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 22, 2000
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.)
Route 70 and Haddonfield Road
Cherry Hill, New Jersey 08034
----------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 856-488-3838
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
Item 2. Acquisition or Disposition of Assets.
------------------------------------
On May 22, 2000, International Thoroughbred Breeders, Inc. ("ITB" or the
"Company"), through its wholly-owned subsidiary, Orion Casino Corporation,
closed on the sale (the "El Rancho Transaction") of the non-operating former El
Rancho Hotel and Casino (the "El Rancho Property") in Las Vegas, Nevada, to
Turnberry/Las Vegas Boulevard, LLC ("Turnberry"). The purchase price was $45
million and was paid by: (i) previous cash deposits totaling a $2,000,000; and
(iii) the balance of the purchase price paid in cash at the closing.
The proceeds of the El Rancho Transaction were principally used by the
Company to reduce the outstanding balance on the Company's loan from Credit
Suisse First Boston Mortgage Capital LLC ("Credit Suisse") to $14.7 million and
to purchase a promissory note of the buyer in the amount of $23,000,000 which
will be convertible at the Company's option into a 33 1/3% equity interest in
the buyer.
The note will accrue interest at a 22% per annum rate, which will be
adjusted from time to time since the interest actually payable will be dependent
upon, and payable solely out of, the buyer's net cash flow available for
distribution to its equity owners ("Distributable Cash"). After the equity
investors in the buyer have received total distributions equal to their capital
contributions plus an agreed upon return on their invested capital, the next $23
million of Distributable Cash will be paid to the Company. The Company will
thereafter receive payments under the note equal to 33 1/3% of all Distributable
Cash until the maturity date, which occurs on the 30th anniversary of the
Company's purchase of the note. The Company may convert the promissory note, at
its option, into a 33 1/3% equity interest in the buyer during a six month
period beginning at the 15th anniversary of the issuance of the note. If not
then converted, the note will convert into a 33 1/3% equity interest in the
buyer at the 30th anniversary of its issuance.
2
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(b) Pro Forma Financial Information
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2000
<TABLE>
ASSETS
As Reported As Adjusted
March 31, Pro Forma
2000 Pro Forma Balance
(UNAUDITED) Adjustments Sheet
----------------- ------------------- ------------
<CAPTION>
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 94,018 $ 400,000 (1) $ 2,577,739
1,100,000 (1)
983,721 (4)
Accounts Receivable 2,235 2,235
Prepaid Expenses 130,781 130,781
Other Current Assets 39,003 39,003
Net Assets of Discontinued
Operations - Current (279,427) (279,427)
-------------- -------------
TOTAL CURRENT ASSETS (13,390) 2,470,331
-------------- ------------
NET ASSETS OF DISCONTINUED
OPERATIONS - Long Term 30,000,000 30,000,000
PROPERTY HELD FOR SALE 42,149,755 (42,149,755) (4) 0
LAND, BUILDINGS AND EQUIPMENT:
Land and Buildings 214,097 214,097
Equipment 685,886 685,886
-------------- ------------
899,983 899,983
LESS: Accumulated Depreciation 373,060 373,060
-------------- ------------
TOTAL LAND, BUILDINGS AND
EQUIPMENT, NET 526,923 526,923
-------------- ------------
OTHER ASSETS:
Note Receivable 0 23,000,000 (4) 23,000,000
Deposits and Other Assets 1,003,172 1,003,172
-------------- ------------
TOTAL OTHER ASSETS 1,003,172 24,003,172
-------------- ------------
TOTAL ASSETS $ 73,666,460 $ 57,000,426
============== ============
</TABLE>
See Notes to Pro Forma Financial Statements.
3
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
As Reported As Adjusted
March 31, Pro Forma
2000 Pro Forma Balance
(UNAUDITED) Adjustments Sheet
-------------- ----------------- --------------
<CAPTION>
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts Payable $ 129,487 $ 4,289 (5) $ 133,776
Accrued Expenses 1,586,480 (1,020,927) (3) 625,766
1,795 (4)
58,418 (6)
Current Maturities of Long-Term Debt 36,713,200 (17,895,167) (3) 18,818,033
Deferred Gain on Sale of Property 500,000 1,500,000 (1) 2,979,061
(109,205) (2)
19,256,094 (3)
(18,167,828) (4)
-------------- -------------
TOTAL CURRENT LIABILITIES 38,929,167 22,556,636
-------------- -------------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Series A Preferred Stock, $100.00 Par Value,
Authorized 500,000 Shares, Issued and
Outstanding, 362,482 Shares 36,248,375 36,248,375
Common Stock, $2.00 Par Value, Authorized
25,000,000 Shares, Issued 11,884,260 Shares
and Outstanding 8,980,244 Shares 23,768,527 23,768,527
Capital in Excess of Par 26,144,552 26,144,552
(Deficit) (subsequent to June 30, 1993,
date of quasi-reorganization) (44,136,204) (293,503) (44,429,707)
-------------- -------------
TOTAL 42,025,250 41,731,747
LESS: Treasury Stock, 2,904,016 Shares, at cost (7,260,040) (7,260,040)
LESS: Deferred Compensation, Net (27,917) (27,917)
-------------- -------------
TOTAL STOCKHOLDERS' EQUITY 34,737,293 34,443,790
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $ 73,666,460 $ 57,000,426
============== =============
</TABLE>
See Notes to Pro Forma Financial Statements.
4
<PAGE>
UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2000
<TABLE>
As Reported
Nine Months
Ended As Adjusted
March 31, Pro Forma Company
2000 Adjustments Pro Forma
----------------- --------------- ---------------
<CAPTION>
<S> <C> <C> <C>
REVENUE:
Rental Income $ 230,154 $ 230,154
Interest Income 34,749 34,749
-------------- --------------
TOTAL REVENUES 264,903 264,903
-------------- --------------
EXPENSES:
General & Administrative
Expenses 2,132,032 $ 58,419 (6) 2,190,451
Interest Expense 3,285,517 40,000 (3) 3,625,517
300,000 (3)
El Rancho Property
Carrying Costs 960,494 (109,205)(2) 855,578
2,718 (5)
1,571 (5)
-------------- --------------
TOTAL EXPENSES 6,378,043 6,671,546
-------------- --------------
NