1997 (as from
time to time amended in accordance with the terms hereof and in
effect, the "Agreement") by and among INTERNATIONAL THOROUGHBRED
BREEDERS, INC., a Delaware corporation ("ITB"), GARDEN STATE RACE
TRACK, INC., a New Jersey corporation ("GSRT"), FREEHOLD RACING
ASSOCIATION, a New Jersey corporation ("FRA"), INTERNATIONAL
THOROUGHBRED GAMING DEVELOPMENT CORPORATION, a New Jersey
corporation ("ITGDC"), and ORION CASINO CORPORATION, a Nevada
corporation ("OCC") (all of the foregoing, individually and
collectively, jointly and severally, "Borrower" or, for purposes of
technical grammatical clarity, "Borrowers"), and CREDIT SUISSE
FIRST BOSTON MORTGAGE CAPITAL LLC, a Delaware limited liability
company (together with its successors and assigns, "Lender").
RECITALS:
A. Lender has agreed to make a loan (the "Loan") to
Borrower in the amount of Fifty Five Million and 00/100 Dollars
($55,000,000.00) (the "Loan Amount") subject to the terms and
conditions contained herein. The Loan is evidenced by a certain
Convertible Promissory Note of even date herewith in the Loan
Amount (together with any amendments thereto and substitutions
therefor, the "Note").
B. GSRT is the owner of (i) those certain approximately
222.75 acres of real property located in Camden County, New Jersey,
together with the improvements constructed or to be constructed
thereon, commonly known as Garden State Race Track and more
specifically described in Exhibit "A-1" attached hereto (the
"Garden State Property"), and (ii) those certain approximately 56
acres of real property located in Camden County, New Jersey,
together with the improvements constructed or to be constructed
thereon, more specifically described in Exhibit "A-4" attached
hereto (the "Adjacent Garden State Property").
C. FRA is the owner of those certain approximately 57
acres of real property located in Monmouth County, New Jersey,
together with the improvements constructed or to be constructed
thereon, commonly known as Freehold Raceway and more specifically
described in Exhibit "A-2" attached hereto (the "Freehold
Property").
D. OCC is the owner of those certain approximately 20.86
acres of real property located in Clark County, Nevada, together
with the improvements constructed or to be constructed thereon,
commonly known as El Rancho Hotel and Casino and more specifically
described in Exhibit "A-3" attached hereto (the "El Rancho
Property"; and collectively with the Garden State Property, the
Adjacent Garden State Property, the Circa Property (as hereinafter
defined) (when subject to a recorded Mortgage (as hereinafter
defined) in accordance with Section 6.15 hereof) and the Freehold
Property, the "Properties").
E. ITGDC owns 100% of the stock in OCC.
F. ITB owns 100% of the stock in each of GSRT, FRA and
ITGDC and other companies.
G. Borrower will use the proceeds of the Loan for the
purpose of refinancing various loans affecting the Properties,
funding certain working capital needs of Borrowers, and funding
certain development costs of the El Rancho Property, all in
accordance with the terms and conditions of this Agreement.
H. GSRT will derive substantial benefit from the Loan as
a result of certain of the proceeds thereof being used to refinance
a loan encumbering the Garden State Property.
I. FRA will derive substantial benefit from the Loan as
a result of certain of the proceeds thereof being used to refinance
a loan encumbering the Freehold Property.
J. OCC will derive substantial benefit from the Loan as
a result of certain of the proceeds thereof being used (i) to
refinance a loan encumbering the El Rancho Property, and (ii) for
the payment of certain development costs in connection with the El
Rancho Property.
K. ITGDC will derive substantial benefit from the Loan
as a result of (i) certain of the proceeds thereof being used to
fund certain of ITGDC's working capital needs, and (ii) the benefits of the
Loan described above received by OCC, a wholly-owned subsidiary of ITGDC.
L. ITB will derive substantial benefit from the Loan as
a result of (i) certain of the proceeds thereof being used to fund
certain of ITB's working capital needs, and (ii) the benefits of
the Loan described above received by GSRT, FRA and ITGDC, each
wholly-owned subsidiaries of ITB.
NOW, THEREFORE, in consideration of the mutual promises
contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
Lender and Borrower hereby agree as follows:
ARTICLE 1
Definitions
1.1 Definitions. In addition to the definitions set
forth in the foregoing Recitals, which are hereby incorporated into
the substantive provisions of this Agreement, as used in this
Agreement, the following terms shall have the following meanings
(all terms defined in this Section 1.1 or in any other provision of
this Agreement which are stated in the singular shall have the same
meanings when used in the plural and vice versa):
"Account and Security Agreement" shall have the meaning
set forth in Section 4.1(p) hereof.
"ACH" means Atlantic City Harness, Inc., a New Jersey
corporation, a wholly-owned subsidiary of ITB.
"ACH Letter Agreement" means a letter agreement executed
by ACH in favor of Lender relating to ACH's involvement with the
Freehold Property, in form and content reasonably satisfactory to
Lender.
"ADA" means the Americans with Disabilities Act, 42
U.S.C. Section 12101, et. set., and all applicable rules and
regulations promulgated thereunder.
"Additional Funding" means the additional funding
referred to in the section of the Term Sheet entitled "Additional
Funding".
"Adjacent Garden State Property" shall have the meaning
set forth in Recital B hereto.
"Adjacent Garden State Contract" means that certain
Agreement of Sale and Purchase dated December 15, 1995 between GSRT
and The Four B's for the sale of the Adjacent Garden State
Property, as amended by amendments dated January 26, 1996, February
2, 1996, February 9, 1996 and February 3, 1997.
"Affiliate" means with respect to any Person, (i) a
Person that directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common
control with such Person; (ii) any officer, director, partner or
shareholder (provided such shareholder has or is deemed to have
Control) of such Person; and (iii) if such Person is an individual,
(a) any member of the immediate family (including parents, spouse,
children and siblings) of such individual, (b) any trust whose
principal beneficiary is such individual or one or more members of
such immediate family, and (c) any Person who is controlled by any
such member or trust. With respect to Borrower, it is expressly
acknowledged that, without limitation, all of the Persons
identified on the structural chart annexed hereto as Exhibit B are
Affiliates.
"Agreement" shall have the meaning set forth in the
initial paragraph of this Agreement.
"Applicable Law" shall have the meaning set forth in
Section 5.8 hereof.
"Appraisals" shall have the meaning set forth in Section
4.2 hereof, as the same may be updated in connection with the
Extension Term.
"Appraiser" shall have the meaning set forth in Section
4.2 hereof.
"Approval Notification Letter" means a certain letter
from Lender to DeSantis on behalf of ITB dated April 10, 1997,
constituting the "Approval Notification" contemplated by the Term
Sheet.
"Assignment of Leases" means, collectively, (i) that
certain Assignment of Leases and Rents given by GSRT to Lender in
connection with the Garden State Property, (ii) that certain
Assignment of Leases and Rents given by GSRT to Lender in
connection with the Adjacent Garden State Property, (iii) that
certain Assignment of Leases and Rents given by FRA to Lender in
connection with the Freehold Property, (iv) that certain
Assignment of Leases and Rents given by OCC to Lender in connection
with the El Rancho Property, and (v) upon Lender's election
pursuant to and in accordance with Section 6.15 hereof, that
certain Assignment of Leases and Rents given by Circa to Lender in
connection with the Circa Property, the form and substance of all
of which shall be satisfactory to Lender.
"Bankruptcy Decisions" shall have the meaning set forth
in Section 4.22 hereof.
"Base Rate" means for any day, as determined by Lender,
the interest rate per annum offered for deposits in U.S. dollars
for a one month period in the London interbank market which appears
on Telerate Page 3750 or such other page as may replace Page 3750
on that service or such other service or services as may be
nominated by the British Bankers Association for the purpose of
displaying such rate (collectively, "Telerate Page 3750") as of
11:00 a.m., London time, on the date of determination (or if such
date is not a Eurodollar Business Day, then on the immediately
preceding Eurodollar Business Day). If such rate does not appear
on Telerate Page 3750 (or the successor page thereto) as of 11:00
a.m., London time, on such date of determination (or if such date
is not a Eurodollar Business Day, then on the immediately preceding
Eurodollar Business Day), the Base Rate shall be the arithmetic
mean of the offered rates (expressed as a one hundred basis point
percentage per annum) for deposits in U.S. dollars for a one month
period that appear on the Reuters Screen LIBO Page as of 11:00
a.m., London time, on such date of determination (or if such date
is not a Eurodollar Business Day, then on the immediately preceding
Eurodollar Business Day), if at least two such offered rates so
appear. If fewer than two such offered rates appear on the Reuters
Screen LIBO Page as of 11:00 a.m., London time, on such date of
determination (or if such date is not a Eurodollar Business Day,
then on the immediately preceding Eurodollar Business Day), Lender
shall request the principal London office of any four major
reference banks in the London interbank market selected by Lender
to provide such bank's offered quotation (expressed as a one
hundred basis point percentage per annum) to prime banks in the
London interbank market for deposits in U.S. dollars for a one
month period as of 11:00 a.m., London time, on such date of
determination (or if such date is not a Eurodollar Business Day,
then on the immediately preceding Eurodollar Business Day) for
amounts of not less than U.S. $1,000,000. If at least two such
offered quotations are so provided, the Base Rate shall be the
arithmetic mean of such quotations. If fewer than two such
quotations are so provided, Lender shall request any three major
banks in New York City selected by Lender to provide such bank's
rate (expressed as a one hundred basis point percentage per annum)
for loans in U.S. dollars to leading European banks for a one month
period as of approximately 11:00 a.m., New York City time, on such
date of determination for amounts of not less than U.S. $1,000,000.
If at least two such rates are so provided, the Base Rate shall be
the arithmetic mean of such rates. If fewer than two rates are so
provided or if, at any time Lender reasonably determines, which
determination shall be conclusive absent manifest error, that the
quotation of interest rates or the deposits referred to in the
preceding sentences are unavailable by reason of circumstances
affecting the Eurocurrency market, Lender shall notify Borrower,
and thereafter during the continuation of such circumstances, the
Base Rate shall mean, as of the date of determination, the then
current yield (stated as an annual percentage rate) on U.S.
Treasury obligations having a maturity equal to the number of whole
months from the date of determination until the Maturity Date, or
the nearest equivalent maturity.
"Borrower" shall have the meaning set forth in the
initial paragraph of this Agreement.
"Borrowers" shall have the meaning set forth in the
initial paragraph of this Agreement.
"Broker" shall have the meaning set forth in Section 5.27
hereof.
"Business Day" means any day other than a day when banks
in New York, New York are closed.
"Capital Adequacy Compensation" shall have the meaning
set forth in Section 2.3.5(b) hereof.
"Capital Adequacy Events" shall have the meaning set
forth in Section 2.3.5(b) hereof.
"Casino-Co" means Casino-Co Corporation, a Nevada
corporation, a wholly-owned subsidiary of LVEN.
"Change of Control" shall be deemed to have occurred at
such time after the date of this Agreement as either of the
following shall have occurred: (a) a "person" or "group" (within
the meaning of Sections 13 (d) and 14(d) (2) of the Securities
Exchange Act of 1934), other than a Permitted Holder, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934), directly or indirectly, of more than 5% of
the total voting power of all classes of stock then outstanding of
any Borrower normally entitled to vote in the election of
directors; or (b) Robert E. Brennan becomes actively involved in
the management of any Borrower. Notwithstanding anything to the
contrary set forth herein, if any stock or other interest in any
Borrower or right to manage any Borrower shall have been pledged or
otherwise given as security prior to the date of this Agreement, a
"Change of Control" shall be deemed to have occurred upon the
exercise of any rights or remedies under or in connection with such
pledge or other security arrangement which results in such stock or
other interest or the right to manage being foreclosed or otherwise
being finally vested in another person or entity, other than a
Permitted Holder.
"Circa" means Circa 1850, Inc., a New Jersey corporation,
a wholly-owned subsidiary of ITB.
"Circa Property" means the land and improvements
consisting of six (6) single-family homes on the southern perimeter
of the Garden State Property, more specifically described in
Exhibit "A-5" attached hereto.
"Claim" means any loss, liability, suit, demand, action,
debt, cause of action, sum of money, account, bill trespass,
judgement, claim, damage, fine penalty, cost or expense (including
the fees, disbursements and expenses of outside counsel and the
reasonable fees, disbursements and expenses of in-house staff
counsel on an allocated basis in good faith determined by Lender).
"Closing Date" shall have the meaning set forth in
Section 2.1 hereof.
"Closing Statement" shall have the meaning set forth in
Section 2.6 hereof.
"Coehlo" means Anthony Coehlo.
"Coehlo Related Parties" means Coehlo, his Family Members
and trusts established for the benefit of his Family Members.
"Collateral" means any items of real or personal
property provided as security under the Loan Documents for the
payment and performance by Borrower of the Obligations, including
the Properties and the Reserve Accounts, and the proceeds and
products, whether tangible or intangible, of any of the foregoing
including proceeds of insurance covering any or all of the
Collateral, and any and all property, money, deposit accounts, or
other tangible or intangible property resulting from the sale,
exchange, collection, or other disposition of any of the foregoing,
or any portion thereof or interest therein, and the proceeds
thereof. Notwithstanding the foregoing, the Collateral shall not
include any communications, gaming, racing or liquor licenses or
any permits or agreements with any governmental authority of any of
the Borrowers to the extent that the grant of a security interest
therein is prohibited or restricted by Applicable Law; provided,
however, that the Collateral shall include the proceeds from the
sale or disposition of such licenses and permits, if any.
"Commission Orders" means the State of New Jersey Casino
Control Commission Orders, dated December 18, 1996 and January 13,
1997, together with a related approval letter from the State of New
Jersey Department of Law and Public Safety Division of New Jersey
Racing Commission dated December 23, 1996, in respect of the sale
by Robert E. Brennan of his ITB Stock, as the foregoing may be
amended from time to time, and any other orders by Racing/Gaming
Authorities dealing with the same issues or as may otherwise
pertain to the insulation of Robert E. Brennan or Persons
affiliated with Robert E. Brennan from any ability to control or
affect the affairs of any of the Borrowers or any of the
Properties, as the same may be amended from time to time.
"Construction Loan Condition" means either (a) an offer
by Lender to Borrower to make a $50,000,000 construction loan in
connection with the development of the El Rancho Property, or (b)
an offer by Lender to Borrower to provide a standby forward
commitment for a $50,000,000 construction loan by another lender in
connection with the development of the El Rancho Property, such
commitment to be subject only to (i) lien-free completion of the
development of the El Rancho Property in accordance with approved
plans and specifications, and (ii) the receipt of a certificate of
occupancy or equivalent with respect thereto.
"Contracts" shall have the meaning set forth in Section
4.8 hereof.
"Control" (including, with its correlative meanings,
"controlled by" and "under common control with") means possession,
directly or indirectly, of the power to direct or cause the
direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract
or otherwise), provided that, in any event, any Person that owns
directly or indirectly securities having five percent (5%) or more
of the voting power for the election of directors or other
governing body of a corporation or five percent (5%) or more of the
partnership or other ownership interests of any other Person (other
than as a limited partner of such other Person) will be deemed to
control such corporation or other Person.
"Controlled Entity" means any Person as to which (and
only during any period of time that)
(a) the Coehlo Related Parties or the DeSantis Related
Parties, individually or in combination, own and Control at
least fifty-one percent (51%) of the outstanding voting stock
by vote (assuming that all convertible instruments, warrants
and options then outstanding have been exercised); and
(b) the Coehlo Related Parties or the DeSantis Related
Parties, individually or in combination, have the power to
elect such number of members to the board of directors of such
Person as is necessary to make all material decisions on
behalf of such Person.
"Conversion Amount" shall have the meaning set forth in
Section 2.10.1 hereof.
"Conversion Date" shall have the meaning set forth in
Section 2.10.1 hereof.
"Conversion Price" shall have the meaning set forth in
Section 2.10.1 hereof.
"Costs" means (i) all Claims; (ii) all actual fees,
disbursements and expenses of Lender's and Servicer's outside
counsel and reasonable attorneys' fees of Lender's and Servicer's
in-house staff counsel, receivers' fees, engineers' fees,
accountants' fees, appraisal fees, independent consultants' fees
(including environmental consultants), servicing fees (subject to
Section 10.2 hereof) and custodial fees which may be paid or
incurred by or on behalf of Lender in connection with or in any way
related to this Agreement or the other Loan Documents or any
security afforded thereby, including in connection with or for any
of the purposes set forth in sub-clauses (a) - (m) of the following
clause (iv), inclusive; (iii) all actual expenditures and expenses
which may be paid or incurred by or on behalf of Lender in
connection with or in any way related to advising, structuring,
drafting, reviewing, administering, amending, terminating,
enforcing (including actual fees, disbursements and expenses of
Lender's and Servicer's outside counsel and reasonable in-house
staff counsel fees and expenses incurred in connection with a
"workout," a "restructuring," or an insolvency proceeding
concerning any Borrower or any guarantor of the Obligations),
defending, or concerning the Loan Documents, irrespective of
whether suit is brought; and (iv) reasonable out-of-pocket
expenditures and expenses which may be reasonably paid or incurred
by or on behalf of Lender in connection with or in any way related
to this Agreement or the other Loan Documents or any security
afforded thereby, including in connection with or for any of the
following purposes: (a) repairs; (b) to remove from, or protect
against, Liens on any of the Collateral other than Permitted Liens
(to the extent that they remain qualified as such and no defaults
have occurred under or in respect thereof); (c) to monitor the
proceedings or actions of any Borrower in satisfying or complying
with the obligations under the Loan Documents or to obtain advice
or representation with respect to any matters related in any way to
the Loan Documents; (d) any audit or inspection of any of the
Properties; (e) upon the occurrence and during the continuation of
a Default, documentary and expert evidence, stenographers' charges,
stamp taxes, publication costs and costs (which may be estimates as
to items to be expended after entry of an order or judgment) for
procuring all abstracts of title, title and UCC searches and
examinations, title insurance policies and similar data and
assurances with respect to title as Lender may deem reasonably
necessary either to prosecute any action or to evidence to bidders
at any foreclosure sale of any of the Properties the true condition
of the title to, or the value of, such Property(ies); (f) upon the
occurrence and during the continuation of a Default, preserving the
value of the Collateral; (g) the disbursement of funds to any
Borrower (by wire transfer or otherwise); (h) resulting from the
dishonor of checks; (i) upon the occurrence and during the
continuation of a Default, to correct any Default or enforce any
provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated; (j)
the enforcement of Lender's remedies; (k) upon the occurrence and
during the continuation of a Default, obtaining approvals or
permits to operate any of the Properties as they are currently or
then being operated; (l) cooperating with any Borrower in obtaining
or preserving licenses, approvals or permits; and (m) all fees and
charges imposed by the Depository in connection with the
establishment and maintenance of any of the Reserve Accounts.
"Default" shall mean an Event of Default or an event that
with notice or lapse of time or both would become an Event of
Default.
"Default Rate" shall mean, in respect of any principal of
the Loan or any other amount payable to Lender under this
Agreement, the Note or any other Loan Document that is not paid
when due (whether at stated maturity, by acceleration, by mandatory
prepayment or otherwise), a rate per annum, during the period from
and including the due date to the date on which such amount is paid
in full, equal to eight and one-half percent (8.5%) plus the Base
Rate, as determined as of two (2) Eurodollar Business Days prior to
the first (1st) Business Day of each calendar month, but in no
event greater than the Highest Lawful Rate. To the extent that the
Default Rate shall be applicable for a period that extends beyond
the last day of any calendar month, the Default Rate shall be
recalculated on the first day of each calendar month.
"Default Termination Provision" shall have the meaning
set forth in Section 7.16 hereof.
"Deferred Maintenance Account" shall have the meaning set
forth in Section 2.7.4 hereof.
"Deferred Maintenance Funds" shall have the meaning set
forth in Section 2.7.4 hereof.
"Depository" shall have the meaning set forth in the
Reserve Account Agreement.
"DeSantis" means Nunzio DeSantis.
"DeSantis Related Parties" means DeSantis, his Family
Members and trusts established for the benefit of his Family
Members.
"Dollars" and "$" shall mean lawful money of the United
States of America.
"El Rancho Indebtedness" means the Indebtedness secured
by the El Rancho Lien.
"El Rancho Lien" means the lien on the El Rancho
Property, securing indebtedness in the original principal amount of
$10,500,000 and with an outstanding principal balance on the date
hereof of $10,500,000.
"El Rancho Property" shall have the meaning set forth in
Recital D hereto.
"El Rancho Reserve Account" shall have the meaning set
forth in Section 2.7.7 hereof.
"El Rancho Reserve Funds" shall have the meaning set
forth in Section 2.7.7 hereof.
"Engineering Reports" shall have the meaning set forth in
Section 4.3 hereof.
"Entertainment Agreement" shall have the meaning set
forth in Section 7.16 hereof.
"Environmental Remediation Account" shall have the
meaning set forth in Section 2.7.5 hereof.
"Environmental Remediation Funds" shall have the meaning
set forth in Section 2.7.5 hereof.
"Environmental Report" shall have the meaning set forth
in Section 4.6 hereof.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, or any predecessor,
successor, or superseding laws of the United States of America,
together with all regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or
not incorporated) which, within the meaning of section 414 of the
IRC, is: (a) under common control with any Borrower; (b) treated,
together with any Borrower, as a single employer; (c) treated as a
member of an affiliated service group of which any Borrower is also
treated as a member; or (d) is otherwise aggregated with any
Borrower for purposes of the employee benefits requirements listed
in IRC Section 414(m)(4).
"ERISA Event" means any one or more of the following: (a)
a Reportable Event with respect to a Qualified Plan or a
Multiemployer Plan; (b) a Prohibited Transaction with respect to
any Plan; (c) a complete or partial withdrawal by any Borrower or
any ERISA Affiliate from a Multiemployer Plan, which withdrawal
would result in material liability for the Borrower; (d) the
complete or partial withdrawal of any Borrower or an ERISA
Affiliate from a Qualified Plan during a plan year in which it was,
or was treated as, a "substantial employer" as defined in Section
4001(a) (2) of ERISA, which withdrawal would result in material
liability for the Borrower; (e) a failure to make full payment when
due of all amounts which, under the provisions of any Plan or
applicable law, any Borrower or any ERISA Affiliate is required to
make; (f) the filing of a notice of intent to terminate, or the
treatment of a plan amendment as a termination, under Sections 4041
or 4041A of ERISA; (g) an event or condition which might reasonably
be expected to constitute grounds under Section 4042 of ERISA for
administer, any Qualified Plan or Multiemployer Plan; (h) the
imposition of any liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA,
upon any Borrower or any ERISA Affiliate; and (i) a violation of
the applicable requirements of Sections 404 or 405 of ERISA, or the
exclusive benefit rule under Section 403(c) of ERISA, by any
fiduciary or disqualified person with respect to any Plan for which
any Borrower or any ERISA Affiliate may be directly or indirectly
liable.
"Eurodollar Business Day" means any day on which
commercial banks are open for international business (including
dealings in Dollars) in London, England.
"Event of Default" shall have the meaning set forth in
Section 8.1 hereof.
"Exit Fee" shall have the meaning set forth in Section
9.1 hereof.
"Extension Commencement Date" shall have the meaning set
forth in Section 2.2.2 hereof.
"Extension Notice" shall have the meaning set forth in
Section 2.2.2 hereof.
"Extension Term" shall have the meaning set forth in
Section 2.2.2 hereof.
"Family Member" means, as to any individual, any other
individual having a relationship by blood (to the third degree of
consanguinity), marriage or adoption to such individual.
"FEIN" means federal employer identification number.
"FRA" shall have the meaning set forth in the initial
paragraph of this Agreement.
"Freehold Liens" means the first and second liens on the
Freehold Property, presently held by Kenneth R. Fisher, securing
Indebtedness in the aggregate original principal amount of
$15,084,548.71 and with an aggregate outstanding principal balance
on the date hereof of $13,328,298.71.
"Freehold Property" shall have the meaning set forth in
the recitals hereto.
"Funding Losses" shall have the meaning set forth in
Section 2.3.5(a) hereof.
"Funding Party" shall mean any bank or other entity, if
any, which is directly or indirectly funding Lender with respect to
the Loan, in whole or in part, including any direct or indirect
assignee of, or participant in, the Loan.
"GAAP" shall mean generally accepted accounting
principles as in effect from time to time in the United States,
consistently applied.
"Garden State Contingency" means either (a) the receipt
of the Theater Approval (as defined in the February 3, 1997 Fourth
Amendment to the Adjacent Garden State Contract (the "Fourth
Amendment")) within the period set forth in Section 6 of the Fourth
Amendment, or (b) the execution and delivery of a final settlement
with respect to, or any other final liquidation of, the amounts
contingently owed to GSRT under the Fourth Amendment.
"Garden State Contingent Proceeds" means the Additional
Consideration (as defined in the Fourth Amendment) and all other
amounts paid or payable pursuant to Section 6 of the Fourth
Amendment or any final settlement or liquidation with respect
thereto.
"Garden State Lien" means the first lien on the Adjacent
Garden State Property, presently held by Banque SCS Alliance,
securing Indebtedness in the original principal amount of
$3,000,000 and with an outstanding principal balance on the date
hereof of $3,000,000.
"Garden State Loans" means, collectively, the
Indebtedness secured by the Garden State Lien and the Garden State
Unrecorded Interest.
"Garden State Property" shall have the meaning set forth
in Recital B hereto.
"Garden State Sun Loan" shall have the meaning set forth
in Section 6.14(e) hereof.
"Garden State Sun Mortgage" shall have the meaning set
forth in Section 6.14(e) hereof.
"Garden State Survey" shall have the meaning set forth in
Section 6.22 hereof.
"Garden State Unrecorded Interest" means the unrecorded
mortgage or other security interest on the Adjacent Garden State
Property, presently held by BFC Banque Financiere de la Cite,
securing Indebtedness in the original principal amount of
$3,000,000 and with an outstanding principal balance on the date
hereof of $3,000,000.
"Green" means Bob Green.
"Green Related Parties" means Green, his Family Members
and trusts established for the benefit of his Family Members.
"GSRT" shall have the meaning set forth in the initial
paragraph of this Agreement.
"Highest Lawful Rate"means the maximum rate allowable
under any applicable usury law or similar law limiting charges
allowable for borrowed money.
"Impositions" shall have the meaning set forth in
Section 6.5 hereof.
"Indebtedness" means any and all liabilities and
obligations owing by any Person to any Person, including principal,
interest, charges, fees, reimbursements and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or
otherwise, direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, original, renewed or extended,
(a) in respect of any borrowed money (whether by loans, the
issuance and sale of debt securities or the sale of any property to
another Person subject to an understanding, agreement, contract or
otherwise to repurchase such property) or for the deferred purchase
price of any property or services (other than trade accounts
payable or accrued expenses incurred in the ordinary course of
business and payable within ninety (90) days ("Trade Payables")),
(b) as lessee under any leases which shall have been or should be,
in accordance with generally accepted accounting principles,
recorded as capital leases, (c) under direct or indirect guarantees
and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise assure any creditor against loss in respect
of the obligations of others, (d) in respect of letters of credit
or similar instruments issued or accepted by banks and other
financial institutions for the account of such indebted Person, or
(e) in respect of unfunded vested benefits under plans covered by
ERISA or any similar liabilities to, for the benefit of, or on
behalf of any employees of such indebted Person. To the extent any
principal Indebtedness is permitted pursuant to the terms hereof,
all interest, charges, fees, reimbursements and expenses payable in
accordance with the terms thereof shall also be deemed permitted
hereunder.
"Independent Director" shall have the meaning set forth
in Section 4.22 hereof.
"Insurance Escrow Payment" shall have the meaning set
forth in Section 2.7.2 hereof.
"Insurance Premiums" shall have the meaning set forth in
Section 2.7.2 hereof.
"Interest Accrual Period" means, with respect to any
Payment Date, the calendar month preceding such Payment Date,
provided that (a) no Interest Accrual Period shall end later than
the Maturity Date (other than for purposes of calculating Default
Interest), and (b) the initial Interest Accrual Period shall begin
on the date hereof.
"Interest Rate" shall have the meaning set forth in
Section 2.3.1 hereof.
"Interest Reserve Account" shall have the meaning set
forth in Section 2.7.3 hereof.
"Interest Reserve Funds" shall have the meaning set forth
in Section 2.7.3 hereof.
"Interest Reserve Renewal Target" means an amount equal
to interest at the Interest Rate on the Outstanding Principal
Balance as of the Extension Commencement Date for the Extension
Term.
"IRC" means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations thereunder from time to
time.
"ITB" shall have the meaning set forth in the initial
paragraph of this Agreement.
"ITB Fairness Opinion Value" shall have the meaning set
forth in the Tri-Party Agreement.
"ITB Lender Stock" shall mean the ITB Stock, and the
rights to acquire the same, set forth in Section 2.10 hereof and in
the Warrants.
"ITB Stock" shall mean the shares of the common stock of
ITB, par value $2.00 per share.
"ITGDC" shall have the meaning set forth in the initial
paragraph of this Agreement.
"Leases" shall have the meaning set forth in Section 4.7
hereof.
"Lender" shall have the meaning set forth in the initial
paragraph of this Agreement.
"Lender Consideration Shares" shall have the meaning set
forth in the Tri-Party Agreement.
"Lender Conversion Shares" shall have the meaning set
forth in the Tri-Party Agreement.
"Lien" shall have the meaning set forth in Section 7.2
hereof.
"Litigation" shall have the meaning set forth in Section
6.9 hereof.
"Loan" shall have the meaning set forth in Recital A
hereto.
"Loan Amount" shall have the meaning set forth in Recital
A hereto.
"Loan Documents" shall have the meaning set forth in
Section 4.1 hereof.
"Loan to Value Ratio" shall mean the ratio, expressed as
a percentage, as of any date, of (a) the sum of (i) the then
Outstanding Principal Balance plus (ii) the then aggregate
outstanding principal balances of all Liens on any of the
Properties which are senior (after giving effect to any
subordination agreement recorded with respect thereto) to the Liens
of Lender under the Loan Documents, and (b) the then aggregate
appraised value of all of the Properties, considering the
Properties as vacant and unimproved (except as to the Freehold
Property, which shall be considered on the basis of an operating
property if the Freehold Property shall, at the time of
determination, still be operating as a race track substantially as
operated on the date hereof), as determined by the Appraisals or
any update thereof.
"LVEN" means Las Vegas Entertainment Network, Inc., a
Delaware corporation.
"Margin Stock" shall mean "margin stock" within the
meaning of Regulations U and X of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be
modified and supplemented and in effect from time to time.
"Market Value" shall have the meaning set forth in
Section 2.10.2 hereof.
"Material Adverse Effect" shall mean (a) with respect to
any Person, a material adverse effect on (i) the property,
business, operations, financial condition, prospects, liabilities
or capitalization of such Person, (ii) the ability of such Person
to perform its obligations under any of the Loan Documents, or
(iii) the validity or enforceability of any of the Loan Documents
by or against such Person or any other party thereto, and (b) with
respect to any of the Collateral (exclusive of the Circa Property),
a material adverse effect on (i) the rights and remedies of Lender
under any of the Loan Documents, or (ii) the performance of all of
the obligations of Borrowers under any of the Loan Documents and
the timely payment of the principal of or interest on the Loan or
other amounts payable in connection therewith by Borrowers.
"Maturity Date" shall mean the day which is the earlier
to occur of (i) the Scheduled Maturity Date, or (ii) the date on
which payment of the Loan shall have been accelerated pursuant to
Section 8.2 hereof.
"Monthly Interest Payment" shall have the meaning set
forth in Section 2.4.1 hereof.
"Mortgages" means, collectively, (a) that certain First
Mortgage, Assignment of Rents and Security Agreement given by GSRT
to Lender and encumbering the Garden State Property as a first
mortgage lien thereon, (b) that certain Third Mortgage, Assignment
of Rents and Security Agreement given by FRA to Lender and
encumbering the Freehold Property as a third mortgage lien thereon,
subject only to the Freehold Liens, (c) that certain First Deed of
Trust, Assignment of Rents, Security Agreement and Fixture Filing
given by OCC to Lender and encumbering the El Rancho Property as a
first deed of trust lien thereon, (d) that certain Second Mortgage,
Assignment of Rents and Security Agreement given by GSRT to Lender
and encumbering the Adjacent Garden State Property as a second
mortgage lien thereon, subject only to the Garden State Lien, and
(e) upon Lender's election pursuant to and in accordance with
Section 6.15 hereof, that certain Second Mortgage, Assignment of
Rents and Security Agreement given by Circa to Lender and
encumbering the Circa Property as a second mortgage lien thereon,
subject only to the Circa Lien, the form and substance of all of
which shall be reasonably satisfactory to Lender.
"Multiemployer Plan" means a multiemployer plan as
defined in Sections 3 (37) or 4001(a)(3) of ERISA or Section 414 of
the IRC in which employees of any Borrower or an ERISA Affiliate
participate or to which any Borrower or any ERISA Affiliate
contributes or is required to contribute.
"New Adjacent Garden State Contract" shall have the
meaning set forth in Section 6.14(b)
"Note" shall have the meaning set forth in Recital A
hereto.
"Obligations" means the obligations evidenced or set
forth hereunder and under the Note and the other Loan Documents,
including Borrower's obligation to pay the principal, interest and
any other sums payable in respect of the Loan under the Loan
Documents and to perform and observe all of the provisions of the
Loan Documents.
"OCC"shall have the meaning set forth in the initial
paragraph of this Agreement.
"Organizational Documents" shall mean, for any
corporation, all of the following as currently in effect: the
certificate or articles of incorporation, the bylaws, corporate
resolutions, an incumbency certificate,
authorizations/qualifications to conduct business in all other
States in which such corporation is conducting business (as
determined by the laws of each such State), a certificate of good
standing from the State of such corporation's incorporation,
certificates of good standing from each other State in which such
corporation is conducting business (as determined by the laws of
each such State) and all amendments to any of the foregoing.
"Other Agreements" shall have the meaning set forth in
Section 5.37 hereof.
"Other Subsidiaries" means Olde English Management Co.,
Inc.; Olde English Equine Insurance Agency, Inc.; Philadelphia Turf
Club, Inc.; Colonial Racing Club, Inc.; and International
Thoroughbred Breeders Management, Inc.
"Outstanding Principal Balance" means, as of any date,
the outstanding principal balance of the Loan.
"Ownership Interest" means, with respect to any Person,
ownership of the right to profits and losses of, and/or the right
to exercise voting power to elect the directors, managers,
operators or other management of, or otherwise to affect the
direction of the management, policies or affairs of, such Person,
whether through the ownership of securities, or partnership,
membership or other interests therein, by contract or otherwise.
"Payment Date" means July 1, 1997 and the first (1st) day
of each calendar month thereafter during the Term.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"Permits" shall have the meaning set forth in Section
4.10 hereof.
"Permitted Acquisition" shall have the meaning set forth
in the Tri-Party Agreement.
"Permitted Contest" means (a) in respect of any Lien, to
the extent permitted under Section 2.8 of the applicable Mortgage,
and (b) in respect of any taxes, assessments or charges, to the
extent that a contest would be permitted under Section 2.8 of the
applicable Mortgage if such tax, assessment or other charge were a
Lien, and provided that (i) the bond required under Section
2.8(vii) of the applicable Mortgage shall include 120% of all
estimated penalties and interest which could reasonably accrue from
the date such tax, assessment or other charge is due through the
Maturity Date as a result of the non-payment of the full amount of
such tax, assessment or other charge, and (ii) there is no imminent
(90 days or less) risk of foreclosure.
"Permitted Debt Conversion" shall have the meaning set
forth in the Tri-Party Agreement.
"Permitted Holder" means (a) the Coehlo Related Parties,
(b) the DeSantis Related Parties, (c) the Controlled Entities, (d)
the Green Related Parties (but only to the extent of (i) the
1,452,008 shares of ITB Stock that Green presently has an option to
acquire from NPD, Inc. and only for so long as such shares of ITB
Stock are the subject of a proxy in favor of DeSantis or a
Controlled Entity, and (ii) the 425,000 shares of ITB Stock
currently held by Green Related Parties), (e) any other Person who
has filed a Schedule 13(d) with the Securities and Exchange
Commission on or prior to the Closing Date (but only as to the
shares of ITB Stock that such Person holds as of the Closing Date),
(f) Lender and its transferees, successors and assigns, and (g)
LVEN.
"Permitted Liens" means: (a) liens and security
interests held by Lender; (b) the Freehold Liens, the Garden State
Lien, the Garden State Unrecorded Interest and the El Rancho Lien;
(c) liens for unpaid taxes, assessments or charges that are not yet
due and payable or that are the subject of (and then only to the
extent that they continue to satisfy all conditions and
requirements to) a Permitted Contest; (d) the interest of any
Borrower as a lessee under any equipment lease entered into in the
ordinary course of business; (e) Liens securing Indebtedness
permitted under Section 7.2(f) hereof as long as that Lien only
attaches to the asset purchased or acquired; (f) Liens set forth in
Schedule "P-1" hereto; (g) Liens arising by operation of law,
incurred in the ordinary course of business of Borrower and not in
connection with the borrowing of money, either (i) provided that
the same is not subject to an action or proceeding to enforce such
Lien, or (ii) to the extent the same is the subject of (and then
only to the extent that they continue to satisfy all conditions and
requirements of) a Permitted Contest; (h) Liens of or resulting
from any judgment or award that does not constitute an Event of
Default hereunder; (i) Liens under bonds required in connection
with worker's compensation, unemployment insurance and other social
security legislation or otherwise arising as a matter of law so
long as no Default shall occur and be continuing; (j) any other
liens and security interests approved in writing by Lender, which
approval may be withheld in Lender's sole discretion, or included
in any Title Policy; and (k) Liens in favor of Kenneth R. Fischer
in and to the shares of stock of FRA, ACH and Circa.
"Person" means any individual, trust, estate,
partnership, limited liability company, limited liability
partnership, corporation, voluntary association, joint venture,
unincorporated organization or government (or any agency,
instrumentality or political subdivision thereof).
"Plan" means an employee benefit plan (as defined in
Section 3(3) of ERISA) which any Borrower or any ERISA Affiliate
sponsors or maintains or to which any Borrower or ERISA Affiliate
makes, is making, or is obligated to make, contributions, including
any Multiemployer Plan or any Qualified Plan.
"Prohibited Transaction" means any transaction described
in Section 406 of ERISA which is not exempt by reason of Section
408 of ERISA, and any transaction described in Section 4975(c) of
the IRC which is not exempt by reason of Section 4975(c) of the
IRC.
"Properties" shall have the meaning set forth in Recital
D hereto.
"Qualified Plan" means a pension plan (as defined in
Section 3(2) of ERISA) intended to be tax-qualified under Section
401(a) of the IRC which any Borrower or any ERISA Affiliate
sponsors or maintains or to which any such Person makes, is making,
or is obligated to make, contributions, or, in the case of a
multiple-employer plan (as described in Section 4064(a) of ERISA),
has made contributions at any time during the immediately preceding
period covering at least five (5) plan years, but excluding any
Multiemployer Plan.
"Racing/Gaming Authorities" means, collectively, the New
Jersey Casino Control Commission, the New Jersey Division of Gaming
Enforcement, the New Jersey Racing Commission, the Nevada Gaming
Commission, the Nevada State Gaming Control Board, any division of
any of the foregoing and any other applicable Federal, State or
local governmental or quasi-governmental authority or authorities
having jurisdiction with respect to conducting any racing or gaming
activities at or from any of the Properties.
"Registration Rights Agreement" means that certain
Registration Rights Agreement of even date herewith executed by
Lender and ITB relating to the ITB Lender Stock and the Warrants.
"Remaining Garden State Proceeds" shall have the meaning
set forth in Section 6.14(a) hereof (it being understood and agreed
that the same shall include any non-refundable sums, as and when
the same become non-refundable, delivered to Borrower prior to the
closing of any sale of the Adjacent Garden State Property on
account of the purchase price thereof, as a contract extension fee
or otherwise).
"Reportable Event" means any event described in Section
4043 (other than subsections (b) (7) and (b) (9)) of ERISA.
"Reserve Account Agreement" shall mean a certain Account
Disbursement and Security Agreement of even date herewith between
Borrower and Lender.
"Reserve Accounts" shall mean, collectively, the Tax and
Insurance Escrow Account, the Interest Reserve Account, the
Deferred Maintenance Account, the Environmental Remediation
Account, the Working Capital Account and the El Rancho Reserve
Account.
"Scheduled Maturity Date" shall mean June 1, 1999, as the
same may be extended pursuant to Section 2.2.2 hereof.
"Second Warrant" shall have the meaning set forth in the
definition of "Warrant" set forth below.
"Senior Lender Consent Agreement" means a consent and
estoppel agreement in form and substance reasonably satisfactory to
Lender from the holder of the Freehold Liens.
"Servicer" shall have the meaning set forth in Section
10.2 hereof.
"Servicing Fee" shall have the meaning set forth in
Section 10.2 hereof.
"Short Period Interest Payment" shall have the meaning
set forth in Section 2.4.1 hereof.
"Sideletter" means a certain letter from Lender to
DeSantis on behalf of ITB dated the date hereof and agreed and
accepted by ITB on the date hereof, with respect to, among other
things, certain amendments to and clarifications of the terms of
the Term Sheet.
"Single Purpose Entity" shall have the meaning set forth
in Section 6.10 hereof.
"Subordination Agreement" means a subordination agreement
entered into by ITB, OCC, ITGDC, LVEN, Inc., Las Vegas
Communication Corporation and Casino-Co in favor of Lender, in form
and substance reasonably satisfactory to Lender.
"Substitute Remaining Garden State Proceeds" shall have
the meaning set forth in Section 6.14(b) hereof.
"Tangible Assets" means, as to any Person as at any
particular date, all amounts that would be included as assets on a
consolidated balance sheet of such Person and its subsidiaries as
at such date, computed in accordance with GAAP, minus (without
duplication) (a) the amount of any Indebtedness owed to such Person
by any Affiliate of such Person, (b) the value of any intangible
assets (including any value attributable to goodwill,
organizational expenses, trademarks, tradenames and similar
intellectual property rights, franchises, licenses and other items
which would properly be treated as intangible in accordance with
GAAP, (c) all reserves, prepaid expenses, deferred charges or
unamortized debt discount and expense (except those paid or
incurred in the ordinary course of business), (d) without
duplication of amounts allocable to assets already excluded
therefrom in accordance with GAAP, the value of any other
securities of, capital contributions to, or investments in any
Affiliate of such Person unless publicly traded, readily
marketable, or capable of independent valuation, but such
securities shall not fail to be readily marketable because of, for
example, restrictions on transfer or other requirements of law
where such restrictions or requirements are reasonably taken into
consideration in determining the value thereof), and (e) any write-up in the
book value of any asset (other then readily marketable
securities) resulting from a revaluation thereof subsequent to such
Person's fiscal year end for the most recent fiscal year of such
Person.
"Tangible Consolidated Net Worth" means, at any
particular date, an amount equal to the excess of all of the
Borrowers' Tangible Assets over all amounts that would be included
as liabilities on a balance sheet of any or all of the Borrowers as
at such date, computed on a consolidated basis in accordance with
GAAP.
"Tangible Consolidated Net Worth Threshold" means
$35,000,000, as increased by (i) upon the occurrence of the
Permitted Debt Conversion, an amount equal to 87.5% of the then
outstanding principal balance of the El Rancho Indebtedness, and
(ii) upon the occurrence of the Permitted Acquisition, an amount
equal to 87.5% of the Fairness Opinion Value.
"Tax and Insurance Escrow Account" shall have the meaning
set forth in Section 2.7.1 hereof.
"Tax Escrow Payment" shall have the meaning set forth in
Section 2.7.1 hereof.
"Taxes" shall have the meaning set forth in Section 2.7.1
hereof.
"Term" shall have the meaning set forth in Section 2.2.1
hereof.
"Term Sheet" means a certain letter from Lender to
DeSantis on behalf of ITB dated March 13, 1997 and acknowledged and
agreed to by DeSantis on behalf of ITB on March 14, 1997, setting
forth the proposed terms of the Loan.
"Title Company" shall have the meaning set forth in
Section 4.4 hereof.
"Title Policy" shall have the meaning set forth in
Section 4.4 hereof.
"Trade Payables" shall have the meaning set forth in the
definition of "Indebtedness" set forth above.
"Transfer" shall have the meaning set forth in Section
7.5 hereof.
"Tri-Party Agreement" means that certain Tri-Party
Agreement dated the date hereof by and among ITB, LVEN and Lender.
"Unfunded Benefit Liability" means the excess of a Plan's
benefit liabilities (as defined in Section 4001(a)(16) of ERISA)
over the current value of such Plan's assets, determined in
accordance with the assumptions used by the Plan's actuaries for
funding the Plan pursuant to Section 412 of the IRC for the
applicable plan year.
"Warrants" means, collectively, (i) that certain warrant
to purchase 546,847 shares of ITB Stock granted by ITB to Lender,
and (ii) that certain warrant (the "Second Warrant") to purchase
497,153 shares of ITB Stock granted by ITB to Lender.
"Working Capital Account" shall have the meaning set
forth in Section 2.7.6 hereof.
"Working Capital Funds" shall have the meaning set forth
in Section 2.7.6 hereof.
"Working Capital Purposes" shall have the meaning set
forth in the Reserve Account Agreement.
1.2 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
GAAP. When used herein, the term "financial statements" shall
include the notes and schedules thereto. Whenever the term
"Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean all Borrowers on a
consolidated basis unless the context clearly requires otherwise.
1.3 Construction. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term
"including" is not limiting and shall mean "including, without
limitation," "including without being limited to," and words of
like import, and the term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase
"and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Section,
subsection, clause, schedule, and exhibit references are to this
Agreement unless otherwise specified. Any reference in this
Agreement or in the Loan Documents to this Agreement or any of the
Loan Documents shall include all alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions,
and supplements, thereto and thereof, as applicable.
1.4 Schedules and Exhibits. All of the schedules and
exhibits attached to this Agreement shall be deemed incorporated
herein by reference.
ARTICLE 2
The Loan
2.1 Funding. Subject to the terms and conditions of
this Agreement, including, without limitation, satisfaction of each
of the conditions precedent set forth in Article 4 hereof, and
relying upon the representations and warranties set forth herein
and in the other Loan Documents, Lender shall disburse on the date
hereof (the "Closing Date"), by wire transfer or otherwise as
directed by Borrower, but in any event in immediately available
funds, the entire proceeds of the Loan to or on behalf of Borrower,
to be applied by Borrower as set forth on the Closing Statement.
2.2 Loan Term.
2.2.1 Maturity Date. The Loan shall mature on the
Maturity Date, at which time the entire Loan shall be due and
payable. As used herein, "Term" shall mean the period commencing
on the date hereof and ending on the date on which the entire
Outstanding Principal Balance and all other sums that shall be due
and payable to Lender hereunder or under any of the other Loan
Documents shall be paid in full to Lender.
2.2.2 Extension Option. Borrower shall have the right to
extend the Scheduled Maturity Date to June 1, 2000 (the period
commencing on the first (1st) day following the original Scheduled
Maturity Date (the "Extension Commencement Date") and ending on
June 1, 2000 being referred to herein as the "Extension Term"),
provided that: (a) Borrower shall have given Lender written notice
(the "Extension Notice") of such extension not less than forty-five
(45) days nor more than ninety (90) days prior to the original
Scheduled Maturity Date; (b) on or before the Extension
Commencement Date, Borrower shall have paid or caused to be paid to
Lender a non-refundable extension fee equal to one percent (1%) of
the then Outstanding Principal Balance; (c) updates of each of the
Appraisals, in form and substance satisfactory to Lender, dated not
later than thirty (30) days prior to the date of the Extension
Notice, prepared at the cost and expense of Borrower by the
Appraiser, shall have been delivered to Lender along with the
Extension Notice; (d) the Loan to Value Ratio as of the Extension
Commencement Date shall not exceed 65%; (e) on the Extension
Commencement Date the Interest Reserve Funds in the Interest
Reserve Account shall not be less than the Interest Reserve Renewal
Target; and (f) no Default shall have occurred and be continuing at
the time of the delivery of the Extension Notice or on the
Extension Commencement Date. In the event the original Scheduled
Maturity Date is extended by the Extension Term in accordance with
the terms hereof, thereafter, all references herein and in any of
the other Loan Documents (except any such references in this
Section 2.2.2) to the "Scheduled Maturity Date" shall be deemed to
refer to the last day of the Extension Term.
2.3 Interest Rate.
2.3.1 Interest Rate Throughout Term. Borrower shall pay
interest to Lender on the Outstanding Principal Balance throughout
the Term at a floating rate per annum equal to the Base Rate plus
seven percent (7%) (the aggregate rate referred to in the preceding
clause being the "Interest Rate") for each Interest Accrual Period,
such Base Rate being determined and fixed monthly for the relevant
Interest Accrual Period, based upon the Base Rate in effect on the
day that is two (2) Eurodollar Business Days prior to the first
Business Day of each calendar month, until all of the Obligations
shall have been paid in full.
2.3.2 Default Interest. Notwithstanding the foregoing
or anything else to the contrary contained in this Agreement or in
any of the other Loan Documents, (a) if any payment of principal or
interest with respect to the Loan is not paid when due hereunder
(whether at stated maturity, by acceleration, by mandatory
prepayment, or otherwise), Borrower promises to pay to Lender
interest at the Default Rate on the Outstanding Principal Balance,
and (b) if any other amount payable by Borrower hereunder or under
any of the other Loan Documents shall not be paid when due (whether
at stated maturity, by acceleration, by mandatory prepayment, or
otherwise), Borrower promises to pay to Lender interest at the
Default Rate on such unpaid amount, in either case, for the period
from and including the due date thereof (or if in respect of an
amount that constitutes a reimbursement to Lender for amounts
incurred or expended by Lender, for the period from and including
the date incurred or advanced by Lender) to the date the same is
paid in full.
2.3.3 Late Charge. In the event that any payment of
principal or interest payable under the Loan Documents is not
received by Lender on the date when due, then in addition to any
default interest payments due hereunder, Borrower shall also pay to
Lender a late charge in an amount equal to three percent (3.0%) of
the amount of such overdue payment.
2.3.4 Calculation of Interest. All interest payable in
accordance with the terms of this Agreement shall be calculated
based on a 360 day year and charged for the actual number of days
elapsed.
2.3.5 Funding Losses; Change in Law, Etc..
(a) Borrower hereby agrees to pay to Lender any amount
necessary to compensate Lender and any Funding Party for any actual
losses or costs (including the costs of breaking any "LIBOR"
contract, if applicable, or funding losses determined on the basis
of Lender's or such Funding Party's reinvestment rate and the
Interest Rate) (collectively, "Funding Losses") sustained by Lender
or such Funding Party: (i) if the Loan, or any portion thereof, is
repaid for any reason whatsoever on any date other than the first
(1st) day of a month (including from Condemnation Awards or
Insurance Proceeds), (ii) as a consequence of (x) any increased
costs that Lender or such Funding Party may sustain in maintaining
the Loan or (y) the reduction of any amounts received or receivable
from Borrower, in either case, due to the introduction of, or any
change in, law or applicable regulation or treaty (including the
administration or interpretation thereof), whether or not having
the force of law, or due to the compliance by Lender or the Funding
Party, as the case may be, with any directive, whether or not
having the force of law, or request from any central bank or
domestic or foreign governmental authority, agency or
instrumentality having jurisdictions, and/or (iii) any other set of
circumstances not attributable to Lender's or such Funding Party's
acts.
(b) If Lender or the Funding Party, as the case may be,
shall have determined that the applicability of any law, rule,
regulation or guideline adopted or newly imposed upon Lender after
the Closing Date pursuant to or arising out of the July 1988 report
of the Basle Committee on Banking Regulations and Supervisory
Practices entitled "International Convergence of Capital
Measurement and Capital Standards", or the adoption or new
imposition upon Lender after the Closing Date of any other law,
rule, regulation or guideline (including any United States law,
rule, regulation or guideline) regarding capital adequacy, or any
change becoming effective in any of the foregoing or in the
enforcement or interpretation or administration of any of the
foregoing by any court or any domestic or foreign governmental
authority, central bank or comparable agency charged with the
enforcement or interpretation or administration thereof, or
compliance by Lender or its holding company or by such Funding
Party or its holding company, as the case may be, with any request
or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return
on the capital of Lender or its holding company, such Funding Party
or its holding company, as the case may be, to a level below that
which Lender or its holding company or such Funding Party or its
holding company, as the case may be, could have achieved but for
such applicability, adoption, change or compliance (taking into
consideration Lender's or its holding company's or the Funding
Party's or its holding company's, as the case may be, policies with
respect to capital adequacy) (the foregoing being hereinafter
referred to as "Capital Adequacy Events"), then, upon demand by
Lender, Borrower shall pay to Lender, from time to time, such
additional amount or amounts as will compensate Lender or such
Funding Party for any such reduction suffered ("Capital Adequacy
Compensation").
(c) Any amount payable by Borrower under Section
2.3.5(a) or 2.3.5(b) hereof shall be paid to Lender within five (5)
days of receipt by Borrower of a certificate signed by an officer
of Lender or Servicer setting forth the amount due and the basis
for the determination of such amount, which statement shall be
conclusive and binding upon Borrower, absent manifest error.
Failure on the part of Lender or Servicer to demand payment from
Borrower for any such amount attributable to any particular period
shall not constitute a waiver of Lender's right to demand payment
of such amount for any subsequent or prior period. Lender shall
use reasonable efforts to deliver to Borrower prompt notice of any
event described in Section 2.3.5(a) or 2.3.5(b) hereof and of the
amount to be paid under this Section 2.3.5 as a result thereof;
provided, however, any failure by Lender to so notify Borrower
shall not affect Borrower's obligation to make the payments to be
made under this Section 2.3.5 as a result thereof. All amounts
which may become due and payable by Borrower in accordance with the
provisions of this Section 2.3.5 shall constitute additional
interest hereunder and shall be secured by the Mortgages and the
other Loan Documents.
(d) If Lender or any Funding Party requests compensation
for any losses or costs to be reimbursed pursuant to any one or
more of the provisions of Section 2.3.5(a) or 2.3.5(b) above, then,
upon request of Borrower, Lender or such Funding Party shall use
commercially reasonable efforts in a manner consistent with such
institution's practice in connection with loans like the Loan to
designate a different lending office for funding or booking the
Loan or assign its rights and obligations under the Note to another
of its offices, branches or Affiliates, if such designation or
assignment, in Lender's sole determination, (i) would eliminate,
mitigate or reduce amounts payable by Borrower in connection with
Funding Losses or Capital Adequacy Events, and (ii) would not be
otherwise prejudicial to Lender. Borrower agrees to pay all
reasonably incurred costs and expenses incurred by Lender or such
Funding Party in connection with any such designation or
assignment.
2.4 Payments.
2.4.1 Interest. Interest to accrue at the Interest Rate
on the Outstanding Principal Balance from the period commencing on
the Closing Date through and including May 31, 1997, calculated
based upon the Base Rate in effect on the day that is two (2)
Eurodollar Business Days prior to the Closing Date, shall be
payable on the Closing Date (the "Short Period Interest Payment").
Thereafter, interest accruing at the Interest Rate on the
Outstanding Principal Balance during each Interest Accrual Period
shall be payable monthly in arrears on each Payment Date (each a
"Monthly Interest Payment"), provided that interest payable at the
Default Rate shall be payable from time to time on demand in
accordance with the terms hereof.
2.4.2 Repayment of Outstanding Principal Balance. The
entire Outstanding Principal Balance together with all accrued and
unpaid interest thereon and all other sums due hereunder or under
any of the other Loan Documents, shall, to the extent not sooner
paid pursuant to the terms of the Note and the other Loan
Documents, be due and payable in full on the Maturity Date, at
which time Lender shall have the right to convert $10,000,000.00 of
the Outstanding Principal Balance into ITB Stock as provided in
Section 2.10 hereof.
2.4.3 General. All payments of principal, interest and
other amounts to be made by Borrower under this Agreement, the Note
or any of the other Loan Documents shall be made in Dollars, in
immediately available funds, without deduction (unless withholding
is required under Sections 897 and 1445 of the Foreign Investment
in Real Property Tax Act of 1980 provisions of the IRC, if the then
holder of the Note is a "foreign person" who does not, and then
only for the time and then only to the extent that it does not,
qualify for an exemption or reduction from the withholding
provisions thereof), set-off or counterclaim, to Lender (at such
address as Lender shall notify Borrower in writing), not later than
1:00 p.m. New York time on the date on which such payment shall
become due (each such payment made after such time on such due date
to be deemed to have been made on the next succeeding Business
Day). If the due date of any payment under this Agreement, the
Note or any of the other Loan Documents would otherwise fall on a
day that is not a Business Day, such date shall be extended to the
next succeeding Business Day, and interest shall be payable with
respect to any principal of the Loan for the period of such
extension.
2.4.4 Highest Lawful Rate. Notwithstanding any other
provision contained herein or in any of the other Loan Documents,
Lender shall not be entitled to contract for, charge, take,
reserve, receive or apply as interest on the Obligations any amount
in excess of the Highest Lawful Rate, and in the event that Lender
contracts for, charges, takes, reserves, receives or applies as
interest any such excess, it shall be deemed a partial prepayment
of principal and treated hereunder as such; and, if the Obligations
are indefeasibly paid and performed in full, any remaining excess
shall forthwith be paid to Borrower or as a court of competent
jurisdiction may otherwise order. In determining whether or not
the interest paid or payable in any specific event exceeds the
Highest Lawful Rate, Lender and Borrower shall, to the maximum
extent permitted under applicable law, (a) characterize any
nonprincipal payments as an expense, fee or premium rather than as
interest, (b) exclude optional prepayments and the effects thereof,
and (c) treat the total amount of such payment as interest earned
throughout the entire contemplated term of the Loan, provided that
if such Obligations are indefeasibly paid and performed in full
prior to the end of the full contemplated term thereof, and the
interest received through the actual period that the Obligations
are outstanding exceeds the Highest Lawful Rate, Lender shall
refund such excess, and in such event, Borrower waives any claim
against Lender for contracting for, and Lender shall not be subject
to any penalties provided by any laws for, charging, taking,
reserving or receiving interest in excess of the Highest Lawful
Rate.
2.5 Prepayments of Loan.
(a) Provided that no Event of Default shall have
occurred and be continuing, Borrower may elect to prepay the Loan
(i) in whole, but not in part, on any Business Day on or prior to
the first (1st) anniversary of the Closing Date and (ii) in whole
or in part thereafter, provided, that in either case:
(A) Lender shall have the rights set forth in
Section 2.10 hereof, and Borrower may not prepay unless it has
delivered to Lender (or its designee) ITB Lender Stock to the
extent required by the terms and conditions of Section 2.10
hereof;
(B) Borrower has given Lender written notice of
such prepayment not more than thirty (30) days and not less
than fifteen (15) days prior to the date of such prepayment;
(C) such prepayment is accompanied by (x) the
Funding Losses, if any, applicable to such prepayment, and (y)
all interest accrued on the amount so prepaid and all other
fees and other sums then due hereunder and under the other
Loan Documents, if any, up to and including the date of
prepayment;
(D) if such prepayment occurs on or prior to the
first (1st) anniversary of the Closing Date, such prepayment
is accompanied by, in addition to the foregoing, a prepayment
fee in an amount equal to the present value, discounted at a
rate per annum equal to the Base Rate as of the date of such
prepayment, of the product of (x) seven percent (7%) times (y)
the Outstanding Principal Balance times (z) a fraction the
numerator of which is the actual number of days from and
including the date of prepayment through and including the
first (1st) anniversary of the Closing Date and the
denominator of which is 360; and
(E) such prepayment is accompanied by, in addition
to the foregoing, the Exit Fee or a pro-rata portion thereof
in the case of a partial prepayment.
In the event that any prepayment fee is due hereunder, Lender or
Servicer shall deliver to Borrower a statement setting forth the
amount and determination of the prepayment fee, and, provided that
Lender shall have in good faith applied the formula described
above, Borrower shall not have the right to challenge the
calculation or the method of calculation set forth in any such
statement in the absence of manifest error, which calculation may
be made by Lender on any day during the fifteen (15) day period
preceding the date of such prepayment. Lender shall not be
obligated or required to have actually reinvested the prepaid
principal balance at the Base Rate or otherwise as a condition to
receiving the prepayment fee.
(b) Any voluntary partial prepayments in accordance with
the preceding Section 2.5(a) shall be in the minimum amount of
$3,000,000.00. Mandatory prepayments made in connection with the
application (pursuant to any of the Mortgages) of Insurance
Proceeds or Condemnation Awards (each, as defined in the Mortgages)
shall be paid in the amounts and at the times specified in the
Mortgage, and, notwithstanding anything herein to the contrary, no
prepayment fee or premium shall be due or payable (but an Exit Fee
shall be due and shall be payable in the manner set forth in
Section 9.1 (ii) hereof) in connection with any such mandatory
prepayment whenever paid, other than the Funding Losses, if any,
applicable thereto.
(c) Except as otherwise expressly provided in Section
2.5(b) above, a prepayment fee calculated as set forth in clause
(D) of Section 2.5(a) above, shall be due, to the extent permitted
by applicable law, under any and all circumstances where all or any
portion of the Loan is paid prior to the first (1st) anniversary of
the Closing Date, whether such prepayment is voluntary or
involuntary, even if such prepayment results from Lender's exercise
of its rights upon Borrower's default and acceleration of the
Scheduled Maturity Date (irrespective of whether foreclosure
proceedings have been commenced), and shall be in addition to any
other fees or sums due hereunder or under any of the other Loan
Documents. No tender of a prepayment with respect to which a
prepayment fee is due shall be effective unless such prepayment is
accompanied by the prepayment fee.
2.6 Uses of Loan Proceeds. The uses of the proceeds of
the Loan shall be as set forth on a closing statement to be
executed by Borrower and Lender on the Closing Date (the "Closing
Statement"). Borrower shall deliver such information and
documentation as Lender shall reasonably request to verify that the
uses are as set forth on the Closing Statement. To the extent that
Borrower shall not apply any amounts necessary for any of such uses
as indicated on the Closing Statement, the Loan shall be reduced by
an equal amount.
2.7 Reserves.
2.7.1 Tax Escrow. As additional collateral for the
Loan, on each Payment Date, Borrower shall deposit with the
Depository (each a "Tax Escrow Payment") a sum equal to one-twelfth
(1/12th) of the amount reasonably estimated by Lender to be
sufficient to pay, on the date due and payable, all taxes, general
and special assessments, water and sewer rents and charges and
other similar charges levied against each of the Properties (the
"Taxes"). Each such Tax Escrow Payment shall be deposited in a
segregated interest bearing account (or sub-account maintained on
a ledger entry basis) established at the Depository (the "Tax and
Insurance Escrow Account") (with all interest accruing thereon
being deemed to constitute a part thereof and, upon payment of the
last installment of Taxes for any Tax year, any remaining interest
in the Tax and Insurance Escrow Account on account of Taxes shall
be credited and taken into account in calculating the next twelve
(12) Tax Escrow Payments on an equal installment basis) and the
same shall thereafter be governed by and treated in accordance with
the terms of this Agreement and the Reserve Account Agreement. So
long as no Event of Default shall have occurred and be continuing
hereunder, Lender shall apply all such Tax Escrow Payments
deposited in the Tax and Insurance Escrow Account to pay the Taxes.
Upon and during the continuance of any Event of Default, Lender may
apply all such sums to the Obligations, in such amounts and order
of priority as Lender shall elect in its sole discretion. If
Lender at any time reasonably determines that such amount on
deposit is or will be insufficient to fully pay the Taxes next
becoming due and payable, Borrower shall, within ten (10) days
following receipt of written notice from Lender, deposit such
additional sum as may be reasonably required by Lender to fully pay
the Taxes next becoming due and payable. On the Maturity Date, any
such moneys remaining on deposit with the Depository shall, at
Lender's option, be applied against the Obligations or returned to
Borrower or its designee. The obligation of Borrower to pay the
Taxes is not affected or modified by the foregoing, except to the
extent of such Tax Escrow Payments on deposit from time to time
with the Depository, subject to Lender's right to apply the same to
the Obligations upon and during the continuance of an Event of
Default in accordance with the terms hereof and of the Reserve
Account Agreement.
2.7.2 Insurance Escrow. As additional collateral for
the Loan, on each Payment Date, Borrower shall deposit with the
Depository (each an "Insurance Escrow Payment") a sum equal to one-twelfth
(1/12th) of the amount reasonably estimated by Lender to be
sufficient to pay, on the date due and payable, all insurance
premiums for the insurance coverage required under Section 6.3
hereof for each of the Properties (the "Insurance Premiums"). Each
such Insurance Escrow Payment shall be deposited in the Tax and
Insurance Escrow Account (with all interest accruing thereon being
deemed to constitute a part thereof and, upon payment of the last
installment of Insurance Premiums for any calendar year, any
remaining interest in the Tax and Insurance Escrow Account on
account of Insurance Premiums shall be credited and taken into
account in calculating the next twelve (12) Insurance Escrow
Payments on an equal installment basis) and the same shall
thereafter be governed by and treated in accordance with the terms
of this Agreement and the Reserve Account Agreement. So long as no
Event of Default shall have occurred and be continuing hereunder,
Lender shall release to Borrower or directly to the policy issuer,
in Lender's discretion, on an annual basis sums from the Tax and
Insurance Escrow Account sufficient, to the extent available, to
pay the Insurance Premiums when due. Upon and during the
continuance of any Event of Default, Lender may apply all such sums
to the Obligations, in such amounts and order of priority as Lender
shall elect in its sole discretion. If Lender at any time
reasonably determines that such amount on deposit is or will be
insufficient to fully pay the Insurance Premiums next becoming due
and payable, Borrower shall, within ten (10) days following receipt
of written notice from Lender, deposit such additional sum as may
be reasonably required by Lender. On the Maturity Date, any such
moneys remaining on deposit with the Depository shall, at Lender's
option, be applied against the Obligations or returned to Borrower
or its designee. The obligation of Borrower to pay the Insurance
Premiums is not affected or modified by the foregoing, except to
the extent of such Insurance Escrow Payments on deposit from time
to time with the Depository, subject to Lender's right to apply the
same to the Obligations upon and during the continuance of an Event
of Default in accordance with the terms hereof and of the Reserve
Account Agreement.
2.7.3 Interest Reserve Account. On the Closing Date,
Lender shall fund to itself from the Loan proceeds an amount equal
to the Short Period Interest Payment. Additionally, as additional
collateral for the Loan, on the Closing Date, $9,825,546.87 of the
Loan proceeds advanced to Borrower shall be deposited with the
Depository (which amount shall constitute a portion of the
Outstanding Principal Balance) (the "Interest Reserve Funds"). All
such Interest Reserve Funds shall be deposited in a segregated
interest bearing account (or sub-account maintained on a ledger
entry basis) established at the Depository (the "Interest Reserve
Account"), and all interest payable thereon shall be deemed a part
of the Interest Reserve Funds, and shall be governed by and treated
in accordance with the terms of this Agreement and the Reserve
Account Agreement. So long as no Event of Default shall have
occurred and be continuing hereunder, Lender shall apply the
Interest Reserve Funds as contemplated by Section 2.7.3(b) hereof.
Upon and during the continuance of any Event of Default, Lender may
apply all such Interest Reserve Funds to the Obligations, in such
amounts and order of priority as Lender shall elect in its sole
discretion. On the Maturity Date, any such Interest Reserve Funds
remaining on deposit with the Depository shall, at Lender's option,
be applied against the Obligations or returned to Borrower.
(b) So long as no Event of Default shall have occurred
and be continuing, on the first (1st) Business Day of each month
during the Term, Lender shall apply Interest Reserve Funds to the
payment to Lender of the Monthly Interest Payment then due and
payable, and the Interest Reserve Funds shall be reduced by an
equal amount. Borrower expressly acknowledges and agrees that in
the event that an Event of Default shall have occurred and be
continuing or in the event that the amount required to pay any
Monthly Interest Payment exceeds the amount of the Interest Reserve
Funds, Borrower shall remain liable for the payment of the entire
amount of all Monthly Interest Payments as and when due.
2.7.4 Deferred Maintenance Account. As additional
collateral for the Loan, on the Closing Date, $500,000 of the Loan
proceeds advanced to Borrower shall be deposited with the
Depository (which amount shall constitute a portion of the
Outstanding Principal Balance) (the "Deferred Maintenance Funds").
All such Deferred Maintenance Funds shall be deposited in a
segregated interest bearing account (or sub-account maintained on
a ledger entry basis) established at the Depository (the "Deferred
Maintenance Account") (with all interest accruing thereon being
deemed to constitute a part of the Deferred Maintenance Funds) for
funding certain deferred maintenance items at or in the Properties.
The treatment of the Deferred Maintenance Account and the use of
the Deferred Maintenance Funds shall be governed by the terms of
the Reserve Account Agreement. On the Maturity Date or on such
earlier date as there shall have occurred and be continuing an
Event of Default, the moneys on deposit in the Deferred Maintenance
Account shall, at the option of Lender, be applied against the
outstanding Obligations.
2.7.5 Environmental Remediation Account. As additional
collateral for the Loan, on the Closing Date, $1,000,000 of the
Loan proceeds advanced to Borrower shall be deposited with the
Depository (which, amount shall constitute a portion of the
Outstanding Principal Balance) (the "Environmental Remediation
Funds"). All such Environmental Remediation Funds shall be
deposited in a segregated interest bearing account (or sub-account
maintained on a ledger entry basis) established at the Depository
(the "Environmental Remediation Account") (with all interest
accruing thereon being deemed to constitute a part of the
Environmental Remediation Funds) for remediation of environmental
conditions at the Properties, if any. The treatment of the
Environmental Remediation Account and the use of the Environmental
Remediation Funds shall be governed by the terms of the Reserve
Account Agreement. On the Maturity Date or on such earlier date as
there shall have occurred and be continuing an Event of Default,
the moneys on deposit in the Environmental Remediation Account
shall, at the option of Lender, be applied against the outstanding
Obligations.
2.7.6 Working Capital Account. On the Closing Date,
Lender shall advance to Borrower $3,000,000 from the Loan proceeds
which shall be used only for Working Capital Purposes.
Additionally, as additional collateral for the Loan, (a) on the
Closing Date, $760,000 of the Loan proceeds advanced to Borrower
shall be deposited with the Depository (the amount of which shall
constitute a portion of the Outstanding Principal Balance), and (b)
simultaneously with the closing of the sale of the Adjacent Garden
State Property (or at any earlier time that Borrower shall receive
Remaining Garden State Proceeds or Substitute Remaining Garden
State Proceeds), Borrower shall deposit with the Depository the
first $2,240,000 of Remaining Garden State Proceeds (if such sale
occurs under the Adjacent Garden State Contract) or the first
$2,240,000 of Substitute Remaining Garden State Proceeds (if such
sale occurs under a New Adjacent Garden State Contract), as the
case may be (all of the foregoing, to the extent on deposit with
the Depository from time to time, being referred to herein as the
"Working Capital Funds"). All such Working Capital Funds shall be
deposited in a segregated interest bearing account (or sub-account
maintained on a ledger entry basis) established at the Depository
(the "Working Capital Account") (with all interest accruing thereon
being deemed to constitute a part of the Working Capital Funds) for
Working Capital Purposes. The treatment of the Working Capital
Account and the use of the Working Capital Funds shall be governed
by the terms of the Reserve Account Agreement. On the Maturity
Date or on such earlier date as there shall have occurred and be
continuing an Event of Default, the moneys on deposit in the
Working Capital Account shall, at the option of Lender, be applied
against the outstanding Obligations. Borrower expressly
acknowledges and agrees that the above-described advance of
$3,000,000 on the Closing Date, the above-described deposit of
$760,000 with the Depository on the Closing Date, and the above
provisions for the delivery of the first $2,240,000 of Remaining
Garden State Proceeds or Substitute Remaining Garden State
Proceeds, as the case may be, together constitute the $6,000,000
reserve for Working Capital Purposes that was originally
contemplated by Lender and Borrower.
2.7.7 El Rancho Development Reserve. As additional
collateral for the Loan, (a) on the Closing Date, $3,759,614.51 of
the Loan proceeds advanced to Borrower shall be deposited with the
Depository (which amount shall constitute a portion of the
Outstanding Principal Balance), (b) simultaneously with the closing
of the sale of the Adjacent Garden State Property (or at any
earlier time that Borrower shall receive Remaining Garden State
Proceeds or Substitute Remaining Garden State Proceeds), Borrower
shall deposit with the Depository the Remaining Garden State
Proceeds (if such sale occurs under the Adjacent Garden State
Contract) or the Substitute Remaining Garden State Proceeds (if
such sale occurs under a New Adjacent Garden State Contract), as
the case may be, but only to the extent that such Remaining Garden
State Proceeds or Substitute Remaining Garden State Proceeds, as
the case may be, shall exceed $2,240,000, and (c) if such sale
occurs under the Adjacent Garden State Contract, on the date that
the Garden State Contingency shall occur, Borrower shall cause the
purchaser under the Adjacent Garden State Contract to directly
deposit (or cause any applicable escrow agent to directly deposit)
with the Depository, the Garden State Contingent Proceeds (all of
the foregoing, together with any monies which may be transferred
into the El Rancho Reserve Account pursuant to the provisions of
the Reserve Account Agreement, to the extent on deposit with the
Depository from time to time, being referred to herein as the "El
Rancho Reserve Funds"). All such El Rancho Reserve Funds shall be
deposited in a segregated interest bearing account established at
the Depository (the "El Rancho Reserve Account") (with all interest
accruing thereon being deemed to constitute a part of the El Rancho
Reserve Funds) for the payment of costs and expenses incurred by
Borrower in connection with the development of the El Rancho
Property. The treatment of the El Rancho Reserve Account and the
use of the El Rancho Reserve Funds shall be governed by the terms
of the Reserve Account Agreement. On the Maturity Date or on such
earlier date as there shall have occurred and be continuing an
Event of Default, the moneys on deposit in the El Rancho Reserve
Account shall, at the option of Lender, be applied against the
outstanding Obligations.
2.8 [Intentionally Omitted].
2.9 Liability for Obligations. (a) The joint and
several liability of each Borrower for the Obligations shall be
continuing and absolute under any and all circumstances, without
regard to the validity, regularity or enforceability of any of the
Loan Documents. Each Borrower hereby agrees that its liability for
the Obligations shall be unaffected, to the extent permitted by
applicable law, by (i) any amendment or modification of the
provisions of any of the Loan Documents to which such Borrower is
not a party, (ii) any extension of time for the performance
required thereby, (iii) any sale, assignment or foreclosure of the
Loan Documents, or any sale of any of the Collateral or any part
thereof, (iv) the release of any Collateral or the release of any
other Person (including any other Borrower) from performance or
observance of any of the agreements, terms or conditions contained
in any of the Loan Documents, whether by operation of law or
otherwise, and whether made with or without notice to such
Borrower, (v) Lender's failure to properly perfect, protect, secure
or insure any security interest or lien given as security for the
Obligations, (vi) any recovery from any other Person (including any
other Borrower) under any guaranty or indemnity executed in
connection with the Obligations, except to the extent such recovery
is indefeasibly applied by Lender in reduction of the Obligations
in accordance with the terms hereof, or (vii) the accuracy or
inaccuracy of any representations or warranties made by any other
Person (including any other Borrower) in any Loan Document.
(b) Each Borrower, to the extent permitted by applicable
law, hereby waives any and all legal requirements that Lender
institute any action or proceeding at law or in equity against any
other Person (including any other Borrower), or exhaust its
remedies against any other Person (including any other Borrower),
in respect of the Loan Documents, the Obligations or any Collateral
held by Lender as a condition precedent to bringing an action
against such Borrower hereunder. All remedies afforded to Lender
by reason hereof are separate and cumulative remedies and it is
agreed that no one of such remedies, whether exercised by Lender or
not, shall be deemed to be an exclusion of any of the other
remedies available to Lender and shall not limit or prejudice any
other legal or equitable remedy which Lender may have.
(c) It is understood and agreed that, to the extent
permitted by applicable law, until the Obligations have been
satisfied in full, no Borrower shall be released by any act or
thing which might, but for this provision of this Agreement, be
deemed a legal or equitable discharge of an obligor, surety or
guarantor, or by reason of any waiver, extension, modification,
forbearance or delay or other act or omission of Lender or its
failure to proceed promptly or otherwise, or by reason of any
action taken or omitted or circumstance which may or might vary the
risk or affect the rights or remedies of any Borrower or by reason
of any further dealings between any Borrower and Lender, whether
relating to the Obligations or otherwise, and, to the extent
permitted by applicable law, each Borrower hereby expressly waives
and surrenders any defense to its liability hereunder based upon
any of the foregoing acts, omissions, things, agreements, waivers
or any of them, other than a waiver expressly extended by Lender to
such Borrower in accordance herewith, and, to the extent permitted
by applicable law, hereby expressly waives and relinquishes all
other rights and remedies accorded by applicable law to obligors,
sureties and guarantors, it being the purpose and intent of the
parties that the liability of each Borrower for the Obligations is
absolute and unconditional under any and all circumstances. Each
Borrower further waives all rights and defenses that such Borrower
may have because the Obligations are secured by real property.
This means, among other things: (i) Lender may collect from each
Borrower without first foreclosing on any real or personal property
collateral pledged by any Borrower, (ii) if Lender forecloses on
any real property collateral pledged by any Borrower: (A) the
amount of the Obligations may be reduced by the price for which
that collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sales price, and (B) Lender may
collect from each Borrower even if Lender, by foreclosing on the
real property collateral, has destroyed any right any Borrower may
have to collect from any other Borrower. This is an unconditional
and irrevocable waiver of any rights and defenses any Borrower may
have because the Obligations are secured by real property. Each
Borrower also waives all rights and defenses arising out of an
election of remedies by Lender, even though that election of
remedies, such as a nonjudicial foreclosure concerning the security
for the Obligations, has destroyed any Borrower's rights of
subrogation and reimbursement against any other Borrower by
operation of law or otherwise.
(d) Except as expressly set forth herein or in any of
the other Loan Documents, each Borrower hereby waives presentment
for payment, demand, protest, notice of protest and of dishonor,
notices of default and all other notices of every kind and
description now or hereafter provided by any statute or rule of
law.
2.10 Conversion.
2.10.1 Conversion Privilege. On the Maturity Date or,
if earlier, upon any prepayment pursuant to Section 2.5 hereof of
$10,000,000 or more of the Outstanding Principal Balance or upon
acceleration of the Obligations pursuant to Section 8.2 hereof,
$10,000,000 of the Outstanding Principal Balance (the "Conversion
Amount") shall be converted, at the option of Lender, upon written
notice to ITB (the date of each such notice being a "Conversion
Date"), at the conversion price per share of ITB Lender Stock of
$8.75, as adjusted and readjusted from time to time in accordance
with the further provisions of this Section 2.10 (such conversion
price as so adjusted and readjusted and in effect at any time,
being herein called the "Conversion Price"), into the number of
fully paid and non-assessable shares of ITB Lender Stock determined
by dividing the Conversion Amount by the Conversion Price in effect
at the time of such conversion. Subject to the foregoing, promptly
following the Conversion Date, Lender shall mark the Note to
indicate the conversion and payment of the Conversion Amount. The
Note shall be deemed to have been partially converted pursuant to
this Section 2.10.1 on the Conversion Date if Lender exercises its
right to convert the Conversion Amount. As promptly as practicable
on or after the Conversion Date, but in no event later than five
(5) days thereafter, ITB shall, at its expense (including the
payment by it of any applicable issue taxes), issue and deliver to
Lender at its address listed in this Agreement, a certificate or
certificates for the number of full shares of ITB Lender Stock
issuable upon such conversion, together with a cash payment in lieu
of any fraction of a share of ITB Lender Stock, as provided in
Section 2.10.2 hereof.
2.10.2 Fractions of Shares. No fractional shares of ITB
Lender Stock shall be issued upon conversion of the Conversion
Amount pursuant to Section 2.10.1 hereof. In lieu of any
fractional share of ITB Lender Stock which would otherwise be
issuable upon conversion of the Conversion Amount, ITB shall pay a
cash adjustment in respect of such fraction in an amount equal to
such fraction multiplied by the Market Value per share of ITB Stock
at the close of business on the Conversion Date. For purposes
hereof, "Market Value" shall mean the average of the last sale
price of ITB Stock on the principal national securities exchange on
which such stock is listed or admitted to trading or in The Nasdaq
Stock Market, Inc., as the case may be, for the five (5) trading
days immediately preceding the date as to which the determination
of Market Value is to be made.
2.10.3 Antidilution Provisions. (a) In case ITB shall
at any time declare or pay a dividend on ITB Stock payable in ITB
Stock, or shall issue shares of ITB Stock in exchange for the
conversion or cancellation of debt or the receipt of assets or
stock in a transaction with LVEN and/or any of its subsidiaries or
Affiliates during the Term, or shall subdivide the outstanding
shares of ITB Stock into a greater number of shares, the Conversion
Price in effect immediately prior to any such event shall be
proportionately reduced (by multiplying such Conversion Price by a
fraction, the numerator of which shall be the number of shares of
ITB Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of ITB Stock
outstanding immediately after such event), and conversely, in case
the outstanding shares of ITB Stock shall be combined into a
smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be proportionately
increased (by multiplying such Conversion Price by a fraction, the
numerator of which shall be the number of shares of ITB Stock
outstanding immediately prior to such combination and the
denominator of which shall be the number of shares of ITB Stock
outstanding immediately after such combination).
(b) If any capital reorganization or reclassification of
ITB Stock or any consolidation or merger of ITB with another
corporation, or the sale of all or substantially all of its assets
to another corporation shall be effected in such a way that holders
of ITB Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for ITB Stock, then, as a
condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provisions shall be made
whereby Lender shall thereafter have the right to receive upon the
basis and upon the terms and conditions specified herein and in
lieu of the shares of ITB Lender Stock immediately theretofore
receivable upon the exercise of Lender's rights pursuant to this
Section 2.10, such shares of stock, securities or assets (including
cash) as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such ITB Lender Stock equal
to the number of shares of such stock immediately theretofore so
receivable had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to the rights and
interests of Lender to the end that the provisions hereof
(including without limitation provisions for adjustments of the
Conversion Price) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of such exercise rights.
In the event of a merger or consolidation of ITB as a result of
which a greater or lesser number of shares of common stock of the
surviving corporation are issuable to holders of ITB Stock
outstanding immediately prior to such merger or consolidation, the
Conversion Price in effect immediately prior to such merger or
consolidation shall be adjusted in the same manner as though there
were a subdivision or combination of the outstanding shares of ITB
Stock. ITB will not effect any such consolidation, merger or sale,
unless prior to the consummation thereof the successor corporation
(if other than ITB) resulting from such consolidation or merger or
the corporation purchasing such assets shall assume by written
instrument, executed and mailed or delivered to Lender at the
address set forth herein, the obligation to deliver to Lender such
shares of stock, securities or assets as, in accordance with the
foregoing provisions, Lender may be entitled to receive.
(c) If at any time while the Loan is outstanding, ITB
shall issue shares of ITB Stock, or rights, options, warrants, or
convertible or exchangeable securities containing the right to
subscribe for or purchase shares of ITB Stock (excluding (i)
shares, rights, options, warrants, or convertible or exchangeable
securities issued as of the date of issuance of this Agreement or
issued in any of the transactions described in Paragraphs (a) or
(b) above, (ii) shares issued upon the exercise of such rights,
options or warrants or upon conversion or exchange of such
convertible or exchangeable securities, and (iii) the Warrants and
any shares issued upon exercise thereof), at a price per share of
ITB Stock (determined in the case of such rights, options,
warrants, or convertible or exchangeable securities by dividing (x)
the total amount receivable by ITB in consideration of the sale and
issuance of such rights, options, warrants, or convertible or
exchangeable securities, plus the total minimum consideration
payable to ITB upon exercise, conversion, or exchange thereof, by
(y) the total maximum number of shares of ITB Stock covered by such
rights, options, warrants, or convertible or exchangeable
securities) lower than the fair market value per share of ITB Stock
on the date ITB fixes the offering price of such shares, rights,
options, warrants, or convertible or exchangeable securities, then
the Conversion Price shall be adjusted so that it shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior thereto by a fraction (i) the numerator of which
shall be the sum of (A) the number of shares of ITB Stock
outstanding immediately prior to such sale and issuance plus (B)
the number of shares of ITB Stock which the aggregate consideration
received (determined as provided below) for such sale or issuance
would purchase at such fair market value per share, and (ii) the
denominator of which shall be the total number of shares of ITB
Stock outstanding immediately after such sale and issuance. Such
adjustment shall be made successively whenever such an issuance is
made. For the purposes of such adjustment, the maximum number of
shares of ITB Stock which the holder of any such rights, options,
warrants, or convertible or exchangeable securities shall be
entitled to subscribe for or purchase shall be deemed to be issued
and outstanding as of the date of such sale and issuance and the
consideration received by ITB therefor shall be deemed to be the
consideration received by ITB for such rights, options, warrants,
or convertible or exchangeable securities, plus the minimum
consideration or premium stated in such rights, options, warrants,
or convertible or exchangeable securities to be paid for the shares
of ITB Stock covered thereby. In case ITB shall sell and issue
shares of ITB Stock, or rights, options, warrants, or convertible
or exchangeable securities containing the right to subscribe for or
purchase shares of ITB Stock for a consideration consisting, in
whole or in part, of property other than cash or its equivalent,
then in determining the price per share of ITB Stock and the
consideration received by ITB for purposes of the first sentence of
this Paragraph 2.10.3(c), the Board of Directors of ITB shall
determine, in good faith, the fair value of said property, and such
determination shall be described in a duly adopted board resolution
certified by ITB's Secretary or Assistant Secretary. In case ITB
shall sell and issue rights, options, warrants, or convertible or
exchangeable securities containing the right to subscribe for or
purchase shares of ITB Stock together with one or more other
securities as a part of a unit at a price per unit, then in
determining the price per share of ITB Stock and the consideration
received by ITB for purposes of the first sentence of this
paragraph 2.10.3(c), the Board of Directors of ITB shall determine,
in good faith, which determination shall be described in a duly
adopted board resolution certified by ITB's Secretary or Assistant
Secretary, the fair value of the rights, options, warrants, or
convertible or exchangeable securities then being sold as part of
such unit. Such adjustment shall be made successively whenever
such an issuance occurs, and in the event that such rights,
options, warrants, or convertible or exchangeable securities expire
or cease to be convertible or exchangeable before they are
exercised, converted, or exchanged (as the case may be), then the
Conversion Price shall again be adjusted to the Conversion Price
that would then be in effect if such sale and issuance had not
occurred, but such subsequent adjustment shall not affect the
number of Conversion Shares issued upon any exercise of the
Conversion Privilege prior the date such subsequent adjustment is
made.
(d) Upon any adjustment of the Conversion Price, then
and in each such case, ITB shall give written notice thereof, by
first class mail, postage prepaid, addressed to Lender at the
address set forth herein, which notice shall state the Conversion
Price resulting from such adjustment, setting forth in reasonable
detail the method of calculation and the facts upon which such
calculation is based.
(e) If any event occurs as to which, in the reasonable
opinion of Lender, the other provisions of this Section 2.10.3 are
not strictly applicable or if strictly applicable would not, in the
reasonable opinion of Lender, fairly protect Lender's rights in
accordance with the essential intent and principles of this
Section, then ITB shall in good faith make an adjustment in the
application of the provisions of this Section, in accordance with
such essential intent and principles, so as to protect the rights
of Lender hereunder, but in no event shall any such adjustment have
the effect of increasing the Conversion Price as otherwise
determined pursuant to this Section 2.10 except in the event of a
combination of shares of the type contemplated in clauses (a) or
(b) of this Section 2.10.3 and then in no event to an amount
greater than the Conversion Price as adjusted pursuant to such
clauses (a) or (b).
(f) ITB shall not, by amendment of its charter or
through any consolidation, merger, reorganization,
recapitalization, transfer of assets, dissolution, issuance or sale
of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Section
2.10.3, but shall at all times in good faith use its best
reasonable efforts to assist in carrying out all of such terms and
in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of Lender against
dilution or other impairment.
ARTICLE 3
Security
3.1 Secured Obligations. The Obligations shall be
evidenced and secured hereunder and under the other Loan Documents.
3.2 Collateral. The Obligations shall be secured by the
following Collateral: (a) all of the Collateral defined, described
or otherwise set forth in any of the Loan Documents; (b) the
Reserve Accounts; (c) any other Collateral as shall be reasonably
required by Lender as a condition to making and disbursing the
Loan; and (d) the proceeds of any and all of the foregoing.
ARTICLE 4
Conditions Precedent to Loan
The obligation of Lender to make the Loan provided for
hereunder is subject to the fulfillment on or prior to the date
hereof of all of the following conditions to Lender's satisfaction:
4.1 Delivery of Loan Documents. Lender shall have
received the following documents, all in form and substance
reasonably satisfactory to Lender, and all duly completed and
executed by the respective parties thereto (the following, together
with any other documents evidencing, securing or otherwise relating
to the Loan or executed in connection therewith, and any
modifications, renewals or extensions of any of the foregoing, are
referred to herein collectively as the "Loan Documents"):
(a) This Agreement;
(b) The Note;
(c) The Mortgages;
(d) The Assignment of Leases;
(e) The Reserve Account Agreement;
(f) A Hazardous Substances Indemnity Agreement from all
the Borrowers, jointly and severally;
(g) Such Uniform Commercial Code Financing Statements
as Lender may reasonably require;
(h) The Warrants and the Registration Rights Agreement;
(i) A Pledge and Security Agreement executed by ITB,
pursuant to which all of the stock in GSRT, FRA,
ITGDC, ACH, Circa and the Other Subsidiaries shall
be pledged to Lender as additional security for the
Loan;
(j) The stock certificates for all of the shares in
GSRT, FRA, ITGDC, ACH, Circa and the Other
Subsidiaries (except that Borrower shall not be
obligated to deliver the stock certificates
respecting FRA, ACH and/or Circa if the holder of
the Freehold Liens is holding the FRA, ACH and/or
Circa stock certificates), together with stock
powers executed in blank with respect to each such
stock certificate and such other documents as
Lender shall reasonably require to perfect the
pledge of such shares to Lender;
(k) A Pledge and Security Agreement executed by ITGDC,
pursuant to which all of the stock in OCC shall be
pledged to Lender as additional security for the
Loan;
(l) The stock certificate for all of the shares in OCC,
together with a stock power executed in blank with
respect to such stock certificate and such other
documents as Lender shall reasonably require to
perfect the pledge of such shares to Lender;
(m) The Senior Lender Consent Agreement;
(n) The Subordination Agreement;
(o) The ACH Letter Agreement;
(p) An agreement assigning to Lender all of Borrowers'
rights, title and interest in and to all
agreements, contracts, plans, specifications,
permits, licenses, approvals and other rights and
interests in respect of or relating in any way to
the Properties (the "Account and Security
Agreement");
(q) Such certificates and certified copies of such
agreements and other matters as determined by
Lender;
(r) A plan and budget for the development and
construction of the El Rancho Property approved by
Lender; and
(s) Such other agreements, instruments and documents as
Lender may request to cause the consummation of the
transactions contemplated hereby and by the other
Loan Documents and to confer on Lender all of the
benefits intended to be conferred hereby and
thereby.
4.2 Appraisals. Lender shall have obtained an appraisal
report covering each of the Properties (the "Appraisals"), each in
form and substance satisfactory to Lender, and each prepared at the
cost and expense of Borrower by an independent MAI appraiser
selected by Lender (the "Appraiser").
4.3 Engineering Reports. Lender shall have obtained a
current engineering/physical inspection report covering each of the
Properties (the "Engineering Reports"), each in form and content
acceptable to Lender, and each prepared at the cost and expense of
Borrower by an independent engineering consultant selected by
Lender.
4.4 Title Policy and Endorsements. Lender shall have
received a title insurance policy or an acceptable marked
commitment therefor ("Title Policy"), dated the Closing Date and
acceptable to Lender, insuring marketability of title with respect
to each of the Properties and insuring that the liens of the
respective Mortgages on the El Rancho Property and the Garden State
Property are valid first liens thereon, the lien of the Mortgage on
the Adjacent Garden State Property is a valid second lien thereon,
and the lien of the Mortgage on the Freehold Property is a valid
third lien thereon, in each instance subject only to such
exceptions to title as shall have been approved by Lender,
including the Permitted Liens. The Title Policy shall also contain
any reinsurance or co-insurance and any endorsements required by
Lender, including, without limitation, if applicable and to the
extent available in the applicable State, the following
endorsements in form and substance acceptable to Lender:
comprehensive, creditors' rights, zoning 3.1, survey (with respect
to the El Rancho Property, the Freehold Property and the Adjacent
Garden State Property only, subject to Section 6.22 hereof),
variable rate, usury, first loss, last dollar, contiguity (where
applicable), street address, "doing business", extended coverage,
environmental 8.1 and such other endorsements and affirmative
assurances as Lender shall reasonably require in order to provide
insurance against specific risks identified by Lender in connection
with any of the Properties or the Loan; provided, that (i) to the
extent that the title company(ies) issuing the Title Policy
(individually or collectively, as the case may be, the "Title
Company") shall be precluded by law or regulation from issuing any
required endorsement or if such endorsement is not generally
available for a reasonable cost as reasonably determined by Lender,
such endorsement shall not be required if Borrower shall provide
alternative assurances to Lender (by way of counsel opinion or
indemnity, for example) as to the matters that would otherwise have
been addressed by such title endorsement, and (ii) in lieu of a
zoning 3.1 endorsement with respect to any of the Properties,
Borrower may provide to Lender an official letter from the
appropriate official in the locality in which such Property is
situated, in form and content reasonably satisfactory to Lender, as
to the zoning classification of such Property and that the current
use of such Property conforms with such zoning classification.
4.5 Surveys. Lender shall have received and approved a
survey of each of the Freehold Property, the El Rancho Property and
the Adjacent Garden State Property, each dated or redated not more
than forty five (45) days prior to the Closing Date, and each
prepared by a registered land surveyor in accordance with the 1992
American Land Title Association/American Congress on Surveying and
Mapping Standards and certified or re-certified in favor of Lender
and the Title Company issuing the Title Policy for each such
Property. The surveyor shall certify that such Properties are not
in a flood hazard area as identified by the Secretary of Housing
and Urban Development. The surveys shall be sufficient for the
Title Company to remove the general survey exception from the Title
Policy with respect to each such Property. Additionally, Lender
shall have received and reasonably approved a boundary survey of
the Garden State Property prepared by a registered land surveyor.
4.6 Environmental Reports. Lender shall have obtained
a Phase I environmental audit of each of the Properties prepared at
the cost and expense of Borrower by an environmental consultant
selected by Lender, and, if recommended by any of such Phase I
environmental audits, a Phase II environmental audit of the
applicable Property(ies) thereafter prepared at the cost and
expense of Borrower by such environmental consultant (individually
or collectively, if applicable, the "Environmental Report"). The
Environmental Report shall be acceptable to Lender, in form and
substance, in Lender's sole discretion.
4.7 Leases. Borrower shall have submitted to Lender
true, complete and correct copies of all leases and operating
agreements affecting the Properties, together with all amendments
thereto (together with any future leases affecting the Properties,
collectively, the "Leases"), and such Leases shall be satisfactory
to Lender in form and substance. On the Closing Date, all Leases
shall be in full force and effect.
4.8 Contracts. Borrower shall have submitted to Lender
a detailed schedule describing, and copies of, all material
existing service, repair, maintenance, management, use,
development, sale, brokerage, advertising, labor and other
contracts, agreements and commitments in respect of the operation
of each of the Properties, including all simulcasting,
rebroadcasting and wagering contracts (together with any future
such material contracts, collectively, the "Contracts"), which
schedule (i) shall reflect the sums payable under each such
contract as of the Closing Date, (ii) shall identify those
contracts which are not cancelable without cause and without
premium or penalty upon thirty (30) days' (or less) notice, and
(iii) shall be certified by Borrower to Lender as true, complete
and correct.
4.9 Insurance. Borrower shall have provided to Lender
copies of certificates evidencing the insurance policies required
to be maintained with respect to each of the Properties pursuant to
Section 6.3 hereof, each in form and substance reasonably
acceptable to Lender.
4.10 Compliance with Laws. Borrower shall have
submitted to Lender, and Lender shall have approved, (a) a final
and valid certificate of occupancy (or its equivalent) for each of
the Properties other than the El Rancho Property, (b) a schedule
describing, and copies of, all permits, licenses and other
approvals necessary for the use and/or operation of each of the
Properties as currently used and operated and as contemplated to be
used and operated (together with any future such permits, licenses
or other approvals, collectively, the "Permits"), and (c) evidence
satisfactory to Lender that the Properties are not in violation in
any material respect with any of the applicable laws, rules,
regulations and ordinances (including building, zoning, density,
land use and planning, racing and gaming, and liquor, beverage and
food service, requirements, laws, rules, regulations and
ordinances, to the extent applicable), covenants, conditions and
restrictions, subdivision requirements (including parcel maps), and
environmental impact and other environmental requirements.
4.11 Commission Orders. Borrower shall have submitted
to Lender a true, complete and correct copy of the Commission
Orders (existing on the date hereof), which shall be satisfactory
to Lender in form and substance, together with proof satisfactory
to Lender that the Commission Orders are in full force and effect,
that there have been no defaults thereunder and that no facts or
circumstances exist that could result in the same or similar claims
or charges that formed the underlying basis for the Commission
Orders being made (including any risk of loss of any permits or
licenses for any racing, betting, gaming or simulcasting
activities).
4.12 Racing and Gaming Consents and Approvals. Borrower
shall have submitted to Lender proof reasonably satisfactory to
Lender that, except for the qualification investigation currently
being conducted by the New Jersey Racing/Gaming Authorities with
respect to NPD, Inc., DeSantis and Coehlo, all issues and
outstanding matters and all consents and approvals have been
settled, satisfied, resolved and received from all Racing/Gaming
Authorities.
4.13 Adjacent Garden State Contract. Borrower shall
have submitted to Lender a true, correct and complete copy of the
Adjacent Garden State Contract.
4.14 Counsel Opinions. Lender shall have received legal
opinions from counsel to each Borrower, each in form and substance
reasonably satisfactory to Lender.
4.15 Representations and Warranties. The representa-tions and
warranties of Borrower herein and in the other Loan
Documents, and all certificates, documents and financial and other
written statements furnished at any time under or in connection
herewith or therewith, shall be true and correct in all material
respects as of the date hereof.
4.16 No Default. Borrower shall be in compliance with
all of the terms and conditions set forth herein and in each of the
other Loan Documents on its part to be observed or performed, and
there shall not have occurred and be continuing a Default.
4.17 No Injunction. No law or regulation shall have
been adopted, no order, judgment or decree of any governmental
authority having jurisdiction over Lender, any Borrower, any of the
Properties or the transactions contemplated by this Agreement shall
have been issued, and no litigation shall be pending or threatened,
which, in the reasonable judgment of Lender, would enjoin, prohibit
or restrain, or impose or result in the imposition of any condition
having a Material Adverse Effect upon, Lender, any Borrower or any
of the transactions contemplated hereby or by any of the other Loan
Documents or the making or repayment of the Loan.
4.18 Consents, Licenses, Approvals, etc. Lender shall
have received copies of all consents, licenses and approvals, if
any, required in connection with the execution, delivery and
performance by Borrower, and the validity and enforceability
against each Borrower of this Agreement and the other Loan
Documents, and such consents, licenses and approvals shall be in
full force and effect.
4.19 Transaction Costs. Borrower shall have paid, or
shall have made provision for payment from the anticipated proceeds
of the Loan of, all Costs paid or payable relating to the Loan,
including all Costs incurred by Lender in connection with the
negotiation, preparation, execution and delivery of this Agreement,
the Note and the other Loan Documents and Lender's due diligence
review of all matters relating to the Properties and Borrowers.
4.20 Mortgage Recording Tax. Borrower shall have paid
or caused to be paid all state, county and municipal recording and
other taxes imposed upon the execution and recordation of any of
the Mortgages, if any.
4.21 [Intentionally Omitted].
4.22 Bankruptcy Remote Entities. The Organizational
Documents of each of GSRT, FRA, ITGDC, OCC, ACH and Circa shall
have been amended, to the reasonable satisfaction of Lender, to
provide for the addition of an independent member to the board of
directors of each of them (the "Independent Director") whose
affirmative vote is required regarding any decision to elect the
benefits of (or, in an involuntary proceeding, to elect not to
discharge a filing under) any federal, state or local bankruptcy
laws (including filing for reorganization or liquidation) (the
"Bankruptcy Decisions"); provided, however, that notwithstanding
anything to the contrary contained herein or in any of the other
Loan Documents, at any time following the Closing Date, any of such
entities may eliminate such Independent Director and, in lieu
thereof, create a new class of stock, all of the shares of which
are and shall remain owned by the Independent Director, and on such
other terms and conditions as such entity shall elect in its sole
discretion, except that (a) the affirmative vote of such class of
stock must be required with respect to any Bankruptcy Decision of
such entity, and (b) such class of stock shall not be entitled to
any dividends or other distributions other than a dividend in an
amount equal to the Independent Director's annual fee.
4.23 Intra-Company Debt. Borrower shall have delivered
to Lender reasonably satisfactory evidence of the cancellation or
conversion to capital of all loans from any Borrower to any other
Borrower and a certificate of an officer of ITB that no other loans
are extant between or among any Borrowers.
4.24 Additional Items. Lender shall have received such
other certificates, opinions, documents and instruments relating to
the transactions contemplated hereby and by any of the other Loan
Documents as Lender may have reasonably requested, and all
corporate and other proceedings and all other documents (including,
without limitation, all documents referred to herein) and legal
matters in connection with the transactions contemplated by this
Agreement, the Note and the other Loan Documents shall be
satisfactory in form and substance to Lender.
ARTICLE 5
Representations and Warranties
As an inducement to Lender to enter into this Agreement and to make
the Loan, each Borrower hereby represents and warrants as follows,
which representations and warranties shall be true and correct as
of the date hereof and which shall survive the Closing Date
hereunder and shall remain true and correct until all of the
Obligations are paid in full:
5.1 Borrower Existence; Status; Enforceability. (a)
Each Borrower is a corporation, duly formed, validly existing and
in good standing under the laws of the following States: ITB -
Delaware; GSRT, FRA and ITGDC - New Jersey; and OCC - Nevada, with
their chief executive offices and FEIN as follows:
(i) The chief executive office of ITB is located at
Route 70 and Haddonfield Road, Cherry Hill, New Jersey 08034 and
its FEIN is 22-2332039;
(ii) The chief executive office of GSRT is located at
Route 70 and Haddonfield Road, Cherry Hill, New Jersey 08034 and
its FEIN is 22-2442299;
(iii) The chief executive office of FRA is located at
Route 9 and Route 33, Freehold, New Jersey 07726 and its FEIN is
22-1892707;
(iv) The chief executive office of ITGDC is located at
Route 70 and Haddonfield Road, Cherry Hill, New Jersey 08034 and
its FEIN is 22-3291821; and
(v) The chief executive office of OCC is located at 2755
Las Vegas Boulevard South, Las Vegas, Nevada 89109 and its FEIN is
088-0351769.
(b) Each Borrower (i) is in good standing under the laws
of, and is authorized to transact business in, all jurisdictions in
which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify would be
reasonably likely (either individually or in the aggregate) to have
a Material Adverse Effect with respect to such Borrower or its
properties; (ii) has all requisite power and authority to own its
properties and to carry on its business as now being conducted; and
(iii) has full right, power and authority to execute and deliver
and to perform its obligations under the Loan Documents to which it
is a party. The Loan Documents to which each Borrower is a party
have been duly authorized, executed and delivered and each
constitutes the valid and legally binding obligation of such
Borrower, enforceable against such Borrower in accordance with
their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally and subject to the
availability of equitable remedies.
5.2 Borrowers' Corporate Structure.
(a) The authorized capital stock of ITB consists of
twenty-five million (25,000,000) shares of common stock, par value
$2.00 per share, of which eleven million six hundred fifty-one
thousand five hundred twenty-eight (11,651,528) shares are
outstanding and five hundred thousand (500,000) shares of preferred
stock of which three hundred sixty-two thousand four hundred sixty-eight
(362,468) shares of Series A Convertible Preferred Stock, par
value $100.00 per share, are outstanding; such outstanding shares
have been duly authorized and validly issued; and Schedule "5.2(a)"
is a true and correct list of all warrants (other than the
Warrants) and stock options granted by ITB to any Person.
(b) The authorized capital stock of GSRT consists of one
thousand (1,000) shares of common stock of which one thousand
(1,000) shares are outstanding. Such outstanding shares have been
duly authorized and validly issued and are all owned of record by
ITB.
(c) The authorized capital stock of FRA consists of two
thousand five hundred (2,500) shares of common stock of which two
thousand five hundred (2,500) shares are outstanding. Such
outstanding shares have been duly authorized and validly issued and
are all owned of record by ITB.
(d) The authorized capital stock of ITGDC consists of
two thousand five hundred (2,500) shares of common stock of which
two thousand five hundred (2,500) shares are outstanding. Such
outstanding shares have been duly authorized and validly issued and
are all owned of record by ITB.
(e) The authorized capital stock of OCC consists of two
thousand five hundred (2,500) shares of common stock of which one
hundred (100) shares are outstanding. Such outstanding shares have
been duly authorized and validly issued and are all owned of record
by ITGDC.
(f) The authorized capital stock of ACH consists of five
thousand (5,000) shares of common stock of which four thousand
(4,000) shares are outstanding. Such outstanding shares have been
duly authorized and validly issued and are all owned of record by
ITB.
(g) The authorized capital Stock of Circa consists of
one thousand (1,000) shares of common stock of which one hundred
(100) shares are outstanding. Such outstanding shares have been
duly authorized and validly issued and are all owned of record by
ITB.
(h) ITB and ITGDC have obtained all necessary approvals
from all appropriate governmental agencies to hold or own the stock
of its subsidiaries.
(i) Attached hereto as Schedule "5.2(i)" is a true and
correct list of all of the Other Subsidiaries and all of the
officers, directors and shareholders thereof.
5.3 ITB Lender Stock. (a) Except for Racing/Gaming
Authority consent under certain circumstances, there are no
restrictions upon the sale or transfer of the ITB Lender Stock
except for restrictions under federal and state securities laws.
(b) Except for Racing/Gaming Authority consent under
certain circumstances, no authorization or other action by, and no
notice to or filing with, any governmental authority or regulatory
body is required (i) for the issuance and delivery of the ITB
Lender Stock to Lender (except for any required filing under
Regulation D of the Securities Act of 1933, as amended, and the
filing of a listings application with the American Stock Exchange,
which filings Borrower shall timely process), (ii) for the
execution, delivery or performance of this Agreement by any
Borrower, or (iii) except for compliance with applicable state and
federal securities law, for the sale or transfer of the ITB Lender
Stock by Lender.
5.4 Borrower's Organizational Documents. A true and
complete copy of the Organizational Documents of each Borrower has
been furnished to Lender. To the best of the knowledge of each
Borrower, there are no other agreements, oral or written, among any
of the shareholders in any Borrower relating to such Borrower,
except for (i) certain agreements between NPD, Inc. and Green, and
(ii) NPD, Inc. and Casino-Co., true, correct and complete copies of
all of which have been delivered to Lender. No party is in default
in any material respect of its obligations under any Borrower's
Organizational Documents and no condition exists which, with the
giving of notice and/or the passage of time, would constitute a
default under any Borrower's Organizational Documents.
5.5 Authorization; Conflict. The execution and delivery
of this Agreement and the Loan Documents by each Borrower, and the
performance of their respective obligations hereunder and
thereunder and the creation of the security interests provided for
herein and therein (a) have been duly authorized, (b) do not and
will not violate any provisions of law or any applicable
regulation, order or other decree of any court or governmental
entity, and (c) do not and will not conflict or be inconsistent
with, or result in any default under, any material contract,
agreement or commitment to which any Borrower is bound. No
Borrower is in default under any contract, agreement or commitment
to which it is a party in any material respect which would have a
Material Adverse Effect. Each Borrower has delivered to Lender
copies of any material agreements (including Leases and Contracts)
between such Borrower, on the one hand, and any Affiliate, on the
other hand, related in any way to any Property and any other
agreements or documents materially affecting the use and operation
of any Property.
5.6 Approvals. No authorizations, approvals or consents
of, and no filings or registrations with, any governmental or
regulatory authority or agency, or any securities exchange, are
necessary for the execution, delivery or performance by any
Borrower hereof or of any other Loan Documents to which it is a
party or for the legality, validity or enforceability hereof or
thereof, except for filings and recordings in respect of the liens
created pursuant to the Loan Documents.
5.7 Title. Fee simple title to each Property is owned
by the applicable Borrower referred to in the Recitals hereto, free
and clear of all liens, claims, encumbrances, covenants,
conditions, restrictions, security interests and claims of others,
except for the Loan Documents, the Permitted Liens and such
exceptions as are set forth in the Title Policy accepted by Lender
on the Closing Date.
5.8 Legal Compliance. There currently exists a final
and valid certificate of occupancy (or its equivalent) for each
Property (other than the El Rancho Property). Each Property is in
compliance in all material respects with all applicable laws, rules
and regulations and any orders of any governmental or quasi-governmental
authorities (including zoning requirements, building
codes, subdivision improvement agreements and all covenants,
conditions and restrictions of record, if applicable, and the
requirements and orders of all governmental and quasi-governmental
authorities having jurisdiction over any racing and/or gaming
activities conducted at or from any of the Properties, including
the Racing/Gaming Authorities) (collectively, "Applicable Law").
The zoning and subdivision approval of each Property and the right
and ability to use or operate each Property are not in any way
dependent on or related to any real estate other than the
applicable Property, except pursuant to validly recorded easements,
rights of way, restrictions or other agreements which have been
approved by Lender. There are no, nor, to each Borrower's best
knowledge, are there any written allegations or assertions of,
material violations of law, regulations, ordinances, codes,
permits, including any of the Permits, licenses, declarations,
covenants, conditions or restrictions of record or other agreements
relating to any of the Properties or any part thereof.
5.9 Project Access. Each Property is accessible through
fully improved and dedicated roads accepted for maintenance and
public use by the public authority having jurisdiction over that
Property.
5.10 Utilities. All utility services necessary and
sufficient for the use or operation of each Property are available,
including water, storm, sanitary sewer, gas, electric and telephone
facilities.
5.11 Physical Condition. Except as otherwise disclosed
in the Engineering Reports, each Property is free of material
structural defects and all building systems contained therein
(except in the case of the El Rancho Property to the extent not
required by any Applicable Law) are in good working order subject
to ordinary wear and tear.
5.12 Flood Hazards/Wetlands. None of the Properties are
situated in an area designated as having special flood hazards as
defined by the Flood Disaster Protection Act of 1973, as amended,
or, to the best knowledge of Borrower, as a wetlands by any
governmental entity having jurisdiction over such Property.
5.13 Taxes/Assessments. There are no unpaid or
outstanding real estate or other taxes or assessments on or against
any Property or any part thereof, except general real estate taxes
for the current tax period that are not yet due or payable. Copies
of the current general real estate tax bills with respect to each
Property have been delivered to Lender. Except as otherwise
approved by Lender, said bills for each Property cover that entire
Property and do not cover or apply to any other property. To the
best knowledge of Borrower, there is no pending or contemplated
action pursuant to which any special assessment may be levied
against any portion of any one or more Properties.
5.14 Tax Returns. Each Borrower has filed all Federal
income tax returns and all other tax returns that are required to
be filed by such Borrower and has paid all taxes due pursuant to
such returns or pursuant to any assessment received by such
Borrower against it or any of its properties, and to the best
knowledge of each Borrower no claims are being asserted or have
been threatened with respect to any of such taxes. No Borrower has
given or been requested to give a waiver of the statute of
limitations relating to the payment of Federal, state, local and
foreign taxes or other impositions.
5.15 Eminent Domain. There is no eminent domain or
condemnation proceeding pending or, to the best knowledge of
Borrower, threatened relating to any Property.
5.16 Casualty Damage. No material casualty or other
material damage has occurred to any Property or any portion thereof
which, as of the date hereof, has not been substantially repaired
and/or restored and the cost of which repair and restoration has
not been fully paid.
5.17 Leases. Borrower has furnished Lender with a true
and complete copy of all Leases, all of which Leases are in full
force and effect. No Property is subject to any Leases other than
such Leases delivered to Lender, no person has any possessory
interest in any of the Properties or right to occupy the same,
except under and pursuant to the Leases and each such tenant is
conducting business only in that portion of the applicable Property
covered by its Lease. No Lease contains any option to purchase,
right of first refusal or other similar provision, except as
specifically disclosed to and approved in writing by Lender.
5.18 Contracts. Borrower has furnished Lender with
true, correct and complete copies of all presently existing
Contracts, all of which Contracts are in full force and effect.
Schedule 1 annexed hereto contains a true, correct and complete
schedule of all Contracts existing as of the date hereof. No
Borrower and no other party to any of the Contracts is in default
thereunder in any material respect.
5.19 Litigation. Except as set forth on Schedule 2
annexed hereto, there is no litigation, arbitration or other
proceeding or governmental investigation pending or, to the best
knowledge of each Borrower, threatened against or relating to any
Borrower, or any of their respective properties, assets or
business, including any of the Properties, which if decided
adversely would materially adversely affect the respective
business, affairs, assets or financial condition of any Borrower,
any of the Properties or the prospects for repayment of the Loan.
5.20 Investment Company Act. No Borrower is an
"investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940,
as amended.
5.21 Public Utility Holding Company Act. No Borrower is
a "holding company", or an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
5.22 Foreign Ownership. No Borrower is and no legal or
beneficial interest of any shareholder, partner, member or other
constituent in any Borrower (other than ITB) is held by, directly
or indirectly, a "foreign corporation", "foreign partnership",
"foreign trust", "foreign estate", "foreign person", "affiliate" of
a "foreign person" or a "United States intermediary" of a "foreign
person" within the meaning of IRC Sections 897 and 1445, the
Foreign Investments in Real Property Tax Act of 1980, the
International Foreign Investment Survey Act of 1976, the
Agricultural Foreign Investment Disclosure Act of 1978, or the
regulations promulgated pursuant to such Acts or any amendments to
such Acts.
5.23 Solvency. No Borrower is insolvent and there has
been no: (a) assignment made for the benefit of the creditors of
any of them; (b) appointment of a receiver for any of them or for
the property of any of them; or (c) bankruptcy, reorganization or
liquidation proceeding instituted by or against any of them.
5.24 Financial Statements/No Change. Borrowers have
heretofore delivered to Lender copies of their most current
financial statements. Said financial statements were prepared on
a basis consistent with that of preceding years, and each of such
financial statements presents fairly in all material respects the
financial condition of each Borrower as of the respective dates in
question and the results of the respective operations for the
periods indicated. Since the respective dates of such statements,
there has been no material adverse change in the business or
financial condition of any Borrower. No Borrower has any material
contingent liabilities not provided for or disclosed in its
financial statements heretofore delivered to Lender. There has
been no material adverse change in the structure, business
operations, credit, prospects or financial condition of any
Borrower since the date of the most recent financial statements
provided to Lender with respect thereto.
5.25 Accuracy. None of this Agreement, the schedules
furnished contemporaneously herewith, or any document, financial
statement, written credit information, certificate or written
statement prepared by or for, and furnished to, Lender by or on
behalf of any Borrower in connection with the Loan, taken together
on the date hereof, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make
the statements contained herein or therein, in light of the
circumstances under which they are made, not misleading. There is
no fact known to any Borrower which would materially adversely
affect the business, properties, assets, condition or prospects,
financial or otherwise, of any Borrower which has not been
disclosed herein or therein.
5.26 Use of Credit. Borrower is not engaged
principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying Margin Stock, and no part of the
proceeds of the Loan hereunder will be used to buy or carry any
Margin Stock. No part of the proceeds of the Loan hereunder will
be used for any purpose which violates, or which would be
inconsistent with the provisions of Regulations G, T, U or X of the
Board of Governors of the Federal Reserve System as now and from
time to time hereafter in effect.
5.27 No Broker. No brokerage commission or finder's fee
is owing to any broker or finder arising out of any actions or
activity of any Borrower or any Affiliate thereof in connection
with the Loan, other than to Standard Capital Group, Inc. (the
"Broker") who will be paid by Borrower pursuant to a separate
agreement between the Broker and Borrower.
5.28 Commission Orders. The Commission Orders remain in
full force and effect. There are no defaults under the Commission
Orders and no facts or circumstances exist that could result in a
breach of or default under the Commission Orders or that could
constitute a future claim or charge similar to the claims or
charges that formed the underlying basis for the Commission Orders
or that could lead to a revocation of any license, permit, contract
or other right with respect to racing, betting (pari-mutual or
otherwise), gaming or simulcasting activities at any of the
Properties.
5.29 Employee Benefits. Each Plan (other than any
Multiemployer Plan) is in compliance in all material respects with
the applicable provisions of ERISA and the IRC. Each Qualified
Plan and every Multiemployer Plan has been determined by the
Internal Revenue Service to qualify under Section 401 of the IRC,
and the trusts created thereunder have been determined to be exempt
from tax under Section 501 of the IRC, and nothing has occurred
that would cause the loss of such qualification or tax-exempt
status. There are no outstanding liabilities of any Borrower under
Title IV of ERISA with respect to any Plan maintained or sponsored
by any Borrower or any ERISA Affiliate, nor with respect to any
Plan to which any Borrower or any ERISA Affiliate contributes or is
obligated to contribute which could reasonably be expected to have
a Material Adverse Effect on the financial condition of any
Borrower taken as a whole. No Plan subject to Title IV of ERISA
has any Unfunded Benefit Liability which could reasonably be
expected to have a Material Adverse Effect on the financial
condition of any Borrower taken as a whole. No Borrower nor any
ERISA Affiliate has transferred any Unfunded Benefit Liability to
a Person other than such Borrower or an ERISA Affiliate or has
otherwise engaged in a transaction that could reasonably be
expected to have a Material Adverse Effect on the financial
condition of any Borrower taken as a whole. No Borrower nor any
ERISA Affiliate has incurred nor reasonably expects to incur (a)
any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability)
under Sections 4201 or 4243 of ERISA with respect to a
Multiemployer Plan, or (b) any liability under Title IV of ERISA
(other than premiums due but not delinquent under Section 4007 of
ERISA) with respect to a Plan (other than any Multiemployer Plan),
which could, in either event, reasonably be expected to have a
Material Adverse Effect on the financial condition of any Borrower
taken as a whole. No application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the
IRC has been made with respect to any Plan (other than any
Multiemployer Plan). No ERISA Event has occurred or is reasonably
expected to occur with respect to any Plan (other than any
Multiemployer Plan) which could reasonably be expected to have a
Material Adverse Effect on the financial condition of any Borrower.
Each Borrower and each ERISA Affiliate has complied in all material
respects with the notice and continuation coverage requirements of
Section 4980B of the IRC.
5.30 Compliance With The ADA. (a) Borrower and the
Properties are in compliance, in all material respects, with the
requirements of the ADA.
(b) No Borrower has received any notice or complaint
regarding any noncompliance with the ADA of any of the Properties
or of any Borrower's employment practices and, to the best of each
Borrower's knowledge, there has been no litigation threatened in
writing alleging any such noncompliance by any Borrower or any of
the Properties.
5.31 The El Rancho Property. The El Rancho Property
consists of approximately 20.86 contiguous acres with approximately
335 feet of frontage along Las Vegas Boulevard South. As of the
Closing Date, there is currently a thirteen (13) story hotel tower
and a three (3) story parking structure on the El Rancho Property.
The improvements on the El Rancho Property are closed and not
operating and comply in all material respects with all Applicable
Laws. No applications for construction, gaming or other activities
are pending at or with respect to the El Rancho Property.
5.32 The Freehold Property. The Freehold Property
consists of approximately 57 contiguous acres. At the Closing
Date, it consists of 10 primary buildings (and numerous ancillary
buildings such as ticket booths), one-half mile of harness oval, a
paddock area and parking areas. The improvements on the Freehold
Property comply in all material respects with all Applicable Laws.
5.33 The Garden State Property. The Garden State
Property consists of approximately 222.75 contiguous acres. At the
Closing Date, it consists of approximately 1,280,000 square feet of
buildings divided between 10 buildings including stable, grandstand
and paddock area as well as a one mile oval track with a 7/8ths
mile inside track and a practice track which is 3/8 mile oval. The
improvements on the Garden State Property comply in all material
respects with all Applicable Laws.
5.34 The Adjacent Garden State Property. The Adjacent
Garden State Property consists of approximately 56 contiguous acres
of vacant land.
5.35 Atlantic City Harness, Inc. As of the Closing
Date, ACH does not own any property other than a Permit to run
races at the Freehold Property and the only involvement that it has
with the Borrowers or the Properties is (a) such Permit to run
races at the Freehold Property, and (b) that it is a subsidiary of
ITB.
5.36 Permits. Borrower has furnished Lender with true,
correct and complete copies of all Permits, all of which Permits
are in full force and effect. Schedule 3 annexed hereto contains
a true, correct and complete schedule of all Permits existing as of
the date hereof. No Borrower and no other party to any of the
Permits is in default or violation thereunder in any material
respect.
5.37 Other Agreements. In addition to the Leases,
Contracts and Permits, Borrower has furnished Lender with true,
correct and complete copies of all other material agreements and
documents relating to the Properties (collectively, the "Other
Agreements"), including, without limitation, (i) the Adjacent
Garden State Contract, (ii) all agreements which are the subject of
the Subordination Agreement, and (iii) all agreements which are the
subject of the Senior Lender Consent Agreement.
5.38 Due Diligence Materials. Prior to the Closing
Date, Lender sent to Borrower a Preliminary Document Request List,
a copy of which is annexed hereto as Schedule 4. Borrower has
delivered to Lender true, correct and complete copies of all
documents and agreements falling into the descriptive categories
contained in such Preliminary Document Request List, other than
those descriptive categories marked "none" on said Schedule 4.
With respect to such descriptive categories marked "none" on said
Schedule 4, no documents or agreements exist that fall into the
same or that otherwise have not been delivered pursuant to another
such descriptive category.
5.39 Qualification Investigation. With respect to the
qualification investigation of NPD, Inc., DeSantis and Coehlo
currently being conducted by the New Jersey Racing/Gaming
Authorities, Borrower is not aware of any facts or circumstances
that could reasonably lead to a finding of disqualification of any
such Persons and Borrower is diligently pursuing the completion
thereof.
ARTICLE 6
Affirmative Covenants
Each Borrower hereby covenants and agrees that so long as
any of the Obligations remain outstanding or unpaid such Borrower
shall observe, comply with, perform, do, make and deliver each and
all of the terms, conditions, provisions, acts, things, documents,
instruments, agreements, and certificates hereinafter described in
this Article 6.
6.1 Payment of Obligations. Borrower shall pay and
otherwise perform the Obligations in accordance with the terms of
the Loan Documents.
6.2 Existence; Compliance with Law. Each Borrower will
do all things necessary to preserve and keep in full force and
effect its existence, and material franchises, rights and
privileges, and will timely comply in all material respects with
all regulations, rules, ordinances, statutes, orders and decrees of
any governmental authority or court applicable to it and/or the
Properties or any part thereof (including the applicable
Racing/Gaming Authorities and the Securities and Exchange
Commission).
6.3 Insurance.
6.3.1 Borrower, at its expense, shall maintain the
following insurance coverages with respect to each of the
Properties, any of which may be covered under a blanket policy,
provided that all of the requirements for such coverage set forth
below are satisfied under such blanket policy:
(a) Insurance against loss or damage under a Special
Causes of Loss ("All Risk") form or equivalent including flood
and earthquake perils, with such endorsements as Lender may
from time to time reasonably require and which are customarily
required by institutional lenders with respect to similar
properties similarly situated, in an amount not less than the
greater of (i) the Loan Amount, (ii) 100% of the replacement
value of the improvements on each Property (exclusive of
footings and foundations) and all personal property, without
regard to depreciation, and (iii) such other amount as is
necessary to prevent any reduction in such policy by reason of
and to prevent any Borrower, Lender or any other insured
thereunder from being deemed to be a co-insurer. The policy
will include Agreed Amount (waiving co-insurance) and Building
Ordinance extensions.
(b) Commercial General Liability (1993 form or
equivalent) insurance against claims for personal and bodily
injury and/or death to one or more persons or property damage,
occurring on, in or about any of the Properties or the
adjoining streets, sidewalks and passageways and as a result
of all operations, with a combined single limit of no less
than One Million Dollars ($1,000,000) per occurrence and Two
Million Dollars ($2,000,000) general aggregate ("per
location"). The policy will include Liquor Legal Liability
and Employee Benefit Legal Liability extensions.
(c) Combined Business Income (including Rents)/Extra
Expense coverage with a limit representing no less than one
hundred percent (100%) of the projected annual profits plus
continuing expenses (including debt service) for all
operations. Such coverage shall include extensions for off
premises power losses ($1,000,000) and an extended period of
indemnity to ninety (90) days.
(d) Insurance against loss or damage from (i) leakage of
sprinkler systems, and (ii) explosion of steam boilers, air
conditioning equipment, pressure vessels or similar apparatus
now or hereafter installed in or at any of the Properties,
including production equipment, written under a comprehensive
form with a combined direct/indirect limit of no less than
Twenty-Five Million Dollars ($25,000,000).
(e) Flood insurance in an amount equal to the full
insurable value of each Property or the maximum amount
available, whichever is less, if all or any portion of any
Property is located in an area which has been designated by
the Secretary of Housing and Urban Development as having
special flood hazards, and if flood insurance is available
under the National Flood Insurance Act.
(f) Worker's compensation insurance with respect to the
employees of each Borrower, as required by applicable law in
each state of operation.
(g) An Automobile Liability policy written under
coverage Symbol "1", providing a One Million Dollar
($1,000,000) combined single limit for bodily injury and
property damage covering all owned, non-owned and hired
vehicles of each Borrower. If any Property is subject to
garage operations, the applicable Borrower will also maintain
Garage Liability with One Million Dollar ($1,000,000) limit
and Garagekeepers Legal Liability with a Five Hundred Thousand
Dollar ($500,000) limit for comprehensive and collision
coverages to vehicles in such Borrower's care, custody and
control.
(h) An Umbrella Liability policy with a limit of not
less than Twenty-Five Million Dollars ($25,000,000), which
shall be increased to not less than Forty Million Dollars
($40,000,000) at the time when the El Rancho Property opens to
the public as a hotel and/or casino, providing excess coverage
over all limits and coverages indicated in subsections (b),
(f), and (g) above. The limits can be obtained by a
combination of Primary and Excess Umbrella policies, provided
that all layers follow form with the underlying policies
indicated in subsections (b), (f) and (g) above and are
written on an "occurrence form."
(i) Such other insurance as may from time to time be
reasonably required by Lender against other insurable hazards,
which at the time are commonly insured against and generally
available in the case of similar properties and operations
similarly situated.
6.3.2 No Borrower shall carry separate insurance,
concurrent in kind or form or contributing in the event of loss,
with any insurance required under this Section; provided, however,
that notwithstanding the foregoing, any Borrower may carry
additional insurance not required hereunder, provided any such
insurance affecting any Property shall be for the mutual benefit of
the applicable Borrower and Lender as their respective interests
may appear, and shall be subject to all other provisions of this
Section.
6.3.3 All insurance required by this Section shall be in
such forms and amounts and with such deductibles as, from time to
time, shall be reasonably acceptable to Lender, under valid and
enforceable policies issued by financially responsible insurers
authorized to do business in the State in which each Property is
located, which have a "claims paying ability" rating from each of
the insurance rating agencies in one of their respective two (2)
highest rating categories (i.e., minimum AA rating, or the
equivalent, if such rating system shall hereafter be altered or
replaced) and which are approved in writing by Lender. Originals
or certified copies of all insurance policies shall be delivered to
and held by Lender. All such policies shall name Lender as an
additional insured, shall provide for loss payable to Lender and
shall contain: (i) a standard "non-contributory mortgagee"
endorsement or its equivalent relating, inter alia, to recovery by
Lender notwithstanding the negligent or willful acts or omissions
of any Borrower; (ii) a waiver of subrogation endorsement as to
Lender; (iii) an endorsement indicating that neither Lender nor any
Borrower shall be or shall be deemed to be a co-insurer with
respect to any risk insured by such policies and shall provide for
a deductible per loss of an amount not more than the lesser of five
percent (5%) or that which is customarily maintained by owners of
similar properties similarly situated; and (iv) a provision that
such policies shall not be canceled or amended, including, without
limitation, any amendment reducing the scope of limits of coverage,
without at least thirty (30) days' prior written notice to Lender
in each instance. Each Borrower shall, promptly upon receipt but
in no event less than ten (10) days prior to the expiration date of
any of the insurance policies, deliver to Lender originals or
certified copies of renewals of such policies (or certificates
evidencing such renewals) bearing notations evidencing the payment
of the premiums therefor.
6.3.4 If any Borrower fails to maintain and deliver to
Lender the original policies or certificates of insurance required
hereunder, or to pay the premiums for same, Lender may, at its
option, procure such insurance, and Borrower shall reimburse Lender
in the amount of all such premiums thereon promptly upon demand by
Lender, together with interest thereon at the Default Rate until
paid, and such sum shall be a part of the Obligations secured by
the Loan Documents.
6.4 Maintenance of Properties. Borrower shall, at all
times, maintain each Property in good operating order and
condition, subject to reasonable wear and tear, and shall promptly
make, from time to time, all repairs, renewals, replacements,
additions and improvements in connection therewith which are
necessary or desirable to such end.
6.5 Impositions and Other Claims. Borrower, from time to
time when the same shall become due and payable, shall pay and
discharge all taxes of every kind and nature, all general and
special assessments, levies, permits, inspection and license fees,
Taxes and charges, and all other public charges, whether of a like
or different nature, imposed upon or assessed against each Property
or any part thereof, or upon the revenues, rents, issues, income
and profits of any Property or arising in respect of the occupancy,
use or possession thereof, as well as all lawful claims for labor,
materials and supplies or otherwise which could become a lien,
claim or encumbrance on each Property (collectively, the
"Impositions"), unless such item or items are the subject of a
Permitted Contest (and then only to the extent that such item(s)
continue to satisfy all conditions and requirements of a Permitted
Contest). If Borrower fails to pay any Impositions when due,
Lender may, at its option, pay such amounts, and Borrower shall
reimburse Lender therefor promptly upon demand by Lender, together
with interest thereon at the Default Rate until paid, and such sum
shall be a part of the Obligations secured by the Loan Documents.
6.6 Inspection. Subject to the rights of tenants,
Lender and its authorized agents may enter upon and inspect each
Property at all reasonable times upon reasonable prior notice
(except in the event of an emergency) given orally or in writing to
Borrower. In making any such inspection, Lender shall use its best
efforts not to unreasonably interfere with or disrupt any
Borrower's or any tenant's conduct of business. Lender, at
Borrower's expense, and as reasonably necessary, may retain one or
more independent consultants to periodically inspect the
Properties.
6.7 Books and Records/Audits. Borrower shall keep and
maintain at all times at its chief executive offices stated above,
or at such other place as Lender may approve in writing, complete
and accurate books of accounts and records adequate to reflect the
results of the operation of each of the Properties and to provide
the financial statements required to be provided to Lender pursuant
to Section 6.8 below and copies of all written contracts,
correspondence, reports of any Borrower's independent consultants,
if any, and all other documents affecting or relating to any of the
Properties. Lender and its designated agents shall have the right
to inspect and copy any of the foregoing. Additionally, Lender may
audit and determine, in Lender's sole and absolute discretion, the
accuracy of any Borrower's records and computations. The costs and
expenses of the audit shall be paid by Borrower if the audit
discloses a monetary variance in any financial information or
computation equal to or greater than the greater of: (i) five
percent (5%); or (ii) $15,000 more than any computation submitted
by any Borrower.
6.8 Financial Statements and Other Reporting
Requirements. Borrower shall furnish to Lender such financial
statements and other financial information as Lender may from time
to time request. All such financial statements shall show all
material contingent liabilities and shall accurately and fairly
present in all material respects the results of operations and the
financial condition of each Property at the dates and for the
period indicated. Without limitation of the foregoing, Borrower
shall provide Lender with the following:
6.8.1 Monthly Financial Statements. As soon as
available, but in any event within twenty (20) days after the end
of each calendar month, Borrower shall furnish to Lender internal
profit and loss statements for the prior month, and as soon as
available, but in any event within forty-five (45) days after the
end of each calendar month, Borrower shall furnish to Lender
statements of the operations of each Property for the same month to
which the most recent internal profit and loss statement delivered
applies, consisting of (a) a current rent roll for each of the
Properties, (b) operating statements for each Property, and (c) a
consolidated balance sheet for Borrower, all of the foregoing as of
the last day of the prior calendar month, and including a year-to-date
compilation and a comparison to the corresponding period of
the immediately preceding calendar year, all in reasonable detail,
each such statement to be certified in a certificate of the chief
executive officer, president or chief financial officer of ITB as
fairly representing the results of operations of the Properties as
at its date and for such prior month and, to the extent GAAP is
applicable, as having been prepared in accordance with GAAP
(subject to year-end audit adjustments). Notwithstanding anything
to the contrary contained herein, to the extent that any of the
foregoing monthly statements (or any statements containing
substantially the same information) shall be required to be
delivered to the Securities and Exchange Commission or any
Racing/Gaming Authority by a date that is prior to the date on
which the same are required to be delivered to Lender hereunder,
then such statements shall be required to be delivered to Lender
hereunder within three (3) Business Days following such earlier
date as the same are required to be delivered to the Securities and
Exchange Commission or such Racing/Gaming Authority (but in no
event later than when the same are required to be delivered
hereunder, absent this provision).
6.8.2 Quarterly Financial Statements. Quarterly, as
soon as available, but in any event not later than forty-five (45)
days following the end of each of ITB's fiscal quarters during the
Term, Borrower shall furnish to Lender statements of the operations
of each Property for the prior fiscal quarter, consisting of (a) a
balance sheet, (b) a statement of income, (c) a statement of
changes in cash flow, (d) a statement of stockholders' equity, and
(e) a current rent roll for each of the Properties, all of the
foregoing as of the last day of the prior fiscal quarter, and
including a year-to-date compilation and a comparison to the
corresponding period of the immediately preceding calendar year,
all in reasonable detail, each such statement to be certified in a
certificate of the chief executive officer, president or chief
financial officer of ITB as fairly representing the results of
operations of the Properties as at its date and for such prior
fiscal quarter and, to the extent GAAP is applicable, as having
been prepared in accordance with GAAP (subject to year-end audit
adjustments). Notwithstanding anything to the contrary contained
herein, to the extent that any of the foregoing quarterly
statements (or any statements containing substantially the same
information) shall be required to be delivered to the Securities
and Exchange Commission or any Racing/Gaming Authority by a date
that is prior to the date on which the same are required to be
delivered to Lender hereunder, then such statements shall be
required to be delivered to Lender hereunder within three (3)
Business Days following such earlier date as the same are required
to be delivered to the Securities and Exchange Commission or such
Racing/Gaming Authority (but in no event later than when the same
are required to be delivered hereunder, absent this provision).
6.8.3 Annual Financial Statements. Annually, as soon as
available, but in any event not later than ninety (90) days
following the end of each of ITB's fiscal years during the Term
(which fiscal year ends each June 30), Borrower shall furnish to
Lender statements of the operations of each Property for the prior
fiscal year, consisting of (a) a balance sheet, (b) a statement of
income, (c) a statement of changes in cash flow, (d) a statement of
stockholders' equity, and (e) a current rent roll for each of the
Properties, including a comparison to the fiscal year prior to the
fiscal year covered by such statements, prepared, to the extent
GAAP is applicable, in accordance with GAAP, in reasonable detail,
and audited (other than with respect to the rent rolls deliverable
under the foregoing clause (e)) by a firm of independent certified
public accountants reasonably satisfactory to Lender (it being
agreed that the firm of Moore Stephens, P.C. is satisfactory to
Lender). All statements of the certified public accountants
delivered pursuant to this Section 6.8.3 shall be accompanied by a
certificate of the accountants addressed to Lender stating that
such accountants do not have knowledge of the existence of any
Default and which such certificate shall read as follows:
"We hereby acknowledge that the financial statements to which
this certification relates shall be made available to CREDIT
SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC. CREDIT SUISSE FIRST
BOSTON MORTGAGE CAPITAL LLC intends to rely on such statements
and [Borrower] has knowledge of such reliance. This
acknowledgment is made pursuant to 1.b.(3) of New Jersey P.L.
1995, Chapter 49."
Notwithstanding anything to the contrary contained herein, to the
extent that any of the foregoing annual statements (or any
statements containing substantially the same information) shall be
required to be delivered to the Securities and Exchange Commission
or any Racing/Gaming Authority by a date that is prior to the date
on which the same are required to be delivered to Lender hereunder,
then such statements shall be required to be delivered to Lender
hereunder within three (3) Business Days following such earlier
date as the same are required to be delivered to the Securities and
Exchange Commission or such Racing/Gaming Authority (but in no
event later than when the same are required to be delivered
hereunder, absent this provision).
6.8.4 Other Reporting Requirements.
(a) Borrower shall deliver to Lender ITB's Form 10-Q
Quarterly Reports, Form 10-K Annual Reports, Form 8-K Current
Reports and any other filings made by any Borrower with the
Securities and Exchange Commission, if any, as soon as the same are
filed, or any other information that is provided by any Borrower to
its shareholders, and any other report reasonably requested by
Lender relating to any of the Collateral and/or the financial
condition of any Borrower.
(b) Each month, together with the financial statements
provided pursuant to Section 6.8.1 hereof, Borrower shall deliver
to Lender a certificate signed by ITB's chief financial officer
certifying: (i) that all financial statements delivered or caused
to be delivered to Lender hereunder have been prepared in
accordance with GAAP and fairly present, in all material respects,
the financial condition of each Borrower (subject to the absence of
footnotes and audit adjustments); (ii) that each Borrower is in
timely compliance with all of its covenants and agreements
hereunder; (iii) that the representations and warranties of
Borrower contained in this Agreement and the other Loan Documents
are true and correct in all material respects on and as of the date
of such certificate, as though made on and as of such date (except
to the extent that such representations and warranties relate
solely to an earlier date and except to the extent described in
such certificate); (iv) that on the date of delivery of such
certificate to Lender there does not exist any condition or event
that constitutes an Event of Default (or, in each case, to the
extent of any non-compliance, describing such non-compliance as to
which he or she may have knowledge and what action Borrower has
taken, is taking, or proposes to take with respect thereto); (v)
that each Borrower is in compliance with all gaming, racing and
other Applicable Laws in all material respects, and (vi) as to
Borrower's Tangible Consolidated Net Worth as of the last day of
the prior calendar month.
(c) Each Borrower shall issue written instructions to
its independent certified public accountants authorizing them to
communicate with Lender and to release to Lender whatever financial
information concerning any Borrower that Lender may request. Each
Borrower hereby irrevocably authorizes and directs all auditors,
accountants, or other third parties to deliver to Lender, at
Borrowers' expense, copies of Borrowers' financial statements,
papers related thereto and other accounting records of any nature
in their possession, and to disclose to Lender any information they
may have regarding any Borrower's business affairs and/or financial
conditions.
(d) Throughout the Term, Borrower shall immediately
deliver to Lender all notices and other written communications
received by any Borrower from the Securities and Exchange
Commission, any Racing/Gaming Authority or any other governmental
or quasi-governmental agency, except for such notices and other
written communications which could not reasonably be expected to
adversely affect any Borrower, any Borrower's operations at any
Property or any of the Collateral.
6.8.5 Employee Benefits. (a) Borrower shall deliver to
Lender a written statement by the chief financial officer of ITB
specifying the nature of any of the following events and the
actions which Borrower proposes to take with respect thereto within
ten (10) days of becoming aware of any of them, and when known, any
action taken or threatened by the Internal Revenue Service, PBGC,
the Department of Labor or other party with respect thereto: (i)
an ERISA Event with respect to any Plan; (ii) the incurrence of an
obligation to pay additional premiums to the PBGC under Section
4006(a) (3)(E) of ERISA with respect to any Plan; and (iii) any
lien on the assets of any Borrower arising in connection with any
Plan.
(b) Borrower shall also promptly furnish to Lender
copies of any of the following prepared or received by any Borrower
or any ERISA Affiliate: (i) each annual report (Internal Revenue
Service Form 5500 series) and all accompanying schedules, actuarial
reports, financial information concerning the financial status of
each Plan, and schedules showing the amounts contributed to each
Plan by or on behalf of any Borrower or its ERISA Affiliates for
the most recent three (3) plan years; (ii) except with respect to
the termination of FRA's existing Plan, all notices of intent to
terminate or to have a trustee appointed to administer any Plan;
(iii) all written demands by the PBGC under Subtitle D of Title IV
of ERISA; (iv) all notices required to be sent to employees or to
the PBGC under Section 302 of ERISA or Section 412 of the IRC; (v)
all written notices received with respect to a Multiemployer Plan
concerning: (A) the imposition or amount of withdrawal liability
pursuant to Section 4202 of ERISA, (B) a termination described in
Section 4041A of ERISA, or (C) a reorganization or insolvency
described in Subtitle E of Title IV of ERISA; (vi) the adoption of
any new Plan that is subject to Title IV of ERISA or Section 412 of
the IRC by any Borrower or any ERISA Affiliate; (vii) the adoption
of any amendment to any Plan that is subject to Title IV of ERISA
or Section 412 of the IRC, if such amendment results in a material
increase in benefits or Unfunded Benefit Liability; or (viii) the
commencement of contributions by any Borrower or any ERISA
Affiliate to any Plan that is subject to Title IV of ERISA or
Section 412 of the IRC.
6.8.6 Compliance With The ADA. (a) Borrower shall
promptly provide Lender with copies of all written notices or
claims which may be received by any Borrower involving claims made
by any individual, entity or governmental agency as to any alleged
noncompliance of any Property with the requirements of the ADA.
(b) Borrower shall observe and comply in all material
respects with all obligations and requirements of the ADA as it
applies to the Properties, which shall include, without limitation,
installing or constructing all improvements or alterations which
may be necessary to cause the Properties to be accessible to all
persons if the use of any of the Properties or any part thereof
becomes a "public accommodation", as defined in the ADA, or in the
event additional building improvements are added or incorporated
into the existing improvements, and making any reasonable
accommodations which may be necessary to accommodate the needs or
requirements of any existing or future employee of any Borrower.
6.8.7 Audits. If Borrower fails to furnish or cause to
be furnished promptly any report required by this Section 6.8 and
such failure shall continue for ten (10) days following notice to
Borrower of such failure, or if Lender reasonably deems such
reports to be unacceptable and any inadequacy or deficiency therein
is not corrected to Lender's reasonable satisfaction within ten
(10) days following notice to Borrower of such inadequacy or
deficiency, Lender may elect (in addition to exercising any other
right and remedy) to conduct an audit of all books and records of
Borrower, and to prepare the statement or statements which Borrower
failed to procure and deliver or which was unacceptable. Such
audit shall be made and such statement or statements shall be
prepared by an independent firm of certified public accountants to
be selected by Lender. Borrower shall pay all reasonable third
party expenses of the audit and other services, which expenses
shall be immediately due and payable following notice thereof to
Borrower.
6.9 Notice of Litigation or Default. Borrower shall
provide Lender with (a) notice of any litigation, arbitration, or
other proceeding or governmental investigation pending or, to its
best knowledge, threatened against or relating to any Borrower or
any Property (any of the foregoing, a "Litigation"), but only in
the event that (i) the aggregate amount at issue (if commenced by
a Borrower) or alleged to be at issue (if commenced against a
Borrower) in any one Litigation is in excess of $50,000, or (ii)
the aggregate amount at issue (if commenced by a Borrower) or
alleged to be at issue (if commenced against a Borrower) in all
Litigations is in excess of $250,000 at any one time, or (iii) if
there are five (5) or more Litigations at any one time; (b) a copy
of all notices of default, termination notices or the like received
by it under any material agreements to which it is a party, or
received by it with respect to violations of laws, regulations,
codes, ordinances and the like relating to any Borrower or any
Property; (c) notice of the occurrence of any Default or Event of
Default of which it has knowledge; (d) any notice of default given
or received by it in connection with any Property, including under
any Lease, Contract, Permit or Other Agreement; and (e) notice of
the occurrence of any development, event or change in condition
(financial or otherwise) affecting or involving any Borrower or any
Property which would be reasonably likely to have a Material
Adverse Effect. Each notice pursuant to this Section 6.9 shall be
accompanied by a statement of a senior executive officer of the
Person sending such notice setting forth details of the occurrence
referred to therein and stating what action, if any, such Person
proposes to take with respect thereto, as well as copies of all
material documents and written information related to the
occurrence referred to therein.
6.10 Single Purpose Entity.
(a) Each Borrower (other than ITB) is, and will
hereafter continue to be, a duly formed and existing Single Purpose
Entity. For the purposes hereof, a "Single Purpose Entity" means
a Person that (i) was organized for the purpose of acquiring and
directly holding an ownership interest in the Collateral owned by
it; (ii) does not have any assets other than those related to its
interest in the Collateral owned by it or any indebtedness other
than the Loan or as otherwise permitted under this Agreement or the
other Loan Documents; (iii) has its own separate books and records
and has its own accounts, in each case which are separate and apart
from the books and records and accounts of any other Person; (iv)
does not conduct any business other than the ownership, management
and operation of the Collateral owned by it and activities
incidental thereto, which Collateral generates all of the gross
income of such Person, and (v) holds itself out as being an entity
separate and apart from any other Person.
(b) All customary formalities regarding the separate and
independent existence of each Borrower will hereafter continue to
be observed. No assets have been, nor hereafter will be,
transferred between any Borrower and any other Borrower or any of
its Affiliates without fair consideration and proper documentation.
(c) Each Borrower shall accurately maintain its
financial statements and accounting records, separate from those of
the other Borrowers, any Affiliates and any other Person. The
assets of each Borrower have not at any time been commingled, and
hereafter will not be commingled, with the assets of any other
Borrower, any Affiliates or any other Person. Each Borrower will
accurately maintain its own bank accounts, payroll and separate
books of account.
(d) Each Borrower will pay its own liabilities from its
own separate assets.
(e) Each Borrower and each Affiliate of each Borrower
will identify themselves in all dealings with the public under such
Borrower's or such Affiliate's own name and as separate and
distinct entities. Each Borrower and each Affiliate of each
Borrower will not identify themselves as being a division or a part
of any other entity. Each Borrower and each Affiliate of each
Borrower will not identify any other Borrower or any Affiliate as
being a division or part of each other.
(f) Each Borrower will continue to be adequately
capitalized in light of the nature of its business.
(g) Except as expressly permitted or required under this
Agreement or any of the other Loan Documents, (i) no Borrower will
incur, create, assume, become liable in any manner for, or
guarantee, any liabilities of any other Borrower, any Affiliate or
any other Person, (ii) the liabilities of each Borrower have not
been, and will not be, assumed or guaranteed by any other Borrower,
any Affiliate or any other Person, (iii) no Borrower will acquire
obligations or securities of any other Borrower or any Affiliate,
and (iv) no Borrower will make any loan or advance to any other
Borrower, any Affiliate or any other Person.
6.11 Foreign Ownership. No Borrower is nor will be and
no legal or beneficial interest of any shareholder, partner, member
or other constituent in any Borrower (other than ITB) is or will be
held by, directly or indirectly, a "foreign corporation", "foreign
partnership", "foreign trust", "foreign estate", "foreign person",
"affiliate" of a "foreign person" or a "United States intermediary"
of a "foreign person" within the meaning of IRC Sections 897 and
1445, the Foreign Investments in Real Property Tax Act of 1980, the
International Foreign Investment Survey Act of 1976, the
Agricultural Foreign Investment Disclosure Act of 1978, or the
regulations promulgated pursuant to such Acts or any amendments to
such Acts.
6.12 Tangible Consolidated Net Worth. Throughout the
Term, Borrower shall maintain a Tangible Consolidated Net Worth
equal to at least the then applicable Tangible Consolidated Net
Worth Threshold, which shall be determined as of the last day of
each calendar month during the Term. Borrower shall promptly
deliver to Lender, from time to time, all information requested by
Lender to substantiate Borrower's then Tangible Consolidated Net
Worth.
6.13 Development of the El Rancho Property. Subject to
the provisions of Section 7.15 hereof, Borrower shall either (i)
diligently use its reasonable best efforts to proceed with the
development of the El Rancho Property in substantial compliance
with the plans and budget provided to Lender pursuant to Section
4.1(r) hereof, subject to the receipt of regulatory and gaming
approvals, financial feasibility review and satisfactory financing
arrangements, or (ii) otherwise use its reasonable best efforts to
develop or refurbish the El Rancho Property for use thereof in such
manner as Borrower shall propose and Lender shall approve in
Lender's reasonable discretion.
6.14 Sale of Adjacent Garden State Property. (a)
Borrower shall diligently use its reasonable best efforts to
consummate the sale of the Adjacent Garden State Property in
accordance with the terms of the Adjacent Garden State Contract.
Upon such sale of the Adjacent Garden State Property (whether
pursuant to the Adjacent Garden State Contract or otherwise), all
proceeds thereof shall be applied first, to satisfy the Garden
State Loans (or such Garden State Loans shall be assumed by the
purchaser of the Adjacent Garden State Property and the amount
payable to GSRT in connection with the sale of the Adjacent Garden
State Property shall be reduced on a dollar-for-dollar basis), and
second, the remainder, if any, (being referred to herein as the
"Remaining Garden State Proceeds") shall be applied as follows: (i)
the first $2,240,000 of such Remaining Garden State Proceeds shall
be deposited into the Working Capital Account to be used as set
forth in Section 2.7.6 hereof, and (ii) any remainder of the
Remaining Garden State Proceeds after the deposit referred to in
the preceding clause (i), shall be deposited into the El Rancho
Reserve Account to be used as set forth in Section 2.7.7 hereof,
provided, however, that to the extent that any such proceeds are
Garden State Contingent Proceeds, such proceeds shall be deposited
into the El Rancho Account to be used as set forth in Section 2.7.7
hereof. Borrower shall instruct the purchaser and escrow agent
under the Adjacent Garden State Contract (or under any New Adjacent
Garden State Contract) to pay to and deposit all such proceeds
directly with the Depository. Promptly (and in any event within
three (3) Business Days) following the consummation of any sale of
the Adjacent Garden State Property, Borrower shall deliver to
Lender a copy of the closing statement relating thereto, certified
by Borrower to be true, complete and correct.
(b) In the event that the closing shall fail to occur
under the Adjacent Garden State Contract, thereafter Borrower shall
diligently use its reasonable best efforts to identify a new
purchaser of the Adjacent Garden State Property and to negotiate a
new contract for the sale thereof, which new contract shall be
subject to Lender's reasonable approval (any such contract, the
"New Adjacent Garden State Contract"). Following the execution of
any such New Adjacent Garden State Contract, Borrower shall
diligently use its reasonable best efforts to consummate the sale
thereunder and, upon such closing, all proceeds thereof shall be
applied first, to satisfy the Garden State Loans, and second, the
remainder, if any (the "Substitute Remaining Garden State
Proceeds"), shall be applied as follows: (i) the first $2,240,000
of such Substitute Remaining Garden State Proceeds shall be
deposited into the Working Capital Account to be used as set forth
in Section 2.7.6 hereof, and (ii) any remainder of the Substitute
Remaining Garden State Proceeds after the deposit referred to in
the preceding clause (i), shall be deposited into the El Rancho
Reserve Account to be used as set forth in Section 2.7.7 hereof.
(c) Promptly (and in any event within three (3) Business
Days) following receipt from any holder of or lender under either
Garden State Loan of any material notice (other than a monthly
payment statement) relating to a Garden State Loan or the Adjacent
Garden State Property, Borrower shall deliver to Lender a copy
thereof. Borrower agrees that Lender shall have the right to cure
any default of GSRT under either of the Garden State Loans. In the
event that Borrower shall receive a notice of default under any
Garden State Loan stating that Borrower is in default under such
loan as a result of the execution, delivery or recording of the
Mortgage in respect of the Adjacent Garden State Property, then
provided that such default shall be the only default under the
applicable Garden State Loan, Lender shall cause the release of
record of the Mortgage, Assignment of Leases and any Uniform
Commercial Code Financing Statements in respect of the Adjacent
Garden State Property (provided that such release of record shall
not effect a total release of such Mortgage, Assignment of Leases
and Uniform Commercial Code Financing Statements in respect of the
Adjacent Garden State Property unless the existence of even
unrecorded such documents against the Adjacent Garden State
Property shall constitute a default under the applicable Garden
State Loan). Notwithstanding anything to the contrary set forth in
this Agreement, a default under any Garden State Loan arising
solely as a result of the execution, delivery or recording of the
Mortgage against the Adjacent Garden State Property shall not
constitute a Default or Event of Default.
(d) Simultaneously with the payment to Lender in
accordance with the terms hereof of the Remaining Garden State
Proceeds or the Substitute Remaining Garden State Proceeds, as the
case may be, Lender shall, at Borrower's sole cost and expense,
release of record the Mortgage, the Assignment of Leases and any
Uniform Commercial Code Financing Statements in respect of the
Adjacent Garden State Property.
(e) Borrower has disclosed to Lender that it intends to
refinance the Garden State Loans with a single loan by Sun National
Bank in the original principal amount of $6,000,000, to be secured
by a mortgage on the Adjacent Garden State Property in replacement
of the Garden State Lien and the Garden State Unrecorded Interest
(the "Garden State Sun Mortgage"; and the loan secured thereby, the
"Garden State Sun Loan"). Subject to satisfaction of the
requirements of Section 7.2(g) hereof, Lender hereby consents to
the Garden State Sun Mortgage and the Garden State Sun Loan,
notwithstanding anything to the contrary set forth herein or in any
other Loan Document. Additionally, Lender hereby agrees that,
subject to the immediately preceding sentence, upon (i)
confirmation from the Title Company issuing the Title Policy with
respect to the Adjacent Garden State Property that it has received
all necessary documents and assurances that the Garden State Lien
and the Garden State Unrecorded Lien can then immediately be
removed of record and/or discharged, as the case may be, and (ii)
an agreement from Sun National Bank, in form and substance
reasonably satisfactory to Lender, that (A) it consents to the
Mortgage on the Adjacent Garden State Property and that the same
shall not result in a default under the Garden State Sun Mortgage,
and (B) it shall give Lender copies of all notices of default sent
under the Garden State Sun Mortgage and an opportunity to cure the
same, Lender shall execute and deliver to Sun National Bank a
subordination agreement, pursuant to which the Mortgage is
subordinated to the Garden State Sun Mortgage. Simultaneously with
the occurrence of all of the foregoing, Borrower agrees that (I)
all but the first (1st) two (2) sentences of Section 6.14(c) shall
be deemed deleted from this Agreement, (II) all references in this
Agreement to the Garden State Loan or the Garden State Loans shall
be deemed to be amended to refer to the Sun National Loan, and
(III) all references in this Agreement to the Garden State Lien or
the Garden State Unrecorded Interest shall be deemed amended to
refer to the Garden State Sun Mortgage.
6.15 Circa Property. (a) Upon the written request of
Lender given within ninety (90) days following the Closing Date,
ITB shall cause Circa to execute, deliver and record a Mortgage, an
Assignment of Leases and such Uniform Commercial Code Financing
Statements as Lender may reasonably require against the Circa
Property and satisfy the other requirements of Article 4 hereof
that are applicable to the Properties (including Sections 4.4, 4.5,
4.6, 4.7, 4.8, 4.9, 4.10, 4.18, 4.19, 4.20 and 4.24 hereof). Upon
such request, the Circa Property shall be deemed to be a Property
for all purposes of this Agreement and the other Loan Documents
(including Articles 5, 6, 7 and 8 hereof).
(b) Promptly (and in any event within three (3) Business
Days) following Borrower's receipt of any material notice relating
to the Circa Property, Borrower shall deliver to Lender a copy
thereof.
6.16 Gaming and Racing Applications. Promptly (and in
any event within three (3) Business Days) following Borrower's
delivery to any applicable authority of an application for any
material new, amended or renewal Permit in connection with any
Property, Borrower shall deliver a copy thereof to Lender.
Additionally, Lender shall be promptly copied on (i) all
correspondence sent or received by any Borrower in connection with
any such material new, amended or renewal Permit, and (ii) all
material correspondence sent or received by any Borrower to or from
any Racing/Gaming Authority.
6.17 ITB to Reserve Stock. ITB shall at all times
reserve and keep available, free from preemptive rights, out of its
authorized but unissued ITB Stock or out of ITB Stock held in ITB's
treasury or a combination of both, for the purpose of effecting the
conversion of the Conversion Amount and permitting the exercise of
the Warrants, the full number of shares of ITB Lender Stock
issuable upon conversion of the Conversion Amount and exercise of
the Warrants. ITB covenants that all shares of ITB Lender Stock
which are issued upon conversion pursuant to Section 2.10.1 hereof
and upon exercise of the Warrants will be duly authorized and will,
upon issue, be validly issued and fully paid and non-assessable
with no liability on the part of the holders thereof. ITB will
take all such action as may be necessary to insure that such shares
of ITB Lender Stock may be so issued without violation of any
applicable law or regulation, or of any requirements of any
securities exchange upon which the ITB Lender Stock may be issued.
6.18 Taxes on Conversion and Exercise. ITB will pay any
and all taxes and charges (other than taxes on or measured by
income, capital or franchises or similar taxes) that may be payable
in respect of the issuance or delivery of the ITB Lender Stock to
Lender upon conversion of the Conversion Amount pursuant to Section
2.10.1 hereof and exercise of the Warrants.
6.19 Borrower's Cooperation. Each Borrower agrees that
it shall cooperate and assist Lender, promptly and in good faith,
at its sole cost and expense, in Lender's efforts to obtain the
approvals required from all Racing/Gaming Authorities in order to
(i) exercise its rights under Section 2.10 hereof and/or under the
Warrants, and (ii) exercise any other rights or remedies available
to Lender under any of the Loan Documents, at law or in equity.
6.20 Amendment to ITB Organizational Documents. ITB
agrees that as soon as practicable, but in event within six (6)
months following the closing, ITB shall amend its Organizational
Documents to (a) eliminate and terminate all super-majority voting
rights and requirements (except as set forth in clause (c) below),
(b) provide for the addition of an Independent Director to the
board of directors of ITB whose affirmative vote is required
regarding any Bankruptcy Decision, and (c) require the affirmative
vote of at least seven of the nine members of the board of
directors of ITB, not including the Independent Director, regarding
any Bankruptcy Decision; provided, however, that notwithstanding
anything to the contrary contained herein or in any of the other
Loan Documents, at any time following the Closing Date, ITB may
eliminate the Independent Director from its board of directors and,
in lieu thereof, create a new class of stock, all of the shares of
which are and shall remain owned by the Independent Director, and
on such other terms and conditions as ITB shall elect in its sole
discretion, except that (a) the affirmative vote of such class of
stock must be required with respect to any Bankruptcy Decision, and
(b) such class of stock shall not be entitled to any dividends or
other distributions other than a dividend in an amount equal to the
Independent Director's annual fee.
6.21 Further Assurances. Each Borrower shall execute
and deliver, or cause to be executed and delivered, to Lender, such
other documents and instruments, and do, or cause to be done, such
other acts and things, as Lender, from time to time may deem to be
reasonably necessary or desirable to assure Lender the benefit of
the Loan Documents.
6.22 Delivery of Garden State Survey. Within ninety
(90) days following the Closing Date, Borrower shall, at its sole
cost and expense, cause to be prepared and delivered to Lender a
new survey for the Garden State Property (the "Garden State
Survey"), which Garden State Survey shall be reasonably acceptable
to Lender, it being agreed by Lender, however, that such Garden
State Survey shall be deemed reasonably acceptable to Lender if (a)
it is prepared by a registered land surveyor in accordance with the
1992 American Land Title Association/American Congress on Surveying
and Mapping Standards, (b) it is certified in favor of Lender and
the Title Company who issued the Title Policy with respect to the
Garden State Property, (c) the surveyor certifies that the Garden
State Property is not in a flood hazard area as identified by the
Secretary of Housing and Urban Development, (d) it is sufficient
for the Title Company who issued the Title Policy with respect to
the Garden State Property to remove the general survey exception
from such Title Policy and to provide an ALTA survey endorsement
thereto, and (e) it does not disclose any condition or set of
circumstances which reasonably could materially and adversely
affect the raw land value of the Garden State Property.
Additionally, promptly following the delivery of the Garden State
Survey to Lender and Lender's approval thereof in accordance with
the foregoing, Borrower shall, at its sole cost and expense, cause
to be issued to Lender an ALTA survey endorsement to the Title
Policy with respect to the Garden State Property.
6.23 Documents for Other Subsidiaries. Within ninety
(90) days following the Closing Date, with respect to each of the
Other Subsidiaries, Borrower shall either (a) deliver to Lender
copies of all Organizational Documents for such Other Subsidiary
which Borrower was unable to deliver to Lender on the Closing Date,
certified by Borrower to Lender to be true, complete and correct,
it being agreed by Borrower, however, that Borrower shall use its
diligent efforts to provide the same to Lender on or before the
Closing Date, or (b) cause such Other Subsidiary to be merged into
ITB and provide Lender with documents evidencing the same,
certified by Borrower to Lender to be true, complete and correct.
In furtherance of the foregoing, and notwithstanding anything to
the contrary set forth herein or in any other Loan Document, Lender
hereby agrees to any such merger contemplated under the foregoing
clause (b) of this Section 6.23.
ARTICLE 7
Negative Covenants
Each Borrower hereby covenants and agrees that so long as
any of the Obligations remain outstanding or unpaid such Borrower
shall observe and comply with all of the terms, conditions and
provisions of, and shall not directly or indirectly cause or
permit, perform, do, make, or deliver, any or all of the acts,
things, documents, instruments or agreements hereinafter described
in this Article 7.
7.1 No Amendments. Except as set forth in Sections 4.22
and 6.20, no Borrower shall amend, modify or terminate, or permit
the amendment, modification or termination of, its Organizational
Documents, including, without limitation, any amendment thereto
which requires more than a simple majority to pass any resolution
or matter of such Borrower.
7.2 No Additional Indebtedness; Liens. No Borrower (nor
any Other Subsidiary) shall, without Lender's prior written
consent, incur, create, assume or suffer to exist any Indebtedness
except for (a) the Loan, (b) Trade Payables, which shall in no
event for all Properties other than the El Rancho Property exceed
at any one time $5,000,000, (c) the Indebtedness secured by the
Permitted Liens, (d) Indebtedness set forth on Schedule "7.2", (e)
Indebtedness relating to controlled disbursement accounts or in
respect to overdrafts of zero balance bank accounts so long as
such Indebtedness is outstanding for not more than 2 Business Days
at any one time, (f) other Indebtedness not exceeding for all
Borrowers in the aggregate $3,000,000 in principal amount at any
one time outstanding, provided that the same shall consist only of
(i) Indebtedness in the form of letters of credit required in
connection with the development of the El Rancho Property, and (ii)
Indebtedness in respect of capital leases or purchase money
financing for equipment, and (g) refinancings, renewals, or
extensions of Indebtedness permitted under clauses (b) through (f)
of this Section 7.2 (and continuance or renewal of any Permitted
Liens associated therewith) so long as: (i) as compared to the
Indebtedness being refinanced, renewed or extended, the terms and
conditions of such refinancings, renewals or extensions do not
materially impair the prospects of repayment of the Obligations,
(ii) the net cash proceeds of such refinancings, renewals or
extensions do not result in an increase in the aggregate principal
amount of the Indebtedness so refinanced, renewed or extended
(other than the inclusion of customary fees and expenses incurred
in connection with such financing), (iii) such refinancings,
renewals or extensions do not result in a shortening of the average
weighted maturity of the Indebtedness so refinanced, renewed or
extended, and (iv) to the extent that Indebtedness that is
refinanced was subordinated in right of payment to the Obligations,
then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Lender as those
applicable to the refinanced Indebtedness. Each month, together
with the other financial statements required to be furnished under
Section 6.8.1 hereof, Borrower shall furnish to Lender a
certification detailing the Indebtedness then outstanding,
including the number of days (in increments of 30 days) that each
Trade Payable has been outstanding. Additionally, no Borrower
shall create, incur, assume or suffer to exist any lien of any kind
or nature, including liens for taxes, assessments, governmental
charges or liens and statutory liens of landlords, carriers,
vendors, mechanics, materialmen or repairmen or similar liens upon
any of the Collateral (any of the foregoing a "Lien"), except for
the Liens evidenced by any of the Loan Documents and the Permitted
Liens.
7.3 Limitation on Fundamental Changes. Except for the
Permitted Acquisition and the Permitted Debt Conversion, no
Borrower (nor any Other Subsidiary, subject to Section 6.23 hereof)
shall, in one transaction or in a series of transactions, (a) enter
into any transaction of acquisition, merger, consolidation,
reorganization, recapitalization or amalgamation, or liquidate,
wind up or dissolve itself (or suffer any liquidation or
dissolution), (b) create any subsidiaries, (c) acquire by purchase
or otherwise all or substantially all the business or assets of, or
stock or other evidences of beneficial ownership of, or make any
investment in, any Person, (d) except pursuant to and in accordance
with Sections 6.13, 6.14 and 7.15 hereof, make any material change
in its present method of conducting business, or (e) engage in any
business other than the business of (i) owning and operating the
Garden State Property and Freehold Property as race tracks in the
manner that they are presently operated and with incidental
business(es) thereto, and (ii) owning and operating the El Rancho
Property in accordance with Sections 6.13 and 7.15 hereof.
7.4 Limitation on Distributions. Other than (a) as may
be legally required with respect to ITB's Series A Preferred Stock,
and/or (b) as provided in Sections 4.22 and 6.20 hereof, ITB shall
not declare any distributions on, or make a payment on account of,
or set apart assets for a sinking or other analogous fund for the
purchase, defeasance, redemption, retirement or other acquisition
of, any participating or ownership interest in ITB (including any
of its capital stock or warrants or options therefor), whether now
or hereafter outstanding, or make any other distribution or pay any
dividend in respect thereof, either directly or indirectly, whether
in cash or property or in obligations, or permit any Affiliate to
make any payment on account thereof.
7.5 Transfer. No Transfer shall be permitted, and no
Borrower shall suffer or permit a Transfer to occur, in each
instance, without the prior express written consent of Lender,
except for (a) Transfers of the capital stock of ITB, so long as
the same do not, individually or in the aggregate, result in a
Change of Control (other than with respect to the Transfers of the
ITB Lender Stock contemplated in Section 2.10 hereof and in the
Warrants), (b) a Transfer of the Adjacent Garden State Property in
accordance with Section 6.14 hereof, (c) Permitted Liens, and (d)
as otherwise permitted in the Loan Documents, including, without
limitation, as provided under Sections 6.14 and 6.23 hereof. For
the purposes hereof, "Transfer" shall mean: (i) the conveyance,
assignment, sale, mortgaging, encumbrance, pledging, hypothecation,
leasing (other than as permitted under the Mortgages), subleasing
(other than as permitted under the Mortgages), granting of a
security interest in, granting of options with respect to, or other
disposition of (directly or indirectly, voluntarily or
involuntarily, by operation of law or otherwise, and whether or not
for consideration or of record) all or any portion of any legal or
beneficial interest in all or any portion of any of the Properties
(including the Circa Property, whether or not a Mortgage is
recorded thereon pursuant to Section 6.15 hereof) or in any
Borrower or in any Affiliate, including by the issuance of
additional Ownership Interests therein; (ii) any amendment to any
Borrower's or any Affiliate's Organizational Documents causing or
effecting any of the foregoing; or (iii) any suspension,
liquidation, dissolution or similar event (whether voluntary or
involuntary, judicial or non-judicial, statutory, consensual or
contractual, by operation of law or otherwise) of Borrower or any
Affiliate.
7.6 Accounting Policies. No Borrower shall make any
material change to its accounting policies, practices or procedures
in effect on the date hereof, except to the extent required by
GAAP.
7.7 Compliance with ERISA. Except for the ongoing
termination of FRA's existing Plan, no Borrower shall terminate any
Plan, engage in any "prohibited transaction" (as defined in Section
4975 of the IRC) involving any Plan or incur or suffer to exist any
"accumulated funding deficiency or deficiencies" (as defined in
Section 302 of ERISA) involving any Plan.
7.8 Limitation on Negative Pledge Clauses. No Borrower
shall enter into any agreement with any Person other than Lender
which prohibits or limits its ability to create, incur, assume or
suffer to exist any lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, except for
negative pledge provisions contained in capital leases or purchase
money security agreements respecting the specific property or
assets that are the subject thereof.
7.9 Lienable Work. Except as contemplated by Section
6.13 hereof, no Borrower shall do any excavation, construction,
earth work, site work or any other mechanic's lienable work to any
Property without Lender's prior consent, except for normal repair
and maintenance in the ordinary course of business.
7.10 Property Management. GSRT, FRA and OCC shall self-manage the
Garden State Property, the Adjacent Garden State
Property, the Freehold Property and the El Rancho Property,
respectively, and no Borrower shall engage or retain a manager for
any Property without Lender's prior written consent.
7.11 Use of Properties. Except as contemplated by
Section 6.13 and 7.15 hereof or unless required by applicable law,
no Borrower shall permit material changes in the use of any part of
any of the Properties from the use existing on the date hereof. No
Borrower shall initiate or acquiesce in a change in the plat of
subdivision or zoning classification of any of the Properties
without Lender's prior written consent.
7.12 Corporate Changes. Unless Borrower has given
Lender 30 days prior written notice, no Borrower shall change such
Borrower's name, FEIN, business structure or identity, or add any
new fictitious name. Each Borrower further covenants and agrees
that it will not, without thirty (30) days prior written
notification to Lender, relocate its chief executive office to a
new location and so long as, at the time of such written
notification, such Borrower provides any financing statements or
fixture filings necessary to perfect and continue perfected
Lender's security interests in the Collateral.
7.13 Prepayments. Except for the Permitted Debt
Conversion, no Borrower shall prepay any subordinate Indebtedness
owing to any third Person.
7.14 Change of Control. No Borrower shall cause,
permit, or suffer, directly or indirectly, any Change of Control.
7.15 The El Rancho Property. Except as contemplated by
Section 6.13 hereof, no Borrower shall engage in any development or
construction or apply for any permits to construct at or with
respect to the El Rancho Property except pursuant to the plan and
budget delivered to Lender pursuant to Section 4.1(r) hereof.
Additionally, unless the Title Company issuing the Title Policy
with respect to the El Rancho Property shall provide a mechanics'
lien endorsement with respect thereto, no lienable work of any kind
or nature shall be performed at, in or with respect to the El
Rancho Property for thirty-one (31) days following the Closing
Date.
7.16 Transactions with Affiliates. No Borrower shall
directly or indirectly enter into or permit to exist any material
agreement or transaction with any Affiliate of any Borrower, and no
Borrower shall extend or materially amend any material agreement or
transaction with any Affiliate of any Borrower, in each instance,
except for agreements or transactions (or extensions thereof or
material amendments thereto) that (a) are upon fair and reasonable
terms, (b) are no less favorable to any Borrower than would be
obtained in an arm's length agreement or transaction with a non-Affiliate,
(c) contain a provision that the same are terminable by
Lender, at Lender's sole option, and without any obligation on the
part of Lender to cure any default by the applicable Borrower
thereunder, upon the occurrence and during the continuance of an
Event of Default, immediately upon receipt of a written notice to
such effect from Lender to the parties thereunder (the "Default
Termination Provision"), and (d) are approved by Lender, which
approval shall not be unreasonably withheld or delayed so long as
the foregoing conditions are met; provided, however, that the
following shall not require the approval of Lender so long as they
contain the Default Termination Provision: (i) an employment
contract between ITB and DeSantis, provided that the compensation
thereunder shall not exceed $450,000 per year and the term thereof
shall not exceed five (5) years with one (1) five (5) year
extension option, (ii) an employment contract between ITB and
Coehlo, provided that the compensation thereunder shall not exceed
$120,000 per year and the term thereof shall not exceed one (1)
year, and (iii) a modification to that certain Entertainment
Management Agreement dated January 22, 1996 between OCC and Las
Vegas Communications Corporation (the "Entertainment Agreement"),
provided that any such modification shall not (A) result in a
greater economic burden to OCC than currently exists under the
Entertainment Agreement, (B) extend the term of such Entertainment
Agreement, or (C) be less favorable to OCC or any other Borrower
than the existing Entertainment Agreement.
7.17 No Additional Shares. Other than as provided in
Sections 4.22 and 6.20 hereof, no Borrower (other than ITB) shall
authorize the issuance of any additional shares of stock nor issue
any additional shares of stock which, as of the date hereof, have
been authorized but not issued.
7.18 New Contracts; Amendments to Existing Contracts.
Borrower shall deliver to Lender, promptly after the execution
thereof, copies of all new Contracts (including Contracts with
Affiliates) and all extensions to and material amendments of any
existing Contracts entered into after the date hereof. Subject, to
the extent applicable, to the provisions of Section 7.16 hereof,
Borrower shall use its diligent efforts to have the Default
Termination Provision included in every such Contract, extension
and material amendment entered into after the date hereof (and
Borrower shall, under all circumstances, include the same in all
Contracts with Affiliates), and any such Contract, extension or
material amendment which does not include the Default Termination
Provision shall be subject to Lender's prior approval, which
approval shall not be unreasonably withheld or delayed.
7.19 Use of Proceeds. No Borrower shall use the
proceeds of the Loan for any purpose other than as set forth in the
Closing Statement; it being understood that proceeds of the Loan
that are deposited with the Depository may thereafter be used in
accordance with the provisions of Section 2.7 hereof and the
Reserve Account Agreement.
ARTICLE 8
Events of Default; Acceleration of Obligations; Remedies
8.1 Events of Default. The occurrence of any one or
more of the following events in respect of any Borrower or the
Borrowers in the aggregate shall constitute an "Event of Default"
under this Agreement:
8.1.1 Borrower shall fail: (i) to make any payment of
interest due under the Note, or any installment of principal due
under the Note, in each case, within five (5) days of the date when
the same shall become due and payable, or (ii) to make any other
payment of the principal of the Note, when and as the same shall
become due and payable, whether at maturity or by acceleration or
as part of any prepayment or otherwise, in each case, as provided
in the Note and this Agreement, or (iii) to make payment of any
other Obligations within ten (10) days following receipt of written
notice that the same shall be due and payable; or
8.1.2 A breach by any Borrower (i) of any representation
or warranty set forth in any of the Loan Documents and the
continuance of such breach for a period of thirty (30) days after
notice to Borrower, or (ii) other than as set forth in any other
clause of this Section 8.1 (it being understood and agreed that the
lack of reference to any notice and/or cure period in any such
other clause shall mean that the event(s) described therein shall
constitute an immediate Event of Default), in the due observance or
performance of any covenant or condition on its part in any of the
Loan Documents and continuance of such breach for a period of
thirty (30) days after notice to Borrower, unless, in any of the
foregoing instances, such breach, in Lender's sole discretion, is
of a nature that is not reasonably capable of cure within a thirty
(30) day period, in which event, so long as Borrower shall have
commenced cure within such thirty (30) day period and shall
diligently pursue such cure thereafter, there shall be provided
such additional time as may be reasonably required to cure such
breach, in Lender's reasonable discretion, but in no event more
than an additional sixty (60) days following the initial thirty
(30) day period; or
8.1.3 There shall be a breach in the due observance or
performance of any covenant set forth in Section 6.3 hereof,
Section 6.10 hereof, Section 6.22 hereof or Article 7 hereof.
8.1.4 (a) A petition under any Chapter of Title 11 of
the United States Code or any similar law or regulation is filed by
or against any Borrower (and in the case of an involuntary petition
in bankruptcy, such petition is not discharged within sixty (60)
days of its filing); (b) any Borrower admits its insolvency or
inability to pay its debts as they become due or a post judgment
writ of execution is levied against any property owned by it; (c)
any Borrower shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of itself or of all or a substantial part of
its property, or of any other Borrower or of all or a substantial
part of their respective property, (ii) make a general assignment
for the benefit of its creditors, (iii) file a petition seeking to
take advantage of any law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or
winding-up, or composition or readjustment of debts, or (iv) take
any action for the purpose of effecting any of the foregoing; (d)
any Borrower is adjudged insolvent by any state or federal court of
competent jurisdiction; or (e) a post judgment writ of execution is
levied against any Property or any of the other Collateral; or
8.1.5 The occurrence of a default by any Borrower and
the expiration of any cure period applicable thereto under any
Other Agreement the effect of which is to cause or result in a
Material Adverse Effect; or
8.1.6 Borrower shall default in the payment of any
Indebtedness in an amount in excess of $250,000 in the aggregate
(other than the Obligations) and such default is declared and is
not cured within the time, if any, specified therefor in any
agreement governing the same; or
8.1.7 Any warranty, representation, statement or report
made or delivered, now or in the future, by any Borrower to Lender
pursuant to any express provision of this Agreement or the other
Loan Documents is false or misleading in any material respect, when
(subject to the following provision) "taken as a whole" together
with all other warranties, representations, statements and reports
made or delivered by Borrower to Lender, as of the date when made
or delivered, provided that warranties, representations, statements
and reports set forth in one document shall only be "taken as a
whole" with other warranties, representations, statements and
reports set forth in a separate document if Lender may not
reasonably rely on the one document only and it would be obvious to
any reasonable person that the two (or more) documents must be
considered as a whole; or
8.1.8 A final judgment or judgments for the payment of
money in excess of $250,000 in the aggregate shall be rendered
against Borrower, individually or collectively, by one or more
courts, administrative tribunals or other bodies having
jurisdiction and the same shall not be discharged (or provision
shall not be made for such discharge) or bonded, or a stay of
execution thereof shall not be procured, within thirty (30) days
from the date of entry thereof (or, in the case of any such
judgment which by its terms is payable on a date specified therein,
upon or prior to said date certain), and Borrower shall not, within
said thirty (30) day period (or upon said date certain), or such
longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal; or
8.1.9 If (a) with respect to any Plan, there shall occur
any of the following which could reasonably be expected to have a
material adverse effect on the financial condition of any Borrower:
(i) the violation of any of the provisions of ERISA; (ii) the loss
by a Plan intended to be a Qualified Plan of its qualification
under Section 401(a) of the IRC; (iii) the incurrence of liability
under Title IV of ERISA; (iv) a failure to make full payment when
due of all amounts which, under the provisions of any Plan or
applicable law, any Borrower or any ERISA Affiliate is required to
make; (v) the filing of a notice of intent to terminate a Plan
under Sections 4041 or 4041A of ERISA; (vi) a complete or partial
withdrawal of any Borrower or an ERISA Affiliate from any Plan;
(vii) the receipt of a notice by the plan administrator of any Plan
that the PBGC has instituted proceedings to terminate such Plan or
appoint a trustee to administer such Plan; (viii) a commencement or
increase of contributions to, or the adoption of or the amendment
of, a Plan; or (ix) the assessment against any Borrower or any
ERISA Affiliate of a tax under Section 4980B of the IRC; or (b) the
Unfunded Benefit Liability of all of the Plans of any Borrower and
its ERISA Affiliates shall, in the aggregate, exceed $250,000; or
8.1.10 The lien created by any Loan Document shall at
any time not constitute a valid and perfected lien having the
priority contemplated hereunder on the Collateral intended to be
covered thereby in favor of Lender, free and clear of all other
liens (other than liens permitted under the respective Loan
Documents), or, except for expiration in accordance with its terms,
any of the Loan Documents shall for whatever reason be terminated
or cease to be in full force and effect, or the enforceability
thereof shall be contested by any Borrower, any Affiliate or any
other Person unless any such action by such other Person (who is
not an Affiliate) is being contested by Borrower in good faith and
by appropriate proceedings diligently conducted; or
8.1.11 If any one of the following occurs: (a) any
Racing/Gaming Authority shall have determined that a race permit
issued to any Borrower or to ACH should be revoked, not renewed,
suspended or materially and adversely modified; (b) any
Racing/Gaming Authority shall revoke, not renew or suspend, or any
Borrower shall surrender or terminate, any right, permit or license
to conduct racing or gaming on the Freehold Property or the Garden
State Property or if such rights, permits or licenses are
materially and adversely modified in any manner to restrict the
current uses on such Properties; (c) there is a material threat, in
Lender's reasonable judgement, that one or more of the events
described in (a) or (b) above shall occur; (d) except as otherwise
determined by management in the exercise of its business judgment
with respect to the Garden State Property only, racing or gaming
does not take place on the Freehold Property or the Garden State
Property on any day consistent with past operating schedules,
practices or procedures for such facilities; (e) any Racing/Gaming
Authority shall revoke, not renew or suspend, or any Borrower shall
surrender or terminate, any right, permit, license or exemption
which allows Borrower to simulcast other races at any of the
Properties or allows any Borrower to simulcast the races from any
of the Properties to other locations; (f) any Commission Order is
revoked by any Racing/Gaming Authority or by the Bankruptcy Court
administering Robert Brennan's bankruptcy proceeding, or if any
Commission Order is violated by any Person, terminated for any
reason, determined to be null and void for any reason, or upon a
finding by any Racing/Gaming Authority that any Person has failed
to abide by the terms of any Commission Order; provided, however,
that any Event of Default set forth in this Section 8.1.11(f) may
be cured by Borrower if Borrower provides Lender, within ten (10)
days from such Event of Default, with evidence, satisfactory to
Lender in its sole and absolute discretion, that the relevant
Racing/Gaming Authority will not take action against any Borrower
to revoke, not renew, suspend or modify any permits, licenses or
exemptions to licenses held by any Borrower; (g) any Racing/Gaming
Authority requires any Borrower to take any further action in
addition to the entering into and the compliance with any
Commission Order and such Borrower does not promptly comply with
any such requirements; or
8.1.12 Any Borrower is denied any material Permit
applied for in connection with the operation of the El Rancho
Property as a hotel and casino; provided that if, following any
such denial, Borrower proceeds diligently and in good faith to
appeal or cause the reconsideration of such denial or to cause the
issuance of such Permit to another Person, and in any of such
instances, Borrower is successful in obtaining such Permit within
six (6) months following such denial, then the original denial of
such Permit shall not constitute an Event of Default hereunder (it
being understood and agreed, however, that the foregoing shall not
prevent the occurrence of any other Event of Default hereunder,
including, without limitation, an Event of Default of the type set
forth in Section 8.1.14 hereof); or
8.1.13 ITB shall be unable for any reason (a) to issue
shares of ITB Lender Stock upon Lender's exercise of (i) the
conversion privilege set forth in Section 2.10 hereof, or (ii) the
Warrants; or (b) to register or list the shares of ITB Lender Stock
pursuant to the Registration Rights Agreement; or
8.1.14 Any one of the following shall fail to be true on
November 23, 1998:
(a) Provided that Lender shall have satisfied the
Construction Loan Condition, at least $3,000,000 shall be on
deposit in the Interest Reserve Account;
(b) The Loan to Value Ratio shall not exceed 80%;
(c) Provided that Lender shall have satisfied the
Construction Loan Condition, Borrower's EBITDA, as defined in
and calculated pursuant to GAAP, on an annualized consolidated
basis shall be less than $2,500,000, it being acknowledged and
agreed by Lender and Borrower that the foregoing calculation
of EBITDA shall be based upon (i) the actual EBITDA with
respect to the Garden State Property and the Freehold Property
during the immediately preceding twelve (12) full calendar
months, and (ii) four (4) times the actual EBITDA with respect
to the El Rancho Property during the immediately preceding
three (3) full calendar months, provided, however, that any
expenses paid or revenues received during such three (3) full
calendar month period which apply, at least partially, to any
other period (e.g. lump sum payments for annual or semi-annual
expenses) shall be appropriately pro-rated over a twelve (12)
month period so that the foregoing calculation yields a
reasonable estimate of EBITDA over a twelve (12) month period;
or
(d) At least $1,500,000 shall be on deposit in the
Working Capital Account; or
8.1.15 If, within eighteen (18) months following the
closing of a construction loan with respect to the El Rancho
Property (whether provided by Lender or any other lender), the El
Rancho Property shall not be legally operating and open for
business as a hotel and casino substantially in accordance with the
plans provided to Lender pursuant to Section 4.1(r) hereof, with
such changes thereto as to which Lender shall hereafter reasonably
agree; or
8.1.16 If, following the closing of the Permitted
Acquisition or the Permitted Debt Conversion, Lender shall discover
that any of the conditions precedent thereto set forth in the Tri-Party
Agreement were not satisfied in any material respect; or
8.1.17 The Permitted Acquisition and the Permitted Debt
Conversion shall not occur, for whatever reason, within ninety (90)
days following the Closing Date.
8.2 Acceleration; Remedies. (a) Upon the occurrence of
an Event of Default other than one referred to in Section 8.1.4,
Lender may, by notice to Borrower, declare the Outstanding
Principal Balance of, and the accrued interest on, the Loan and all
other Obligations and amounts payable hereunder, under the Note and
under any other Loan Documents to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without
presentment, demand, protest or other formalities of any kind, all
of which are hereby expressly waived by each Borrower and Lender
shall be entitled to all of the rights and remedies provided in the
Loan Documents or at law or in equity. Each remedy provided in the
Loan Documents is distinct and cumulative to all other rights or
remedies under the Loan Documents or afforded by law or equity, and
may be exercised concurrently, independently or successively, in
any order whatsoever.
(b) Upon the occurrence of an Event of Default referred
to in Section 8.1.4, the Outstanding Principal Balance of, and the
accrued interest on, the Loan and all other Obligations and amounts
payable by Borrower hereunder and under the Note and under any
other Loan Documents shall automatically become immediately due and
payable by Borrower without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived,
and Lender shall be entitled to all of the rights and remedies
provided in the Loan Documents or at law or in equity. Each remedy
provided in the Loan Documents is distinct and cumulative to all
other rights or remedies under the Loan Documents or afforded by
law or equity, and may be exercised concurrently, independently or
successively, in any order whatsoever.
(c) Notwithstanding anything to the contrary set forth
herein or in any of the other Loan Documents, Lender expressly
acknowledges and agrees that Lender's exercise of its rights and
remedies hereunder and thereunder are subject, in all events, to
the applicable provisions of all Federal, State (including New
Jersey and Nevada) and local Applicable Laws relating to gaming or
racing at or from any of the Properties.
8.3 Waiver of Stay, Extension and Moratorium Laws,
Appraisal and Valuation, Redemption and Marshaling. (a) To the
extent permitted by law, no Borrower shall at any time insist upon,
or plead, or in any manner whatever claim or take any benefit or
advantage of any stay or extension or moratorium law, any exemption
from execution or sale of any of the Collateral, or any part of any
thereof, wherever enacted, which may affect the covenants and terms
of performance of the Loan Documents, nor claim, take or insist
upon any benefit or advantage of any law now or hereafter in force
providing for the valuation or appraisal of any of the Collateral,
or any part of any thereof, prior to any sale or sales thereof
which may be made pursuant to any provision of any Loan Document,
or pursuant to the decree, judgment or order of any court of
competent jurisdiction; nor, after any such sale or sales, claim or
exercise any right under any statute to redeem the property so
sold, or any part thereof, and each Borrower hereby expressly
waives all benefit or advantage of any such law or laws, and
covenants not to hinder, delay or impede the execution of any power
herein granted or delegated to Lender, but to suffer and permit the
execution of every power as though no such law or laws had been
made or enacted. Each Borrower, for itself and all who may claim
under it, waives, to the extent that it lawfully may, all right to
have any or all of the Properties or the other Collateral marshaled
upon any foreclosure.
(b) In the event that any bankruptcy or insolvency
proceeding under any federal, state or local law is filed by or
against any Borrower or any of its assignees or designees at any
time prior to full satisfaction of the Loan, Lender shall be
absolutely and unconditionally entitled to relief from any
automatic stay imposed with respect to such Borrower or its
assignees or designees and/or the Collateral by the filing of such
bankruptcy or insolvency proceeding, including, but not limited to,
the stay imposed by section 362(a) of the Bankruptcy Code, 11
U.S.C. section 362(a), effective as of any such filing, without further
action by Lender or order of any court, and Lender shall be
authorized to exercise all of its rights and remedies with respect
to any or all of the Collateral including, but not limited to,
commencing a foreclosure action, seeking the appointment of a
receiver therein and selling the Collateral, and each Borrower
hereby irrevocably consents to the foregoing. Without limiting the
previous sentence, each Borrower hereby irrevocably consents to,
shall not oppose or contest, and shall not request or cause any
creditors' committee or any party in interest to oppose or contest,
any application for relief from the automatic stay or for "adequate
protection," as that term is defined in the Bankruptcy Code, which
may be filed by Lender in any future bankruptcy or insolvency
proceeding with respect to such Borrower and/or any or all of the
Collateral. No other action, inaction or agreement by Lender in
any future bankruptcy or insolvency proceeding shall be deemed to
be a waiver of the rights given to Lender hereby.
8.4 Preferences. Lender shall have no obligation to
marshal any assets in favor of any Borrower or any other party or
against or in payment of the Loan. To the extent any Borrower
makes a payment to Lender, which payment or the proceeds or any
part thereof are subsequently invalidated, declared to be
fraudulent, preferential or avoidable, set aside or required to be
repaid to a trustee, receiver or any other party having requisite
authority under any bankruptcy law, state or federal law, common
law or equitable cause, then, to the extent of such payment or
proceeds received, the obligation hereunder or part thereof
intended to be satisfied shall be revived and continue in full
force and effect, as if such payment or proceeds had not been
received.
ARTICLE 9
Exit Fee
9.1 Payment of Exit Fee. Notwithstanding anything to
the contrary contained herein, in all events and under all
circumstances, Borrower shall be obligated to pay to Lender an exit
fee (the "Exit Fee") in the amount of $1,100,000.00, which shall be
payable as follows: (a) upon any (and each) partial prepayment of
the Loan in accordance with the terms hereof, in addition to all
other amounts payable to Lender under Section 2.5 hereof, Borrower
shall pay to Lender, on account of the Exit Fee, an amount equal to
two percent (2%) of the amount so prepaid; (b) upon any application
of any Condemnation Awards or Insurance Proceeds in accordance with
the terms of any Mortgage to the Obligations, two percent (2%)
thereof shall be retained by Lender on account of the Exit Fee and
the balance thereof shall be applied against the Obligations; and
(c) upon the repayment in full of the Obligations or the
acceleration thereof in accordance with the terms of any of the
Loan Documents, Borrower shall pay to Lender the entire Exit Fee
less any amounts on account thereof previously paid to Lender under
the foregoing clauses (a) or (b) of this Section 9.1. In
furtherance of the foregoing, Borrower expressly acknowledges and
agrees that (i) neither the amount of the Exit Fee nor Borrower's
obligation to pay the same shall be affected by Lender's exercise
of its rights under Section 2.10 hereof or under the Warrants, (ii)
Lender shall have no obligation to accept any prepayment of the
Loan unless and until Borrower shall have complied with clause (a)
of this Section 9.1, and (iii) Lender shall have no obligation to
release any Mortgage upon payment of the Outstanding Principal
Balance unless and until Lender shall have received the entire Exit
Fee.
9.2 Characterization of Exit Fee. Borrower expressly
acknowledges and agrees that the Exit Fee (i) shall constitute
additional consideration for the Loan, and (ii) shall, upon
payment, be the sole and exclusive property of Lender.
ARTICLE 10
Miscellaneous
10.1 Expenditures and Expenses. Upon presentation of
reasonably detailed statements therefor, Borrower shall promptly
pay all Costs incurred by Lender in connection with the
negotiation, documentation, monitoring (including the Servicing
Fee), modification, workout, collection or enforcement of the Loan
or any of the terms or provisions of any of the Loan Documents, or
the acceptance or realization upon any Collateral (including the
fees and expenses of Lender's outside counsel in connection with
the negotiation, execution and delivery of this Agreement and any
modification, waiver or supplement hereto or hereof), and all such
Costs shall be included as Obligations hereunder bearing interest
at the Default Rate until paid in full.
10.2 Servicing. The Loan shall be serviced by an
insured financial servicer selected by Lender in its sole
discretion (the "Servicer"). Lender may change the Servicer from
time to time without the consent of Borrower, on notice to
Borrower. Borrower expressly acknowledges and agrees that the
Servicer's fees (the "Servicing Fee"), which shall be payable in
monthly installments, shall be payable by Borrower and shall
constitute a portion of the Obligations, provided, however, that
Borrower's maximum per annum obligation with respect to the
Servicing Fee (except following and during the continuance of any
Event of Default) shall be twelve (12) basis points times the
amount of the Loan and any amount in excess thereof shall be borne
by Lender, except to the extent the Servicing Fee increases due to
the volume and/or frequency of requests for disbursements by
Borrower in accordance with the Reserve Account Agreement.
10.3 Disclosure of Information. Lender shall have the
right (but shall be under no obligation) to make available to any
party for the purpose of granting participations in or selling,
transferring, assigning or conveying all or any part of the Loan
(including any governmental agency or authority and any prospective
bidder at any foreclosure sale of any Property) any and all
information which Lender may have with respect to the Properties,
any other Collateral or any Borrower, whether provided by Borrower
or any third party or obtained as a result of any third party
reports, provided that such assignee or participant shall be bound
by the confidentiality provisions of Section 10.22 (or by
substantially equivalent or more restrictive confidentiality
provisions). Each Borrower agrees that Lender shall have no
liability whatsoever as a result of delivering any such information
to any third party, and each Borrower, on behalf of itself and its
successors and assigns, hereby releases and discharges Lender from
any and all liability, claims, damages or causes of action, arising
out of, connected with or incidental to the delivery of any such
information to any third party.
10.4 Sale of Loan. Lender, at any time after the
Closing Date and without the consent of any Borrower, may grant
participations in or sell, transfer, assign and convey all or any
portion of its right, title and interest in and to the Loan, this
Agreement and the other Loan Documents, any guaranties given in
connection with the Loan and any Collateral given to secure the
Loan. Without limiting the generality of the foregoing, Borrower
acknowledges that the Loan may be part of a larger pool of loans to
be included in a rated securitization transaction or may be sold on
a whole loan basis. In the event of any such transaction, Borrower
agrees to cooperate with Lender with respect to such amendments to
the Loan Documents, any Borrower's (other than ITB's)
Organizational Documents and such amendments to any Borrower's
(other than ITB's) corporate structure, as Lender determines to be
reasonably necessary to facilitate or consummate such
securitization or sale, at no cost or expense to Borrower (other
than costs or expenses of Borrower which shall be reimbursed by
Lender), provided, that Borrower shall not be required to agree to
any modification of any of the Loan Documents in any manner which
would have a material adverse effect on Borrower or the financial
terms of the Loan or would require additional collateral for or
covenants with respect to the Loan.
10.5 Forbearance by Lender Not a Waiver. Any
forbearance by Lender in exercising any right or remedy under any
of the Loan Documents, or otherwise afforded by applicable law,
shall not be a waiver of or preclude the exercise of any right or
remedy. Lender's acceptance of payment of any sum in respect of
any of the Obligations after the due date of such payment shall not
be a waiver of Lender's right to either require prompt and full
payment when due of all Obligations or to declare a default
hereunder for any failure of Borrower to make any such payment.
The procurement of insurance or the payment of taxes or other liens
or charges by Lender shall not be a waiver of Lender's right to
accelerate the maturity of the Loan, nor shall Lender's receipt of
any awards, proceeds, or damages under any of the Mortgages operate
to cure or waive any default in payment of sums secured by any of
the Loan Documents. With respect to all Loan Documents, only
waivers made in writing by Lender shall be effective against
Lender.
10.6 Governing Law; Severability. The Loan Documents
shall be governed by and construed in accordance with the internal
laws of the State of New York pursuant to Section 5-1401 of the New
York General Obligations Law, except that the provisions of the
laws of the State where the respective Properties are located shall
be applicable to the creation, perfection and enforcement of the
lien created by the applicable Mortgage thereon and the related
Assignment of Leases. The invalidity, illegality or
unenforceability of any provision of this Agreement or any other
Loan Document shall not affect or impair the validity, legality or
enforceability of the remainder of this Agreement or any other Loan
Document, and to this end, the provisions of this Agreement and the
other Loan Documents are declared to be severable.
10.7 Relationship. The relationship between Lender, on
the one hand, and Borrower, on the other hand, shall be that of
creditor-debtor only. No term in this Agreement or in the other
Loan Documents and no course of dealing between the parties shall
be deemed to create any relationship of agency, partnership or
joint venture or any fiduciary duty by Lender to any other party.
10.8 Indemnity. Borrower shall indemnify, protect, hold
harmless and defend Lender, its successors, assigns, shareholders,
directors, officers, employees, and agents from and against any and
all loss, damage, cost, expense, liability, or claim (including any
threatened investigation or litigation or other proceedings, and
actual fees, disbursements and expenses of Lender's outside counsel
and reasonable attorneys' fees of Lender's in-house staff counsel),
arising out of, in connection with or as the result of (a) the
making of the Loan hereunder or acceptance of any Collateral
therefor or any actual or proposed use by Borrower of the proceeds
of the Loan, (b) the Collateral, (c) any act or omission of
Borrower or any of its employees or agents, whether actual or
alleged, or (d) any and all brokers' commissions or other costs of
similar type by any party, including the Broker, in connection with
the Loan, in each case except to the extent arising from any
indemnitee's gross negligence or willful misconduct. Upon written
request by an indemnitee, Borrower will undertake, at its own cost
and expense, on behalf of such indemnitee, using counsel
satisfactory to the indemnitee, the defense of any legal action or
proceeding whether or not such indemnitee shall be a party and for
which such indemnitee is entitled to be indemnified pursuant to
this Section. At Lender's option, Lender may, at Borrower's
expense, prosecute or defend any action involving the priority,
validity or enforceability of any of the Loan Documents.
10.9 Notice. Any notice or other communication required
or permitted to be given shall be in writing addressed to the
respective party as set forth below and may be personally served,
telecopied or sent by overnight courier or U.S. Mail and shall be
deemed given: (a) if served in person, when served; (b) if
telecopied, on the date of transmission if before 3:00 p.m. on a
Business Day, or on the next Business Day if after 3:00 p.m. on a
Business Day or if not on a Business Day, in each instance, based
on the time zone of the location to which such telecopy is sent;
provided that a hard copy of such notice is also sent pursuant to
(c) or (d) below; (c) if by overnight courier, on the first
Business Day after delivery to the courier; or (d) if by U.S. Mail,
certified or registered mail, return receipt requested, on the
fourth (4th) day after deposit in the mail postage prepaid.
Notices to any Borrower: International Thoroughbred
Breeders, Inc.
Post Office Box 1232
Cherry Hill, New Jersey 08034
Attention: Christopher Castens, Esq.
Telecopy: (609) 488-3621
With a copy to: Brobeck, Phleger & Harrison LLP
550 South Hope Street
Los Angeles, California 90071
Attention: John Francis Hilson, Esq.
Telecopy: (213) 239-1324
Notices to Lender: Credit Suisse First Boston Mortgage Capital LLC
Eleven Madison Avenue
New York, New York 10010
Attention: Mr. Richard Luftig
Telecopy: (212) 325-8163
With copies to: Brown Raysman Millstein Felder &
Steiner LLP
120 West 45th Street
New York, New York 10036
Attention: Rand G. Boyers, Esq.
Telecopy: (212) 840-2429
and
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660
Attention: Wendy Balden
Telecopy: (714) 721-5174
10.10 Successors and Assigns Bound; Agents; and
Captions. No Borrower shall have the right to assign any of the
Loan Documents without the express prior written consent of Lender,
which consent may be withheld in Lender's sole discretion.
Notwithstanding any such consent, no such assignment shall be
construed so as to relieve Borrower of any personal liability under
the Note or any of the other Loan Documents for any acts or events
occurring or obligations arising prior to or simultaneously with
the closing of such assignment and each Borrower shall execute,
without any cost or expense to Lender, such documents and
agreements as Lender shall reasonably require to evidence and
effectuate the ratification of said personal liability. The
covenants and agreements contained in the Loan Documents shall
bind, and the rights thereunder shall inure to, as applicable, the
respective successors and assigns of Lender and each Borrower,
subject to the provisions of this Agreement. In exercising any
rights under the Loan Documents or taking any actions provided for
therein, Lender may act through its employees, agents or
independent contractors as authorized by Lender. The captions and
headings of the paragraphs and sections of this Agreement are for
convenience only and are not to be used to interpret or define the
provisions hereof.
10.11 Lender's Consents and Approvals. With respect to
any matter in this Agreement or in any other Loan Document which
requires Lender's consent or approval or is subject to Lender's
judgment, such consent or approval, or the exercise of such
judgment, as the case may be, shall be in the sole and absolute
discretion of Lender, unless otherwise expressly stated to the
contrary.
10.12 Time of Essence. Time is of the essence of this
Agreement and the other Loan Documents and the performance of each
of the covenants and agreements contained herein and therein.
10.13 Venue. EXCEPT WITH RESPECT TO ENFORCEMENT ACTIONS
UNDER ANY MORTGAGE, WHICH SHALL BE MAINTAINED IN A COURT OF
APPROPRIATE JURISDICTION IN THE STATE IN WHICH THE APPLICABLE
PROPERTY IS SITUATED, EACH BORROWER AGREES, PURSUANT TO SECTION 5-1402 OF THE
NEW YORK GENERAL OBLIGATIONS LAW, THAT ALL ACTIONS OR
PROCEEDINGS ARISING DIRECTLY, INDIRECTLY OR OTHERWISE IN CONNECTION
WITH, OUT OF, RELATED TO OR FROM THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS SHALL BE LITIGATED, AT LENDER'S SOLE DISCRETION AND
ELECTION, ONLY IN COURTS HAVING A SITUS WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK. EACH BORROWER HEREBY CONSENTS AND SUBMITS
TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED
WITHIN SAID COUNTY AND STATE. EACH BORROWER HEREBY IRREVOCABLY
APPOINTS AND DESIGNATES CT CORPORATION SYSTEM, HAVING AN ADDRESS AT
1633 BROADWAY, NEW YORK, NEW YORK 10019, AS ITS DULY AUTHORIZED
AGENT FOR SERVICE OF LEGAL PROCESS AND EACH BORROWER AGREES THAT
SERVICE OF SUCH PROCESS UPON SUCH AGENT SHALL CONSTITUTE PERSONAL
SERVICE OF PROCESS UPON SUCH BORROWER. IN THE EVENT SERVICE IS
UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES TO DO BUSINESS,
EACH BORROWER SHALL, WITHIN TEN (10) DAYS AFTER LENDER'S REQUEST,
APPOINT A SUBSTITUTE AGENT ON ITS BEHALF (WHICH AGENT SHALL BE THE
SAME FOR ALL BORROWERS) AND WITHIN SUCH PERIOD NOTIFY LENDER OF
SUCH APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY
APPOINTED, LENDER SHALL, IN ITS SOLE DISCRETION, HAVE THE RIGHT TO
DESIGNATE A SUBSTITUTE AGENT UPON FIVE (5) DAYS NOTICE TO BORROWER.
EACH BORROWER HEREBY WAIVES ANY RIGHT THAT IT MAY HAVE TO TRANSFER
OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY LENDER
ON THE LOAN DOCUMENTS IN ACCORDANCE WITH THIS SECTION.
10.14 Jury Trial Waiver. EACH BORROWER AND LENDER
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE BUSINESS
RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY MADE BY EACH BORROWER AND LENDER, AND
EACH BORROWER ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON
ACTING ON BEHALF OF LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO
INCLUDE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH
IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. EACH BORROWER AND LENDER
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO
A BUSINESS RELATIONSHIP, THAT EACH OF THEM HAS ALREADY RELIED ON
THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS
WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH BORROWER AND LENDER
FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD
THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL.
10.15 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall constitute an original,
and together shall constitute the Agreement.
10.16 Final Agreement/Modification. This Agreement,
together with the other Loan Documents, represents the entire
agreement among Borrower and Lender and supersedes all prior
agreements among the parties with respect to the Loan. This
Agreement and the other Loan Documents may only be modified by
written instrument executed by the parties. Notwithstanding the
foregoing, Borrower and Lender agree that, pursuant to the terms of
the Sideletter, the prior understandings of Borrower and Lender
relative to the Additional Funding are to survive the execution and
delivery of this Agreement and are modified in certain respects
pursuant to the Sideletter. Borrower and Lender further agree that
their original understandings concerning the Additional Funding and
the exercise of the Second Warrant with respect thereto are more
clearly expressed by the provisions of the last paragraph on page
2 (carrying over to page 3) of the Approval Notification Letter,
and that it is their intention that the undertaking of Lender in
respect of the Additional Funding be determined by reading the Term
Sheet, the Approval Notification Letter and the Sideletter
together; provided, however, that in the event that an
irreconcilable conflict exists between any of such documents, the
provisions of the Sideletter are to govern.
10.17 Survival. The obligations of Borrower under
Sections 10.1 and 10.8 hereof shall survive the repayment of the
Loan. In addition, the truth, accuracy, adequacy and completeness
of the representations, warranties and covenants contained in this
Agreement and in the certificates delivered pursuant hereto shall
survive, and not merge with, the making by Lender of the Loan and
the execution and delivery by Borrower of the Note and the
acceptance thereof by Lender and shall continue in full force and
effect so long as any portion of the Obligations remain
outstanding.
10.18 Injunctive Relief. Borrower recognizes that, in
the event it fails to perform, observe or discharge any of its
obligations or liabilities under this Agreement or any other Loan
Document, any remedy at law may prove to be inadequate relief to
Lender; therefore, Lender shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity
of proving actual damages.
10.19 Consequential Damages. Neither Lender, nor any
agent or attorney for Lender, shall be liable to Borrower for
consequential damages arising from any breach of contract, tort or
other wrong relating to the establishment, administration or
collection of the Loan or any other amounts payable to Lender
hereunder or under any Loan Document.
10.20 Construction. All of the parties hereto
acknowledge that they and their respective counsel have reviewed
this Agreement and the other Loan Documents and that the normal
rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any of the other Loan Documents
or any amendments, waivers, modifications, supplements, schedules
or exhibits hereto or thereto.
10.21 Recitals. The Recitals set forth at the beginning
of this Agreement are hereby incorporated into the substantive
provisions of this Agreement.
10.22 No Fees for Waivers and Modifications. Lender
agrees that, unless otherwise agreed to by Borrower, Lender shall
not charge any fee (other than the fees and expenses of its
counsel) in connection with the giving of any waiver under any Loan
Document or the agreement to any modification of any Loan Document;
provided, however, that the foregoing is not intended to express,
and shall not be deemed to create, any obligation on the part of
Lender to give any such waiver or agree to any such modification.
10.23 Confidentiality. Lender agrees that material,
non-public information regarding Borrower, their operations,
assets, and existing and contemplated business plans shall be
treated by Lender in a confidential manner, and Lender shall use
its reasonable best efforts not to disclose any such information to
Persons who are not parties to this Agreement, except: (a) to
counsel for and other advisors, accountants, and auditors to
Lender, (b) as may be required by statute, decision, or judicial or
administrative order, rule or regulation, (c) as may be agreed to
in advance by a Borrower, which approval each Borrower agrees not
to unreasonably withhold or delay, (d) as to any such information
that is or becomes generally available to the public (other than as
a result of a disclosure which Lender has agreed to use its
reasonable best efforts to prevent), and (e) in connection with any
assignment, prospective assignment, sale, prospective sale,
participation or prospective participation, or pledge or
prospective pledge of Lender's interests under this Agreement,
provided that any such Person shall have agreed to take its
interest hereunder subject to the terms hereof.
10.24 Lender Representations. Lender represents and
warrants that:
(a) It has not utilized the services of any broker or finder
(other than the Broker) in connection with the Loan;
(b) It (i) is an "accredited investor" within the meaning of
the Securities Act of 1933, (ii) is acquiring the Note and the
Warrants for the purpose of investment and not with a view to the
distribution thereof, subject to the fact that Lender retains the
right to dispose of its assets from time to time, including as
contemplated under Section 10.4 hereof, (iii) is knowledgeable,
sophisticated, and experienced in business and financial matters,
and (iv) acknowledges that the Note and the Warrants have not been
registered under the Securities Act of 1933;
(c) No portion of the funds to be used by it to purchase the
Note, as of the Closing Date, are "plan assets," within the meaning
of 29 CFR Section 2510.3-101, of an "employee benefit plan," as
defined in Section 3(3) of ERISA, subject to Part 4 of Title I of
ERISA, or a "plan," as defined in Section 4975(e)(1) of the Code,
subject to Section 4975 of the Code; and
(d) As of the Closing Date, it is not a "foreign corporation,
partnership or trust" within the meaning of the IRC; provided,
however, that if it becomes a "foreign corporation, partnership or
trust" within the meaning of the IRC, it agrees to deliver to
Borrower:
(i) if it claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the payment of any interest
in the first calendar year and before the payment of any interest
in each third succeeding calendar year during which interest may be
paid under this Agreement or the Note;
(ii) if it claims that interest paid under this
Agreement or the Note is exempt from United States withholding tax
because it is effectively connected with a United States trade or
business, two (2) properly completed and executed copies of IRS
Form 4224 before the payment of any interest is due in its first
taxable year and in each succeeding taxable year during which
interest may be paid under this Agreement or the Note, and IRS Form
W-9; and
(iii) such other form or forms as may be required under
the IRC or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
10.25 Characterization of Fees and Other Consideration
to Lender. With respect to all fees and other consideration
payable to Lender hereunder or under any of the other Loan
Documents, including, without limitation, the Exit Fee, the
Warrants, the ITB Lender Stock deliverable to Lender under the Tri-Party
Agreement and the ITB Lender Stock which may be deliverable
to Lender under Section 2.10 hereof, Borrower acknowledges and
agrees that (a) Lender shall have the right to characterize the
same on Lender's books as Lender shall elect in its sole
discretion, and (b) Borrower shall reasonably cooperate with Lender
in order to substantiate or otherwise evidence such
characterization.
IN WITNESS WHEREOF each of the parties hereto has
executed this Agreement or has caused the same to be executed by
its duly authorized representatives as of the date first above
written.
BORROWER
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
By:
Name:
Title:
GARDEN STATE RACE TRACK, INC.
By:
Name:
Title:
FREEHOLD RACING ASSOCIATION
By:
Name:
Title:
INTERNATIONAL THOROUGHBRED GAMING DEVELOPMENT CORPORATION
By:
Name:
Title:
ORION CASINO CORPORATION
By:
Name:
Title:
LENDER
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
By:
Name:
Title:
THE TRANSFER OF THIS WARRANT IS SUBJECT TO RESTRICTIONS CONTAINED
HEREIN. THIS WARRANT HAS BEEN ISSUED IN RELIANCE UPON THE
REPRESENTATION OF THE HOLDER THAT IT HAS BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARDS THE RESALE OR
OTHER DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES
ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
Common Stock Subscription Warrant
Warrant to Subscribe Warrant No. 1
for 546,847 shares of Common Stock
dated May 23, 1997
Void After May 23, 2002
___________________
THIS CERTIFIES that, for value received, CREDIT SUISSE FIRST
BOSTON MORTGAGE CAPITAL LLC, a Delaware limited liability company
("CSFB"), or its assigns, is entitled to subscribe for and
purchase from International Thoroughbred Breeders, Inc., a
Delaware corporation (the "Corporation"), at the price of $4.375
per share (such price, as from time to time to be adjusted as
hereinafter provided, being hereinafter called the "Warrant
Price"), at any time on or after the date of this Warrant, but
prior to May 23, 2002 (the "Expiration Date"), up to Five Hundred
Forty-Six Thousand Eight Hundred Forty-Seven (546,847) (subject
to adjustment as hereinafter provided) fully paid and
nonassessable shares of common stock, par value $2.00 per share,
of the Corporation (hereinafter called the "Common Stock"),
subject, however, to the provisions and upon the terms and
conditions hereinafter set forth. This Warrant and any Warrant
or Warrants subsequently issued upon exchange or transfer are
hereinafter collectively called the "Warrants".
Section 1. Exercise of Warrant. (a) The rights
represented by this Warrant may be exercised by the holder
hereof, in whole at any time or from time to time in part, but
not as to a fractional share of Common Stock, by the surrender of
this Warrant (properly endorsed) and delivery of a duly executed
Notice of Exercise, substantially in the form of Annex A hereto,
at the office of the Corporation as it may designate by notice in
writing to the holder hereof at the address of such holder
appearing on the books of the Corporation, and, unless the holder
is exercising the conversion right set forth in paragraph 1(b)
below, by payment to the Corporation of the Warrant Price in cash
or by certified or official bank check, for each share being
purchased.
(b) In lieu of exercising the Warrant as specified in
paragraph 1(a) above, the holder of this Warrant may from time to
time convert this Warrant, in whole or in part, into a number of
shares of Common Stock equal to the quotient of (x) the aggregate
market value of the Common Stock minus the aggregate Warrant
Price of such shares of Common Stock, divided by (y) the fair
market value of the Common Stock. For purposes of this
paragraph, if the shares of Common Stock are traded in a public
market, the fair market value of the Common Stock shall be the
closing price of the Common Stock reported for the business day
immediately before the holder of this Warrant delivers its Notice
of Exercise to the Corporation. If the Common Stock is not
traded in a public market, the Board of Directors of the
Corporation shall determine fair market value in its reasonable
good faith judgment. The foregoing notwithstanding, if the
holder of the Warrant advises the Board of Directors in writing
that the holder disagrees with such determination, then the
Corporation and the holder of this Warrant shall promptly agree
upon a reputable investment banking firm to undertake such
valuation. If the valuation of such investment banking firm is
greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid
by the Corporation. In other circumstances, such fees and
expenses shall be paid by the holder of this Warrant.
(c) In the event of any exercise of the rights represented
by this Warrant, a certificate or certificates for the shares of
Common Stock so purchased, registered in the name of the holder,
shall be delivered to the holder hereof within a reasonable time,
not exceeding ten days, after the rights represented by this
Warrant shall have been so exercised; and, unless this Warrant
has expired, a new Warrant representing the number of shares
(except a remaining fractional share), if any, with respect to
which this Warrant shall not then have been exercised shall also
be issued to the holder hereof within such time. The person in
whose name any certificate for shares of Common Stock is issued
upon exercise of this Warrant shall for all purposes be deemed to
have become the holder of record of such shares on the date on
which the Warrant was surrendered and payment of the Warrant
Price, if applicable, and any applicable taxes was made, except
that, if the date of such surrender and payment is a date on
which the stock transfer books of the Corporation are closed,
such person shall be deemed to have become the holder of such
shares at the close of business on the next succeeding date on
which the stock transfer books are open.
Section 2. Adjustment of Number of Shares. Upon each
adjustment of the Warrant Price as provided in Section 3, the
holder of this Warrant shall thereafter be entitled to purchase,
at the Warrant Price resulting from such adjustment, the number
of shares (calculated to the nearest tenth of a share) obtained
by multiplying the Warrant Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the
product thereof by the Warrant Price resulting from such
adjustment.
Section 3. Certain Adjustments.
(a) Stock Dividends, Issuances, Subdivisions or
Combinations of Stock. In case the Corporation shall at any time
declare or pay a dividend on its Common Stock payable in Common
Stock, or shall issue shares of Common Stock in exchange for the
conversion or cancellation of debt or the receipt of assets or
stock in a transaction with Las Vegas Entertainment Network, Inc.
and/or any of its subsidiaries or affiliates during the term of
the Loan Agreement dated as of the date hereof between CSFB and
the Corporation and certain of its subsidiaries, or subdivide its
outstanding shares of Common Stock into a greater number of
shares, the Warrant Price in effect immediately prior to any such
event shall be proportionately reduced (by multiplying such
Warrant Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to
such event and the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such event),
and conversely, in case the outstanding shares of Common Stock of
the Corporation shall be combined into a smaller number of
shares, the Warrant Price in effect immediately prior to such
combination shall be proportionately increased (by multiplying
such Warrant Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately
prior to such combination and the denominator of which shall be
the number of shares of Common Stock outstanding immediately
after such combination).
(b) Reorganization, Reclassification, Consolidation, Merger
or Sale. If any capital reorganization or reclassification of
the capital stock of the Corporation or any consolidation or
merger of the Corporation with another corporation, or the sale
of all or substantially all of its assets to another corporation
shall be effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition
of such reorganization, reclassification, consolidation, merger
or sale, lawful and adequate provisions shall be made whereby
each holder of the Warrants shall thereafter have the right to
receive upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock of the
Corporation immediately theretofore receivable upon the exercise
of such Warrant or Warrants, such shares of stock, securities or
assets (including cash) as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such
Common Stock equal to the number of shares of such stock
immediately theretofore so receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provision shall be made with
respect to the rights and interests of such holder to the end
that the provisions hereof (including without limitation
provisions for adjustments of the Warrant Price) shall thereafter
be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the
exercise of such exercise rights. In the event of a merger or
consolidation of the Corporation as a result of which a greater
or lesser number of shares of common stock of the surviving
corporation are issuable to holders of Common Stock of the
Corporation outstanding immediately prior to such merger or
consolidation, the Warrant Price in effect immediately prior to
such merger or consolidation shall be adjusted in the same manner
as though there were a subdivision or combination of the
outstanding shares of Common Stock of the Corporation. The
Corporation will not effect any such consolidation, merger or
sale, unless prior to the consummation thereof the successor
corporation (if other than the Corporation) resulting from such
consolidation or merger or the corporation purchasing such assets
shall assume by written instrument, executed and mailed or
delivered to each holder of the Warrants at the last address of
such holder appearing on the books of the Corporation, the
obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to receive.
(c) Price Protection. If at any time while the Warrants
are outstanding, the Corporation shall issue shares of Common
Stock, or rights, options, warrants, or convertible or
exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock (excluding (i) shares, rights,
options, warrants, or convertible or exchangeable securities
issued as of the date of issuance of this Warrant or issued in
any of the transactions described in Paragraphs (a) or (b) above,
(ii) shares issued upon the exercise of such rights, options or
warrants or upon conversion or exchange of such convertible or
exchangeable securities, and (iii) the Warrants and any shares
issued upon exercise thereof), at a price per share of Common
Stock (determined in the case of such rights, options, warrants,
or convertible or exchangeable securities by dividing (x) the
total amount receivable by the Corporation in consideration of
the sale and issuance of such rights, options, warrants, or
convertible or exchangeable securities, plus the total minimum
consideration payable to the Corporation upon exercise,
conversion, or exchange thereof by (y) the total maximum number
of shares of Common Stock covered by such rights, options,
warrants, or convertible or exchangeable securities) lower than
the fair market value per share of Common Stock on the date the
Corporation fixes the offering price of such shares, rights,
options, warrants, or convertible or exchangeable securities,
then the Warrant Price shall be adjusted so that it shall equal
the price determined by multiplying the Warrant Price in effect
immediately prior thereto by a fraction (i) the numerator of
which shall be the sum of (A) the number of shares of Common
Stock outstanding immediately prior to such sale and issuance
plus (B) the number of shares of Common Stock which the aggregate
consideration received (determined as provided below) for such
sale or issuance would purchase at such fair market value per
share, and (ii) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after
such sale and issuance. Such adjustment shall be made
successively whenever such an issuance is made. For the purposes
of such adjustment, the maximum number of shares of Common Stock
which the holder of any such rights, options, warrants or
convertible or exchangeable securities shall be entitled to
subscribe for or purchase shall be deemed to be issued and
outstanding as of the date of such sale and issuance and the
consideration received by the Corporation therefor shall be
deemed to be the consideration received by the Corporation for
such rights, options, warrants, or convertible or exchangeable
securities, plus the minimum consideration or premium stated in
such rights, options, warrants, or convertible or exchangeable
securities to be paid for the shares of Common Stock covered
thereby. In case the Corporation shall sell and issue shares of
Common Stock, or rights, options, warrants, or convertible or
exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock for a consideration consisting,
in whole or in part, of property other than cash or its
equivalent, then in determining the price per share of Common
Stock and the consideration received by the Corporation for
purposes of the first sentence of this Paragraph 3(c), the Board
of Directors of the Corporation shall determine, in good faith,
the fair value of said property, and such determination shall be
described in a duly adopted board resolution certified by the
Corporation's Secretary or Assistant Secretary. In case the
Corporation shall sell and issue rights, options, warrants, or
convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock together with
one or more other securities as a part of a unit at a price per
unit, then in determining the price per share of Common Stock and
the consideration received by the Corporation for purposes of the
first sentence of this Paragraph 3(c), the Board of Directors of
the Corporation shall determine, in good faith, which
determination shall be described in a duly adopted board
resolution certified by the Corporation's Secretary or Assistant
Secretary, the fair value of the rights, options, warrants, or
convertible or exchangeable securities then being sold as part of
such unit. Such adjustment shall be made successively whenever
such an issuance occurs, and in the event that such rights,
options, warrants, or convertible or exchangeable securities
expire or cease to be convertible or exchangeable before they are
exercised, converted, or exchanged (as the case may be), then the
Warrant Price shall again be adjusted to the Warrant Price that
would then be in effect if such sale and issuance had not
occurred, but such subsequent adjustment shall not affect the
number of Warrant Shares issued upon any exercise of Warrants
prior to the date such subsequent adjustment is made.
(d) Notice of Adjustment. Upon any adjustment of the
Warrant Price, then and in each such case, the Corporation shall
give written notice thereof, by first class mail, postage
prepaid, addressed to each holder of the Warrants at the address
of such holder as shown on the books of the Corporation, which
notice shall state the Warrant Price resulting from such
adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(e) Certain Events. If any event occurs as to which,
in the reasonable opinion of CSFB, the other provisions of this
Section 3 are not strictly applicable or if strictly applicable
would not, in the reasonable opinion of CSFB, fairly protect the
exercise rights of this Warrant, in accordance with the essential
intent and principles of such provisions, then the Corporation
shall in good faith make an adjustment in the application of such
provisions, in accordance with such essential intent and
principles, so as to protect such exercise rights as aforesaid,
but in no event shall any such adjustment have the effect of
increasing the Warrant Price as otherwise determined pursuant to
this Section 3 except in the event of a combination of shares of
the type contemplated in paragraphs (a)or (b) of this Section 3
and then in no event to an amount greater than the Warrant Price
as adjusted pursuant to paragraphs (a) or (b) of this Section 3.
(f) Stock to Be Reserved. The Corporation will at all
times reserve and keep available out of its authorized Common
Stock or its treasury shares, solely for the purpose of issue
upon the exercise of this Warrant as herein provided, such number
of shares of Common Stock as shall then be issuable upon the
exercise of this Warrant. The Corporation covenants that all
shares of Common Stock which shall be so issued shall be duly and
validly issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, and,
without limiting the generality of the foregoing, the Corporation
covenants that it will from time to time take all such action as
may be requisite to assure that the par value per share of the
Common Stock is at all times equal to or less than the effective
Warrant Price. The Corporation will take all such action as may
be necessary to assure that all such shares of Common Stock may
be so issued without violation of any applicable law or
regulation, or of any requirements of any national securities
exchange upon which the Common Stock of the Corporation may be
listed. The Corporation will not take any action which results
in any adjustment of the Warrant Price if the total number of
shares of Common Stock issued and issuable after such action upon
exercise of this Warrant would exceed the total number of shares
of Common Stock then authorized by the Corporation's Certificate
of Incorporation. The Corporation has not granted and will not
grant any right of first refusal with respect to shares issuable
upon exercise of this Warrant, and there are no preemptive rights
associated with such shares.
(g) Issue Tax. The issuance of certificates for shares of
Common Stock upon exercise of the Warrants shall be made without
charge to the holders of such Warrants for any issuance tax in
respect thereof provided that the Corporation shall not be
required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate
in a name other than that of any holder of the Warrants.
(h) Closing of Books. The Corporation will at no time
close its transfer books against the transfer of the shares of
Common Stock issued or issuable upon the exercise of this warrant
in any manner which interferes with the timely exercise of this
Warrant.
(i) Definition of Common Stock. As used herein the term
"Common Stock" shall mean and include the Common Stock, par value
$2.00 per share, of the Corporation as authorized on the date of
issuance of this Warrant, and also any capital stock of any class
of the Corporation hereinafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of
the holders thereof to participate in dividends or in the
distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
provided, however, that the shares purchasable pursuant to this
Warrant shall include only shares designated as Common Stock, par
value $2.00 per share, of the Corporation on the date of this
Warrant, or shares of any class or classes resulting from any
reclassification or reclassifications thereof which are not
limited to any such fixed sum or percentage and are not subject
to redemption by the Corporation and in case at any time there
shall be more than one such resulting class, the shares of each
class then so issuable shall be substantially in the proportion
which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all
such classes resulting from all such reclassifications.
Section 4. Notices of Record Date. In the event of (1)
any taking by the Corporation of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution (other than cash dividends out of earned surplus),
or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property,
or to receive any other right, or (2) any capital reorganization
of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation or any transfer of all or
substantially all the assets of the Corporation to or
consolidation or merger of the Corporation with or into any other
corporation, or (3) any voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation, then and in each
such event the Corporation will give notice to the holder of this
Warrant specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or right and
stating the amount and character of such dividend, distribution
or right, and (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of
record of Common Stock will be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon
such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 20 days and not
more than 90 days prior to the date therein specified, and such
notice shall state that the action in question or the record date
is subject to the effectiveness of a registration statement under
the Securities Act of 1933, as amended (the "Securities Act") or
to a favorable vote of stockholders, if either is required.
Section 5. Registration Rights. The rights of the
holder hereof with respect to the registration under the
Securities Act of the shares of Common Stock issuable upon the
exercise of this Warrant are set forth in the Registration Rights
Agreement, dated as of May 23, 1997, among the Corporation and
CFSB.
Section 6. No Stockholder Rights or Liabilities. This
Warrant shall not entitle the holder hereof to any voting rights
or other rights as a stockholder of the Corporation. No
provision hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the holder
hereof, shall give rise to any liability of such holder for the
Warrant Price or as a stockholder of the Corporation, whether
such liability is asserted by the Corporation or by creditors of
the Corporation.
Section 7. Notices of Proposed Transfers. Prior to any
transfer, sale or assignment (each a "Transfer") of this Warrant
or any shares of Common Stock issuable hereunder, the holder of
this Warrant shall give ten days' prior written notice (a
"Transfer Notice") to the Company of such holder's intention to
effect such transfer, describing the manner and circumstances of
the proposed Transfer, and obtain from counsel to such holder who
shall be reasonably satisfactory to the Corporation (it being
agreed that the firm of Brown Raysman Millstein Felder & Steiner
LLP shall be reasonably satisfactory) an opinion that the
proposed Transfer of such Warrants or such Common Stock may be
effected without registration under the Securities Act or
applicable state securities law. After receipt of the Transfer
Notice and opinion by the Corporation, such holder shall
thereupon be entitled to Transfer such Warrants or such Common
Stock in accordance with the terms of the Transfer Notice. Each
Warrant issued upon such Transfer and each certificate
representing shares of Common Stock issued upon such Transfer
shall bear the restrictive legend set forth in Section 8 below,
unless in the opinion of such counsel such legend is not required
in order to ensure compliance with the Securities Act.
Notwithstanding the foregoing provisions of Section 7, the
restrictions imposed by this Section upon the transferability of
the Warrants or the Common Stock issuable upon exercise of the
Warrants and the legend requirements of Section 8 below shall
terminate as to this Warrant or the shares of Common Stock
issuable upon exercise hereof (i) when and so long as such
security shall have been effectively registered under the
Securities Act and disposed of pursuant thereto, or (ii) when the
Corporation shall have delivered to the holder of this Warrant or
shares of Common Stock issuable upon exercise hereof the written
opinion of counsel to the Corporation, which opinion and counsel
shall each be reasonably satisfactory to such holder, stating
that the transferability portion of such legend is not required
to ensure compliance with the Securities Act. Whenever the
restrictions imposed by this Section 7 shall terminate as to this
Warrant as hereinabove provided, the holder of this Warrant shall
be entitled to receive from the Corporation, at the Corporation's
expense, a new Warrant bearing the following legend in place of
the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTION 7 HEREOF TERMINATED ON __________, 19__, AND
ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division
or combination of, or in substitution for, this Warrant, if this
Warrant shall be entitled to bear such legend, shall have a
similar legend endorsed thereon.
Whenever the restrictions imposed by this Section 7 shall
terminate as to any Common Stock issuable upon exercise of this
Warrant, the holder thereof shall be entitled to receive from the
Corporation, at the Corporation's expense, a new share
certificate representing such Common Stock not bearing the legend
set forth in Section 8 below.
Section 8. Investment Representation and Legend. The
holder, by acceptance of the Warrant, represents and warrants to
the Corporation that it is acquiring the Warrant and the shares
of Common Stock (or other securities) issuable upon the exercise
hereof for investment purposes only and not with a view towards
the resale or other distribution thereof. Subject to the
provisions of Section 7 above, the holder, by acceptance of this
Warrant, further agrees that the Corporation may affix the
following legend to certificates for shares of Common Stock
issued upon exercise of this Warrant:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ISSUED IN RELIANCE UPON THE REPRESENTATION OF THE HOLDER THAT
THEY HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TOWARD
THE RESALE OR OTHER DISTRIBUTION THEREOF, AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER
THE SECURITIES EVIDENCED HEREBY, NOR ANY INTEREST THEREIN, MAY BE
OFFERED, SOLD, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF
UNLESS EITHER (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT RELATING THERETO OR (II) THE CORPORATION HAS
RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY IN FORM
AND SUBSTANCE TO THE CORPORATION, STATING THAT SUCH REGISTRATION
IS NOT REQUIRED."
Section 9. Lost, Stolen, Mutilated or Destroyed Warrant.
If this Warrant is lost, stolen, mutilated or destroyed, the
Corporation may, on such terms as to indemnity or otherwise as it
may in its discretion reasonably impose (which shall, in the case
of a mutilated Warrant, include the surrender thereof), issue a
new Warrant of like denomination and tenor as the Warrant so
lost, stolen, mutilated or destroyed. Any such new Warrant shall
constitute an original contractual obligation of the Corporation,
whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.
Section 10. Notices. All notices, requests and other
communications required or permitted to be given or delivered
hereunder shall be in writing, and shall be delivered, or shall
be sent by certified or registered mail, postage prepaid and
addressed, if to the holder, to such holder at the address shown
on such holder's Warrant or Warrant Shares or at such other
address as shall have been furnished to the Corporation by notice
from such holder. All notices, requests and other communications
required or permitted to be given or delivered hereunder shall be
in writing, and shall be delivered, or shall be sent by certified
or registered mail, postage prepaid and addressed to the
Corporation at such address as shall have been furnished to the
holder by notice from the Corporation.
Section 11. Notice of Expiration. The Corporation shall
give the holder of this Warrant written notice of such holder's
right to exercise this Warrant in the form attached as Annex B
hereto not more than 90 days and not less than 30 days before the
Expiration Date. If the notice is not so given, the Expiration
Date shall automatically be extended until 30 days after the date
the Corporation delivers the notice to such holder.
Section 12. Governing Law. This Warrant shall be
governed by and construed in accordance with the laws of the
State of New York.
IN WITNESS WHEREOF, the Corporation has executed this
Warrant on and as of the day and year first above written.
INTERNATIONAL THOROUGHBRED
BREEDERS, INC.
By:________________________________
Name: Nunzio DeSantis
Title: Chief Executive Officer
ANNEX A
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _______
shares of the Common Stock of International Thoroughbred
Breeders, Inc. pursuant to the provisions of Paragraph 1(a) of
the attached Warrant, and tenders herewith payment of the
purchase price of such shares in full.
[or]
1. The undersigned hereby elects to convert the attached
Warrant into shares of Common Stock of International Thoroughbred
Breeders, Inc. in the manner specified in Paragraph 1(b) of the
Warrant. This conversion is exercised with respect to
____________________ of the shares of Common Stock covered by the
attached Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing
said shares in the name of the undersigned or in such other name
as is specified below:
________________
(Name)
________________
________________
(Address)
3. The undersigned represents it is acquiring the shares
solely for its own account and not as a nominee for any other
party and not with a view toward the resale or distribution
thereof except in compliance with applicable securities laws.
________________________________
(Signature)
_________________
(Date)
ANNEX B
Notice that Warrant is About to Expire
_____________, _______
[Name and Address of Holder]
Dear _______:
This is to advise you that the Warrant issued to you
described below will expire on _____________, ____.
Issuer: International Thoroughbred Breeders,
Inc.
Issue Date: May 23, 1997
Class of Security Issuable: Common Stock
Exercise Price per Share: $[ ]
Number of Shares: 546,847
Please contact [name of contact person at (phone number)]
with any questions you may have concerning the exercise of the
Warrant. This is your only notice of pending expiration.
INTERNATIONAL THOROUGHBRED
BREEDERS, INC.
By:___________________________
Name:
Title:
THE TRANSFER OF THIS WARRANT IS SUBJECT TO RESTRICTIONS CONTAINED
HEREIN. THIS WARRANT HAS BEEN ISSUED IN RELIANCE UPON THE
REPRESENTATION OF THE HOLDER THAT IT HAS BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARDS THE RESALE OR
OTHER DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES
ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
Common Stock Subscription Warrant
Warrant to Subscribe Warrant No. 2
for 497,153 shares of Common Stock
dated May 23, 1997
Void After May 23, 2002
___________________
THIS CERTIFIES that, for value received, CREDIT SUISSE FIRST
BOSTON MORTGAGE CAPITAL LLC, a Delaware limited liability company
("CSFB"), or its assigns, is entitled to subscribe for and
purchase from International Thoroughbred Breeders, Inc., a
Delaware corporation (the "Corporation"), at the price of $4.375
per share (such price, as from time to time to be adjusted as
hereinafter provided, being hereinafter called the "Warrant
Price"), at any time on or after the date (the "Effective Date")
on which CSFB shall deliver to the Corporation a commitment for a
construction loan or a permanent take-out loan to provide
additional funding of no less than $50 million to the Corporation
and/or its subsidiaries in connection with the El Rancho Property
(as such term is defined in that certain Loan Agreement of even
date herewith by and between the Corporation, CSFB and the other
entities named therein), but prior to May 23, 2002 (the
"Expiration Date"), up to Four Hundred Ninety-Seven Thousand One
Hundred Fifty-Three (497,153) (subject to adjustment as
hereinafter provided) fully paid and nonassessable shares of
common stock, par value $2.00 per share, of the Corporation
(hereinafter called the "Common Stock"), subject, however, to the
provisions and upon the terms and conditions hereinafter set
forth. This Warrant and any Warrant or Warrants subsequently
issued upon exchange or transfer are hereinafter collectively
called the "Warrants".
Section 1. Exercise of Warrant. (a) The rights
represented by this Warrant may be exercised by the holder
hereof, in whole at any time or from time to time in part, but
not as to a fractional share of Common Stock, by the surrender of
this Warrant (properly endorsed) and delivery of a duly executed
Notice of Exercise, substantially in the form of Annex A hereto,
at the office of the Corporation as it may designate by notice in
writing to the holder hereof at the address of such holder
appearing on the books of the Corporation, and, unless the holder
is exercising the conversion right set forth in paragraph 1(b)
below, by payment to the Corporation of the Warrant Price in cash
or by certified or official bank check, for each share being
purchased.
(b) In lieu of exercising the Warrant as specified in
paragraph 1(a) above, the holder of this Warrant may from time to
time convert this Warrant, in whole or in part, into a number of
shares of Common Stock equal to the quotient of (x) the aggregate
market value of the Common Stock minus the aggregate Warrant
Price of such shares of Common Stock, divided by (y) the fair
market value of the Common Stock. For purposes of this
paragraph, if the shares of Common Stock are traded in a public
market, the fair market value of the Common Stock shall be the
closing price of the Common Stock reported for the business day
immediately before the holder of this Warrant delivers its Notice
of Exercise to the Corporation. If the Common Stock is not
traded in a public market, the Board of Directors of the
Corporation shall determine fair market value in its reasonable
good faith judgment. The foregoing notwithstanding, if the
holder of the Warrant advises the Board of Directors in writing
that the holder disagrees with such determination, then the
Corporation and the holder of this Warrant shall promptly agree
upon a reputable investment banking firm to undertake such
valuation. If the valuation of such investment banking firm is
greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid
by the Corporation. In other circumstances, such fees and
expenses shall be paid by the holder of this Warrant.
(c) In the event of any exercise of the rights represented
by this Warrant, a certificate or certificates for the shares of
Common Stock so purchased, registered in the name of the holder,
shall be delivered to the holder hereof within a reasonable time,
not exceeding ten days, after the rights represented by this
Warrant shall have been so exercised; and, unless this Warrant
has expired, a new Warrant representing the number of shares
(except a remaining fractional share), if any, with respect to
which this Warrant shall not then have been exercised shall also
be issued to the holder hereof within such time. The person in
whose name any certificate for shares of Common Stock is issued
upon exercise of this Warrant shall for all purposes be deemed to
have become the holder of record of such shares on the date on
which the Warrant was surrendered and payment of the Warrant
Price, if applicable, and any applicable taxes was made, except
that, if the date of such surrender and payment is a date on
which the stock transfer books of the Corporation are closed,
such person shall be deemed to have become the holder of such
shares at the close of business on the next succeeding date on
which the stock transfer books are open.
Section 2. Adjustment of Number of Shares. Upon each
adjustment of the Warrant Price as provided in Section 3, the
holder of this Warrant shall thereafter be entitled to purchase,
at the Warrant Price resulting from such adjustment, the number
of shares (calculated to the nearest tenth of a share) obtained
by multiplying the Warrant Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the
product thereof by the Warrant Price resulting from such
adjustment.
Section 3. Certain Adjustments.
(a) Stock Dividends, Issuances, Subdivisions or
Combinations of Stock. In case the Corporation shall at any time
declare or pay a dividend on its Common Stock payable in Common
Stock, or shall issue shares of Common Stock in exchange for the
conversion or cancellation of debt or the receipt of assets or
stock in a transaction with Las Vegas Entertainment Network, Inc.
and/or any of its subsidiaries or affiliates during the term of
the Loan Agreement dated as of the date hereof between CSFB and
the Corporation and certain of its subsidiaries, or subdivide its
outstanding shares of Common Stock into a greater number of
shares, the Warrant Price in effect immediately prior to any such
event shall be proportionately reduced (by multiplying such
Warrant Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to
such event and the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such event),
and conversely, in case the outstanding shares of Common Stock of
the Corporation shall be combined into a smaller number of
shares, the Warrant Price in effect immediately prior to such
combination shall be proportionately increased (by multiplying
such Warrant Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately
prior to such combination and the denominator of which shall be
the number of shares of Common Stock outstanding immediately
after such combination).
(b) Reorganization, Reclassification, Consolidation, Merger
or Sale. If any capital reorganization or reclassification of
the capital stock of the Corporation or any consolidation or
merger of the Corporation with another corporation, or the sale
of all or substantially all of its assets to another corporation
shall be effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition
of such reorganization, reclassification, consolidation, merger
or sale, lawful and adequate provisions shall be made whereby
each holder of the Warrants shall thereafter have the right to
receive upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock of the
Corporation immediately theretofore receivable upon the exercise
of such Warrant or Warrants, such shares of stock, securities or
assets (including cash) as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such
Common Stock equal to the number of shares of such stock
immediately theretofore so receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provision shall be made with
respect to the rights and interests of such holder to the end
that the provisions hereof (including without limitation
provisions for adjustments of the Warrant Price) shall thereafter
be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the
exercise of such exercise rights. In the event of a merger or
consolidation of the Corporation as a result of which a greater
or lesser number of shares of common stock of the surviving
corporation are issuable to holders of Common Stock of the
Corporation outstanding immediately prior to such merger or
consolidation, the Warrant Price in effect immediately prior to
such merger or consolidation shall be adjusted in the same manner
as though there were a subdivision or combination of the
outstanding shares of Common Stock of the Corporation. The
Corporation will not effect any such consolidation, merger or
sale, unless prior to the consummation thereof the successor
corporation (if other than the Corporation) resulting from such
consolidation or merger or the corporation purchasing such assets
shall assume by written instrument, executed and mailed or
delivered to each holder of the Warrants at the last address of
such holder appearing on the books of the Corporation, the
obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to receive.
(c) Price Protection. If at any time while the Warrants
are outstanding, the Corporation shall issue shares of Common
Stock, or rights, options, warrants, or convertible or
exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock (excluding (i) shares, rights,
options, warrants, or convertible or exchangeable securities
issued as of the date of issuance of this Warrant or issued in
any of the transactions described in Paragraphs (a) or (b) above,
(ii) shares issued upon the exercise of such rights, options or
warrants or upon conversion or exchange of such convertible or
exchangeable securities, and (iii) the Warrants and any shares
issued upon exercise thereof), at a price per share of Common
Stock (determined in the case of such rights, options, warrants,
or convertible or exchangeable securities by dividing (x) the
total amount receivable by the Corporation in consideration of
the sale and issuance of such rights, options, warrants, or
convertible or exchangeable securities, plus the total minimum
consideration payable to the Corporation upon exercise,
conversion, or exchange thereof by (y) the total maximum number
of shares of Common Stock covered by such rights, options,
warrants, or convertible or exchangeable securities) lower than
the fair market value per share of Common Stock on the date the
Corporation fixes the offering price of such shares, rights,
options, warrants, or convertible or exchangeable securities,
then the Warrant Price shall be adjusted so that it shall equal
the price determined by multiplying the Warrant Price in effect
immediately prior thereto by a fraction (i) the numerator of
which shall be the sum of (A) the number of shares of Common
Stock outstanding immediately prior to such sale and issuance
plus (B) the number of shares of Common Stock which the aggregate
consideration received (determined as provided below) for such
sale or issuance would purchase at such fair market value per
share, and (ii) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after
such sale and issuance. Such adjustment shall be made
successively whenever such an issuance is made. For the purposes
of such adjustment, the maximum number of shares of Common Stock
which the holder of any such rights, options, warrants or
convertible or exchangeable securities shall be entitled to
subscribe for or purchase shall be deemed to be issued and
outstanding as of the date of such sale and issuance and the
consideration received by the Corporation therefor shall be
deemed to be the consideration received by the Corporation for
such rights, options, warrants, or convertible or exchangeable
securities, plus the minimum consideration or premium stated in
such rights, options, warrants, or convertible or exchangeable
securities to be paid for the shares of Common Stock covered
thereby. In case the Corporation shall sell and issue shares of
Common Stock, or rights, options, warrants, or convertible or
exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock for a consideration consisting,
in whole or in part, of property other than cash or its
equivalent, then in determining the price per share of Common
Stock and the consideration received by the Corporation for
purposes of the first sentence of this Paragraph 3(c), the Board
of Directors of the Corporation shall determine, in good faith,
the fair value of said property, and such determination shall be
described in a duly adopted board resolution certified by the
Corporation's Secretary or Assistant Secretary. In case the
Corporation shall sell and issue rights, options, warrants, or
convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock together with
one or more other securities as a part of a unit at a price per
unit, then in determining the price per share of Common Stock and
the consideration received by the Corporation for purposes of the
first sentence of this Paragraph 3(c), the Board of Directors of
the Corporation shall determine, in good faith, which
determination shall be described in a duly adopted board
resolution certified by the Corporation's Secretary or Assistant
Secretary, the fair value of the rights, options, warrants, or
convertible or exchangeable securities then being sold as part of
such unit. Such adjustment shall be made successively whenever
such an issuance occurs, and in the event that such rights,
options, warrants, or convertible or exchangeable securities
expire or cease to be convertible or exchangeable before they are
exercised, converted, or exchanged (as the case may be), then the
Warrant Price shall again be adjusted to the Warrant Price that
would then be in effect if such sale and issuance had not
occurred, but such subsequent adjustment shall not affect the
number of Warrant Shares issued upon any exercise of Warrants
prior to the date such subsequent adjustment is made.
(d) Notice of Adjustment. Upon any adjustment of the
Warrant Price, then and in each such case, the Corporation shall
give written notice thereof, by first class mail, postage
prepaid, addressed to each holder of the Warrants at the address
of such holder as shown on the books of the Corporation, which
notice shall state the Warrant Price resulting from such
adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(e) Certain Events. If any event occurs as to which,
in the reasonable opinion of CSFB, the other provisions of this
Section 3 are not strictly applicable or if strictly applicable
would not, in the reasonable opinion of CSFB, fairly protect the
exercise rights of this Warrant, in accordance with the essential
intent and principles of such provisions, then the Corporation
shall in good faith make an adjustment in the application of such
provisions, in accordance with such essential intent and
principles, so as to protect such exercise rights as aforesaid,
but in no event shall any such adjustment have the effect of
increasing the Warrant Price as otherwise determined pursuant to
this Section 3 except in the event of a combination of shares of
the type contemplated in paragraphs (a)or (b) of this Section 3
and then in no event to an amount greater than the Warrant Price
as adjusted pursuant to paragraphs (a) or (b) of this Section 3.
(f) Stock to Be Reserved. The Corporation will at all
times reserve and keep available out of its authorized Common
Stock or its treasury shares, solely for the purpose of issue
upon the exercise of this Warrant as herein provided, such number
of shares of Common Stock as shall then be issuable upon the
exercise of this Warrant. The Corporation covenants that all
shares of Common Stock which shall be so issued shall be duly and
validly issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, and,
without limiting the generality of the foregoing, the Corporation
covenants that it will from time to time take all such action as
may be requisite to assure that the par value per share of the
Common Stock is at all times equal to or less than the effective
Warrant Price. The Corporation will take all such action as may
be necessary to assure that all such shares of Common Stock may
be so issued without violation of any applicable law or
regulation, or of any requirements of any national securities
exchange upon which the Common Stock of the Corporation may be
listed. The Corporation will not take any action which results
in any adjustment of the Warrant Price if the total number of
shares of Common Stock issued and issuable after such action upon
exercise of this Warrant would exceed the total number of shares
of Common Stock then authorized by the Corporation's Certificate
of Incorporation. The Corporation has not granted and will not
grant any right of first refusal with respect to shares issuable
upon exercise of this Warrant, and there are no preemptive rights
associated with such shares.
(g) Issue Tax. The issuance of certificates for shares of
Common Stock upon exercise of the Warrants shall be made without
charge to the holders of such Warrants for any issuance tax in
respect thereof provided that the Corporation shall not be
required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate
in a name other than that of any holder of the Warrants.
(h) Closing of Books. The Corporation will at no time
close its transfer books against the transfer of the shares of
Common Stock issued or issuable upon the exercise of this warrant
in any manner which interferes with the timely exercise of this
Warrant.
(i) Definition of Common Stock. As used herein the term
"Common Stock" shall mean and include the Common Stock, par value
$2.00 per share, of the Corporation as authorized on the date of
issuance of this Warrant, and also any capital stock of any class
of the Corporation hereinafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of
the holders thereof to participate in dividends or in the
distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
provided, however, that the shares purchasable pursuant to this
Warrant shall include only shares designated as Common Stock, par
value $2.00 per share, of the Corporation on the date of this
Warrant, or shares of any class or classes resulting from any
reclassification or reclassifications thereof which are not
limited to any such fixed sum or percentage and are not subject
to redemption by the Corporation and in case at any time there
shall be more than one such resulting class, the shares of each
class then so issuable shall be substantially in the proportion
which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all
such classes resulting from all such reclassifications.
Section 4. Notices of Record Date. In the event of (1)
any taking by the Corporation of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution (other than cash dividends out of earned surplus),
or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property,
or to receive any other right, or (2) any capital reorganization
of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation or any transfer of all or
substantially all the assets of the Corporation to or
consolidation or merger of the Corporation with or into any other
corporation, or (3) any voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation, then and in each
such event the Corporation will give notice to the holder of this
Warrant specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or right and
stating the amount and character of such dividend, distribution
or right, and (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of
record of Common Stock will be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon
such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 20 days and not
more than 90 days prior to the date therein specified, and such
notice shall state that the action in question or the record date
is subject to the effectiveness of a registration statement under
the Securities Act of 1933, as amended (the "Securities Act") or
to a favorable vote of stockholders, if either is required.
Section 5. Registration Rights. The rights of the
holder hereof with respect to the registration under the
Securities Act of the shares of Common Stock issuable upon the
exercise of this Warrant are set forth in the Registration Rights
Agreement, dated as of May 23, 1997, among the Corporation and
CFSB.
Section 6. No Stockholder Rights or Liabilities. This
Warrant shall not entitle the holder hereof to any voting rights
or other rights as a stockholder of the Corporation. No
provision hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the holder
hereof, shall give rise to any liability of such holder for the
Warrant Price or as a stockholder of the Corporation, whether
such liability is asserted by the Corporation or by creditors of
the Corporation.
Section 7. Notices of Proposed Transfers. Prior to any
transfer, sale or assignment (each a "Transfer") of this Warrant
or any shares of Common Stock issuable hereunder, the holder of
this Warrant shall give ten days' prior written notice (a
"Transfer Notice") to the Company of such holder's intention to
effect such transfer, describing the manner and circumstances of
the proposed Transfer, and obtain from counsel to such holder who
shall be reasonably satisfactory to the Corporation (it being
agreed that the firm of Brown Raysman Millstein Felder & Steiner
LLP shall be reasonably satisfactory) an opinion that the
proposed Transfer of such Warrants or such Common Stock may be
effected without registration under the Securities Act or
applicable state securities law. After receipt of the Transfer
Notice and opinion by the Corporation, such holder shall
thereupon be entitled to Transfer such Warrants or such Common
Stock in accordance with the terms of the Transfer Notice. Each
Warrant issued upon such Transfer and each certificate
representing shares of Common Stock issued upon such Transfer
shall bear the restrictive legend set forth in Section 8 below,
unless in the opinion of such counsel such legend is not required
in order to ensure compliance with the Securities Act.
Notwithstanding the foregoing provisions of Section 7, the
restrictions imposed by this Section upon the transferability of
the Warrants or the Common Stock issuable upon exercise of the
Warrants and the legend requirements of Section 8 below shall
terminate as to this Warrant or the shares of Common Stock
issuable upon exercise hereof (i) when and so long as such
security shall have been effectively registered under the
Securities Act and disposed of pursuant thereto, or (ii) when the
Corporation shall have delivered to the holder of this Warrant or
shares of Common Stock issuable upon exercise hereof the written
opinion of counsel to the Corporation, which opinion and counsel
shall each be reasonably satisfactory to such holder, stating
that the transferability portion of such legend is not required
to ensure compliance with the Securities Act. Whenever the
restrictions imposed by this Section 7 shall terminate as to this
Warrant as hereinabove provided, the holder of this Warrant shall
be entitled to receive from the Corporation, at the Corporation's
expense, a new Warrant bearing the following legend in place of
the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTION 7 HEREOF TERMINATED ON __________, 19__, AND
ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division
or combination of, or in substitution for, this Warrant, if this
Warrant shall be entitled to bear such legend, shall have a
similar legend endorsed thereon.
Whenever the restrictions imposed by this Section 7 shall
terminate as to any Common Stock issuable upon exercise of this
Warrant, the holder thereof shall be entitled to receive from the
Corporation, at the Corporation's expense, a new share
certificate representing such Common Stock not bearing the legend
set forth in Section 8 below.
Section 8. Investment Representation and Legend. The
holder, by acceptance of the Warrant, represents and warrants to
the Corporation that it is acquiring the Warrant and the shares
of Common Stock (or other securities) issuable upon the exercise
hereof for investment purposes only and not with a view towards
the resale or other distribution thereof. Subject to the
provisions of Section 7 above, the holder, by acceptance of this
Warrant, further agrees that the Corporation may affix the
following legend to certificates for shares of Common Stock
issued upon exercise of this Warrant:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ISSUED IN RELIANCE UPON THE REPRESENTATION OF THE HOLDER THAT
THEY HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TOWARD
THE RESALE OR OTHER DISTRIBUTION THEREOF, AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER
THE SECURITIES EVIDENCED HEREBY, NOR ANY INTEREST THEREIN, MAY BE
OFFERED, SOLD, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF
UNLESS EITHER (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT RELATING THERETO OR (II) THE CORPORATION HAS
RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY IN FORM
AND SUBSTANCE TO THE CORPORATION, STATING THAT SUCH REGISTRATION
IS NOT REQUIRED."
Section 9. Lost, Stolen, Mutilated or Destroyed Warrant.
If this Warrant is lost, stolen, mutilated or destroyed, the
Corporation may, on such terms as to indemnity or otherwise as it
may in its discretion reasonably impose (which shall, in the case
of a mutilated Warrant, include the surrender thereof), issue a
new Warrant of like denomination and tenor as the Warrant so
lost, stolen, mutilated or destroyed. Any such new Warrant shall
constitute an original contractual obligation of the Corporation,
whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.
Section 10. Notices. All notices, requests and other
communications required or permitted to be given or delivered
hereunder shall be in writing, and shall be delivered, or shall
be sent by certified or registered mail, postage prepaid and
addressed, if to the holder, to such holder at the address shown
on such holder's Warrant or Warrant Shares or at such other
address as shall have been furnished to the Corporation by notice
from such holder. All notices, requests and other communications
required or permitted to be given or delivered hereunder shall be
in writing, and shall be delivered, or shall be sent by certified
or registered mail, postage prepaid and addressed to the
Corporation at such address as shall have been furnished to the
holder by notice from the Corporation.
Section 11. Notice of Expiration. The Corporation shall
give the holder of this Warrant written notice of such holder's
right to exercise this Warrant in the form attached as Annex B
hereto not more than 90 days and not less than 30 days before the
Expiration Date. If the notice is not so given, the Expiration
Date shall automatically be extended until 30 days after the date
the Corporation delivers the notice to such holder.
Section 12. Governing Law. This Warrant shall be governed
by and construed in accordance with the laws of the
State of New York.
IN WITNESS WHEREOF, the Corporation has executed this
Warrant on and as of the day and year first above written.
INTERNATIONAL THOROUGHBRED
BREEDERS, INC.
By:________________________________
Name: Nunzio DeSantis
Title: Chief Executive Officer
ANNEX A
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _______
shares of the Common Stock of International Thoroughbred
Breeders, Inc. pursuant to the provisions of Paragraph 1(a) of
the attached Warrant, and tenders herewith payment of the
purchase price of such shares in full.
[or]
1. The undersigned hereby elects to convert the attached
Warrant into shares of Common Stock of International Thoroughbred
Breeders, Inc. in the manner specified in Paragraph 1(b) of the
Warrant. This conversion is exercised with respect to
____________________ of the shares of Common Stock covered by the
attached Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing
said shares in the name of the undersigned or in such other name
as is specified below:
________________
(Name)
________________
________________
(Address)
3. The undersigned represents it is acquiring the shares
solely for its own account and not as a nominee for any other
party and not with a view toward the resale or distribution
thereof except in compliance with applicable securities laws.
________________________________
(Signature)
(Date) ________________________________
ANNEX B
Notice that Warrant is About to Expire
_____________, _______
[Name and Address of Holder]
Dear _______:
This is to advise you that the Warrant issued to you
described below will expire on _____________, ____.
Issuer: International Thoroughbred Breeders,
Inc.
Issue Date: May 23, 1997
Class of Security Issuable: Common Stock
Exercise Price per Share: $[ ]
Number of Shares: 497,153
Please contact [name of contact person at (phone number)]
with any questions you may have concerning the exercise of the
Warrant. This is your only notice of pending expiration.
INTERNATIONAL THOROUGHBRED
BREEDERS, INC.
By:___________________________
Name:
Title:
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT dated as of May __,
1997, between INTERNATIONAL THOROUGHBRED BREEDERS, INC., a
Delaware corporation (the "Company"), and CREDIT SUISSE FIRST
BOSTON MORTGAGE CAPITAL LLC, a Delaware limited liability company
("CSFB").
R E C I T A L S:
A. The Company and CSFB are parties to that
certain Loan Agreement of even date herewith (the "Loan
Agreement"), by and between the Company, CSFB and the other
entities named therein as Borrowers, pursuant to which CSFB has
agreed to make a loan to the Borrowers in the principal amount of
$55,000,000.00.
B. Pursuant to the Loan Agreement, the Company
is selling, contemporaneously herewith, to CSFB two Common Stock
Subscription Warrants (collectively the "Warrants") to purchase
up to an aggregate of 1,044,000 shares (the "Warrant Shares") of
Common Stock, par value $2.00 per share ("Common Stock"), of the
Company.
C. In addition, the Loan Agreement provides that
CSFB may, at its option, convert $10,000,000 of the outstanding
principal balance of the Loan (the "Convertible Debt") into
shares of Common Stock (the "Loan Conversion Shares") at the
Conversion Price (as such term is defined in the Loan Agreement),
and otherwise on the terms and conditions set forth in the Loan
Agreement.
D. Pursuant to a certain tri-party agreement of
even date herewith between CSFB, Las Vegas Entertainment Network,
Inc. and the Company (the "Tri-Party Agreement"), the Company has
agreed to issue to CSFB the Lender Conversion Shares and the
Lender Consideration Shares (as such terms are defined in the
Tri-Party Agreement).
THE PARTIES AGREE AS FOLLOWS:
1. Certain Definitions. Capitalized terms used
herein which are not otherwise defined and which are defined in,
or by reference in, the Loan Agreement shall have the meanings
given therein. For the purposes of this Agreement, the following
terms shall have the following meanings:
"Agreement" shall mean this Registration Rights
Agreement, as the same may be amended, modified or supplemented
from time to time.
"Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, or any similar federal statute then in
effect, and a reference to a particular section thereof shall be
deemed to include a reference to the comparable section, if any,
of any such similar federal statute.
"Holder" shall mean CSFB and each Person to whom
Registrable Securities are transferred so long as such Person
holds such Registrable Securities, provided that for purposes of
Sections 2, 3 and 9(a), a Holder of Warrants or Convertible Debt
shall be deemed to be a Holder of Registrable Securities which
would be issuable upon exercise of the Warrants or conversion of
the Convertible Debt held by such Holder at such time.
"Registrable Securities" shall mean the Warrants,
the Warrant Shares, the Loan Conversion Shares, the Lender
Conversion Shares and the Lender Consideration Shares and any
securities issued in exchange for, or conversion of or
substitution of any thereof, or as a dividend or other
distribution in respect of any thereof. As to any particular
Registrable Securities, once issued such securities shall cease
to be Registrable Securities when (i) a registration statement
with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement,
(ii) they shall have been disposed of pursuant to Rule 144 (or
any successor provision) under the Securities Act, (iii) they
shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent disposition of them shall
not require registration or qualification of them under the
Securities Act or any similar state law then in force (and the
Holder thereof shall have received an opinion of independent
counsel for the Holder reasonably satisfactory to the Company to
the foregoing effects), or (iv) they shall have ceased to be
outstanding.
"Registration Expenses" shall mean any and all
expenses incident to performance of or compliance with this
Agreement, including without limitation, (i) all SEC and National
Association of Securities Dealers, Inc. or stock exchange
registration, listing and filing fees, (ii) all fees and expenses
of complying with securities or blue sky laws (including
reasonable fees and disbursements of counsel for the Company, the
underwriters or the Holders in connection with blue sky
qualifications of the Registrable Securities), (iii) all
printing, messenger, telephone and delivery expenses and transfer
taxes, (iv) the fees and disbursements of counsel for the Company
and of its independent public accountants, including the expenses
of any "cold comfort" letters required by or incident to such
performance and compliance, (v) the reasonable fees and
disbursements of one law firm retained in connection with each
such registration by the Holders of Registrable Securities being
registered and selected by Holders of a majority of Registrable
Securities being registered, (vi) any fees and disbursements of
underwriters customarily paid by issuers or sellers of
securities, and (vii) the reasonable fees and expenses of any
special experts retained in connection with the requested
registration, but excluding underwriting discounts and
commissions of underwriters, agents or dealers relating to the
distribution of the Registrable Securities, if any.
"Securities Act" shall mean the Securities Act of
1933, as amended, or any similar federal statute then in effect,
and a reference to a particular section thereof shall be deemed
to include a reference to the comparable section, if any, of any
such similar federal statute.
"SEC" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering
the Securities Act or the Exchange Act.
2. Shelf Registrations.
(a) Shelf Registrations. Within ninety (90) days
of the date hereof, the Company shall use its best efforts to
effect the registration under the Securities Act of all of the
Registrable Securities (other than the shares of Common Stock
underlying the Warrant dated of even date herewith to subscribe
for 497,153 shares of Common Stock, which shares shall be
registered within ninety (90) days of the effective date of such
Warrant) to the extent necessary to permit the disposition (in
accordance with the intended method or methods of distribution
thereof as specified at the time by the Holders) of such
Registrable Securities. Such registration shall be effected by
the preparation and filing by the Company with the SEC of a
registration statement on Form S-3 or other similar form with
respect to the offering and sale by the Holders of the
Registrable Securities on a continuous or delayed basis in the
future pursuant to Rule 415 under the Securities Act. If the
Registrable Securities shall not have been fully disposed of
pursuant to such registration, within ninety (90) days of the
expiration of such registration pursuant to the provisions of
Section 4(b) hereof, the Company shall use its best efforts to
effect another registration under the Securities Act of all of
the remaining Registrable Securities to the extent necessary to
permit the disposition (in accordance with the intended method or
methods of distribution thereof as specified at the time by the
Holders) of such Registrable Securities. Such registration shall
be effected by the preparation and filing by the Company with the
SEC of a registration statement on Form S-3 or other similar form
with respect to the offering and sale by the Holders of the
remaining Registrable Securities on a continuous or delayed basis
in the future pursuant to Rule 415 under the Securities Act.
(b) Registration Statement Form. If a registration
requested pursuant to this Section 2 which is proposed by the
Company to be effected by the filing of a registration statement
on Form S-3 (or any successor or similar short-form registration
statement) shall be in connection with an underwritten public
offering and if the managing underwriter shall advise the Company
in writing that, in its opinion, the use of another form of
registration statement is of material importance to the success
of such proposed offering, then such registration shall be
affected on such other form.
(c) Expenses. The Company will pay all Registration
Expenses in connection with a registration of Registrable
Securities requested pursuant to this Section 2.
(d) Effective Registration Statement. A registration
requested pursuant to this Section 2 will be deemed to have been
effected if (i) it has become effective (provided that if, after
it has become effective, the offering of Registrable Securities
pursuant to such registration is interfered with by any stop
order, injunction or other order or requirement of the SEC or
other governmental agency or court, such registration will be
deemed not to have been effected), or (ii) the Company is unable
to complete such registration statement because one or more
Holders of Registrable Securities thus being registered failed to
provide information for use in such registration statement
requested reasonable and in a timely manner by the Company or
because such Holders otherwise failed to do such reasonable acts
and things as may be requested by the Company to comply with the
requirements of law.
3. Incidental Registration.
(a) Right to Include Registrable Securities. If
at any time the Company proposes to register any of its equity
securities under the Securities Act (other than a registration on
Form S-4 or Form S-8 or a registration under Section 2 herein),
whether or not for sale for its own account, it will each such
time give prompt written notice to all Holders of Registrable
Securities of its intention to do so and of such Holders' rights
under this Section 3. Upon the written request of any such
Holder made within 20 days after the receipt of any such notice
(which request shall specify the Registrable Securities intended
to be disposed of by such Holder and the intended method of
disposition thereof), the Company will use its best efforts to
effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to
register by the Holders thereof, to the extent requisite to
permit the disposition (in accordance with such intended methods
thereof) of the Registrable Securities so to be registered;
provided that if, at any time after giving written notice of its
intention to register any securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to
register such securities, the Company may, at its election, give
written notice of such determination to each Holder of
Registrable Securities and, thereupon, shall be relieved of its
obligation to register any Registrable Securities in connection
with such registration, without prejudice, however, to the rights
of Holders under the Section 2 herein. No registration effected
under this Section 3 shall relieve the Company of its obligations
to effect registrations upon request under Section 2 herein. The
Company will pay all Registration Expenses in connection with
each registration of Registrable Securities requested pursuant to
this Section 3.
(b) Priority in Incidental Registrations. If a
registration pursuant to this Section 3 involves an underwritten
offering and the managing underwriter advises the Company in
writing that, in its opinion, the number of securities requested
to be included in such registration exceeds the number which
would have an adverse effect on such offering, including the
price at which such shares can be sold, the Company will include
in such registration the maximum number of securities which it is
so advised can be sold without such an adverse effect, allocated
as follows:
(A) first, all securities proposed to be registered by
the Company for its own account, and
(B) second, all securities requested to be included in
such registration under this Section 3 and any other
securities proposed to be registered by the Company other
than for its own account (if necessary, allocated pro rata
among all such requesting Holders and holders of such other
securities on the basis of the relative number of shares of
securities each such Holder and each holder of such other
securities has requested to be included in such
registration).
4. Registration Procedures. If and whenever the
Company is required to use its best efforts to effect or cause
the registration of any Registrable Securities under the
Securities Act as provided in this Agreement, the Company will
use its best efforts to permit the sale of such Registrable
Securities in accordance with the intended method or methods of
distribution thereof, and will, as expeditiously as possible:
(a) prepare and file with the SEC a registration
statement with respect to such Registrable Securities and
use its best efforts to cause such registration statement to
become effective, provided, however, that the Company may
discontinue any registration of its securities which is
being effected pursuant to Section 3 herein at any time
prior to the effective date of the registration statement
relating thereto;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the
prospectus used in connection therewith as may be necessary
to keep such registration statement effective for a period
not in excess of one hundred twenty (120) days from the
effective date thereof (except in the case of a registration
pursuant to Section 2(a) hereof in which case the period
shall be two (2) years) and to comply with the provisions of
the Securities Act with respect to the disposition of all
securities covered by such registration statement during
such period in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in
such registration statement;
(c) furnish to each seller of such Registrable
Securities such number of executed and conformed copies of
such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits and
all documents incorporated by reference), such number of
copies of the prospectus included in such registration
statement (including each preliminary prospectus and
supplemental prospectus), and such other documents as such
seller may reasonably request in order to facilitate the
disposition of the Registrable Securities by such seller;
(d) use its best efforts to register or qualify (and
keep effective such registration or qualification) such
Registrable Securities covered by such registration
statement under such other securities or blue sky laws of
such jurisdictions within the United States as may be
reasonably required to permit such sellers to sell the
Registrable Securities or as the sellers shall reasonably
request, and do any and all other acts and things which may
be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller; provided that
the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in
any jurisdiction where, but for the requirements of this
subsection (d), it would not be obligated to be so
qualified, to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in
any such jurisdiction; and provided, further, that this
subsection (d) shall not be construed to require the Company
to register as a broker-dealer in any jurisdiction any third
person to whom or through whom a Holder proposes to sell
Registrable Securities;
(e) immediately notify each seller of any such
Registrable Securities covered by such registration
statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act within the
appropriate period mentioned in subsection (b) of this
Section 4, of the Company becoming aware that the prospectus
included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading in
light of the circumstances then existing, and at the request
of any such seller promptly prepare and furnish to such
seller a reasonable number of copies of an amended or
supplemented prospectus as may necessary so that, as
thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances then existing;
(f) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at
least twelve months, beginning with the first month after
the effective date of the Registration Statement, which
earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act;
(g) use its best efforts to list such Registrable
Securities (other than the Warrants) on the National
Association of Securities Dealers, Inc. National Market
System or any securities exchange on which securities of
such class are then listed, if such Registrable Securities
(other than the Warrants) are not already so listed, and to
provide a transfer agent and registrar for such Registrable
Securities covered by such registration statement (other
than the Warrants) not later than the effective date of such
registration statement;
(h) enter into such agreements (including an
underwriting agreement in customary form) and take such
other actions as sellers of a majority (by number of shares)
of such Registrable Securities reasonably request in order
to expedite or facilitate the disposition of such
Registrable Securities;
(i) if the registration relates to an underwritten
offering, make such representations and warranties to the
sellers and to the underwriters, if any, as are customarily
made by issuers to underwriters in underwritten offerings,
obtain opinions of counsel to the Company addressed to each
seller and to the underwriters, if any, covering the matters
customarily covered in underwritten offerings, and obtain a
"cold comfort" letter or letters and updates thereof from
the Company's independent public accountants in customary
form and covering matters of the type customarily covered in
underwritten offerings, in each case as the underwriters or
the seller or sellers of a majority (by number of shares) of
such Registrable Securities shall request; and
(j) make available for inspection by any seller of
such Registrable Securities covered by such registration
statement, by any underwriter participating in any
disposition to be effected pursuant to such registration
statement and by any attorney, accountant, or other agent
retained by any such seller or any such underwriter, all
pertinent financial and other records, pertinent corporate
documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply
all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection
with such registration statement.
The Company may require each seller of Registrable Securities as
to which any registration is being effected to furnish the
Company such information regarding such seller and the
distribution of such securities for use in the registration
statement relating to such registration as the Company may from
time to time reasonably request in writing and to do such
reasonable acts and things as the Company may from time to time
reasonably request in writing in order to permit the Company to
comply with the requirements of law.
Each Holder of Registrable Securities agrees by
acquisition of such Registrable Securities that, upon receipt of
any notice from the Company of the happening of any event of the
kind described in subsection (e) of this Section 4, such Holder
will forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement covering such Registrable
Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subsection (e)
of this Section 4, and if so directed by the Company, such Holder
will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the period
mentioned in subsection (b) of this Section 4 shall be extended
by the number of days during the period from and including the
date of the giving of such notice pursuant to subsection (e) of
this Section 4 to and including the date when each seller of
Registrable Securities covered by such registration statement
shall have received the copies of the supplemented or amended
prospectus contemplated by subsection (e) of this Section 4.
Notwithstanding any other provisions of this
Agreement, upon receipt by the Holders of a written notice signed
by the chief executive officer, chief operating officer or chief
financial officer of the Company, to the effect set forth below,
the Company shall not be obligated during a reasonable period of
time thereafter to effect any registrations pursuant to this
Agreement, and the Holders agree that they will immediately
suspend sales of shares under any effective registration
statement for a reasonable period of time, in either case not to
exceed ninety (90) days, at any time during which, in the
Company's reasonable judgment, (i) there is a development
involving the Company or any of its affiliates which is material
but which has not yet been publicly disclosed or (ii) sales
pursuant to the registration statement would materially and
adversely affect an underwritten public offering for the account
of the Company or any other material financing project or a
proposed or pending material merger or other material acquisition
or material business combination or material disposition of the
Company's assets, to which the Company or any of its affiliates
is, or is expected to be, a party. To such end, each Holder
shall notify the Company not less than three (3) business days
prior to any proposed sale of Registrable Securities pursuant to
the shelf registrations contemplated by Section 2 herein. In the
event a registration is postponed or sales by the Holders
pursuant to an effective registration statement are suspended in
accordance with this paragraph, there shall be added to the
period during which the Company is obligated to keep a
registration effective the number of days for which the
registration was postponed or sales were suspended.
5. Indemnification.
(a) Indemnification by the Company. In the event
of any registration of any securities of the Company under the
Securities Act pursuant to Section 2 or 3 herein, the Company
will, and it hereby does, indemnify and hold harmless, to the
fullest extent permitted by law, the seller of any Registrable
Securities covered by such registration statement, its directors
and officers or general and limited partners (and directors and
officers thereof), each Person who participates as an underwriter
in the offering or sale of such securities and each other Person,
if any, who controls such seller or any such underwriter within
the meaning of the Securities Act, against any and all losses,
claims, damages or liabilities, joint or several, and expenses
(including legal, accounting and other expenses incurred in
connection with investigation, preparation or defense of any of
the foregoing, and including any amounts paid in any settlement
effected with the Company's consent) to which such seller, any
such director or officer of general or limited partner or any
such underwriter or controlling Person may become subject under
the Securities Act, the Exchange Act, common law or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are
based upon (a) any untrue statement or alleged untrue statement
of any material fact contained in any registration statement
under which such securities were registered under the Securities
Act, any preliminary, final or supplemental prospectus contained
therein, or any amendment or supplement thereto, or (b) any
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse such
seller and each such director, officer, general or limited
partner, underwriter and controlling Person for any legal or any
other expenses reasonably incurred by them in connection with
investigating or preparing for and defending any such loss,
claim, liability, action or proceeding from time to time as such
expenses are incurred; provided that the Company shall not be
liable in any such case to the extent that any such loss claim,
damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in
such registration statement or amendment or supplement thereto or
in any such preliminary, final or supplemental prospectus in
reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by
such seller or underwriter specifically stating that it is for
use in the preparation thereof. Such indemnity shall remain in
full force and effect regardless of any investigation made by or
on behalf of such seller or any such director, officer, general
or limited partner, underwriter or controlling Person and shall
survive the transfer of such securities by such seller.
(b) Indemnification by the Sellers. The Company
may require, as a condition to including any Registrable
Securities in any registration statement filed in accordance with
Section 4 herein, that the Company shall have received an
undertaking reasonably satisfactory to it from the prospective
seller of such Registrable Securities (except that no such
undertaking shall be required to the extent applicable law,
charter document or by-laws forbid such prospective seller from
giving such undertaking) or any underwriter, to indemnify and
hold harmless (in the same manner and tot he same extent as set
forth in subsection (a) of this Section 5) the Company, its
directors and officers signing the registration statement and its
controlling Persons and all other prospective sellers and their
respective controlling Persons with respect to any statement or
alleged statement in or omission or alleged omission from such
registration statement, any preliminary, final or supplemental
prospectus contained therein, or any amendment or supplement, if
such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly
executed by such seller or underwriter specifically stating that
it is for use in the final or supplemental prospectus or
amendment or supplement, or a document incorporated by reference
into any of the foregoing; provided in no event shall the
liability of any selling Holder or Registrable Securities be
greater in amount than the amount of proceeds received by such
Holder upon such sale. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf
of the Company or any other prospective sellers or any of their
respective directors, officers or controlling Persons and shall
survive the transfer of such securities by such seller.
(c) Notices of Claims, Etc. Promptly after
receipt by an indemnified party hereunder of written notice of
the commencement of any action or proceeding with respect to
which a claim for indemnification may be made pursuant to this
Section 5, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action; provided
that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 5,
except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment (which is based on the
written opinion of its counsel) a conflict of interest between
such indemnified and indemnifying articles exists in respect of
such claim, the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with
any other indemnifying party similarly notified to the extent
that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice form the indemnifying party
to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to
such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the
defense thereof. If in an indemnified party's reasonable
judgment (which is based on the written opinion of its counsel) a
conflict of interest between the indemnified and indemnifying
parties exists in respect of a claim or if the indemnifying party
refuses to participate in and to assume the defense of any action
brought against an indemnified party, the indemnified party may
assume the defense of such claim or action with counsel of its
choosing which shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 5.
No indemnifying party will consent to entry of any judgment or
enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
(d) Contribution. If the indemnification
provided for in or pursuant to this Section 5 is due in
accordance with the terms hereof but is held by a court to be
unavailable or unenforceable in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then each
applicable indemnifying party, in lieu of indemnifying such
indemnified person, shall contribute to the amount paid or
payable by such indemnified person as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying
party on the one and of the indemnified person on the other in
connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses as well as
any other relevant equitable considerations. The relative fault
of the indemnifying party on the one hand and of the indemnified
person on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of
a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying
party or by the indemnified person by such persons' relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. In no event shall
the liability of any selling Holder of Registrable Securities be
greater in amount than the amount of proceeds received by such
Holder upon such sale.
6. Rule 144. The Company covenants that it will
use its best efforts to file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder (or, if the Company
is not required to file such reports, it will, upon the request
of any holder of Registrable Securities, make publicly available
such information as necessary to permit sales pursuant to Rule
144 under the Securities Act, as amended), and it will do all
such other acts and things from time to time as requested by any
Holder of Registrable Securities to the extent required from time
to time to enable each Holder to sell shares of Registrable
Securities without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereunder adopted by the SEC.
Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
7. Public Trading Market. Until the date on
which there are no Registrable Securities, the Company shall use
its best efforts to maintain a public trading market for its
Common Stock.
8. Restriction on Resale. Unless otherwise
agreed by the Company, until the date on which there are no
Registrable Securities, each Holder of Registrable Securities
agrees that it will not resell such Registrable Securities
without registration under the Securities Act, compliance with
Rule 144 under the Securities Act or an opinion of counsel for
the Company, addressed to the Company, to the effect that no such
registration is required. All reasonable costs, fees and
expenses of counsel in connection with such opinion shall be
borne by the Company.
9. Miscellaneous.
(a) Amendments and Waivers. This Agreement may
be amended and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of Holders of
Registrable Securities holding 51% of the Registrable Securities
then outstanding. Holders of Registrable Securities shall be
bound by any consent authorized by this Section 9(a), whether or
not such Registrable Securities shall have been marked to
indicate such consent.
(b) Successors, Assigns and Transferees. This
Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their legal successors-in-interest, and
nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
(c) Notices. All notices and other
communications provided for hereunder shall be given and shall be
effective as provided in the Loan Agreement.
(d) Descriptive Headings. The headings in this
Agreement are for convenience of reference only and shall not
limit or otherwise effect the meaning of terms contained herein.
(e) Severability. In the event that any one or
more of the provisions, paragraphs, words, clauses, phrases or
sentences contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability
of such provision, paragraph, word, clause, phrase, or sentence
in every other respect and of the remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not
be in any way impaired, it being intended that all rights, powers
and privileges of the parties hereto shall be enforceable to the
fullest extent permitted by law.
(f) Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same
instrument, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such
counterpart.
(g) Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the
laws of the State of New York.
(h) Remedies. The Company acknowledges that
monetary damages will not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions hereof and
agrees, to the fullest extent permitted by law, to waive the
defense of adequacy of legal remedies in any action for specific
performance hereof.
(i) Merger, etc. If, directly or indirectly, (i)
the Company shall merge with and into, or consolidate with, any
other Person, (ii) any Person shall merge with and into, or
consolidate with, the Company and the Company shall be the
surviving corporation of such merger or consolidation and, in
connection with such merger or consolidation, all or part of the
Registrable Securities shall be changed into or exchanged for
stock or other securities of any other Person, then, in each such
case, proper provision shall be made so that such Person shall be
bound by the provisions of this Agreement and the term "Company"
shall thereafter be deemed to refer to such Person. For purposes
hereof, the term "Person" shall mean any individual, corporation,
partnership, trust or other nongovernmental entity.
(j) Legal Fees; Costs. If any party to this
agreement institutes any action or proceeding, whether before a
court or arbitrator, to enforce any provision of this Agreement,
the prevailing party therein shall be entitled to receive from
the losing party reasonable attorneys' fees and costs incurred in
such action or proceeding, whether or not such action or
proceeding is prosecuted to judgment.
10. Termination. The Company's obligations under
Sections 2 and 3 hereof shall terminate at the close of business
on the date on which each Holder of Registrable Securities is
able to resell such Registrable Securities in compliance with
Rule 144 under the Securities Act without restriction as to
amount and manner of sale (except to the extent at such time
there is outstanding a request for registration under either of
such Sections), or such earlier date on which there shall be no
Registrable Securities.
IN WITNESS WHEREOF, each of the undersigned has
caused this Registration Rights Agreement to be executed on its
behalf as of the date first written above.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
By: ______________________
Name: Nunzio DeSantis
Title: Chief Executive Officer
CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL LLC
By:__________________________
Name:________________________
Title:_______________________
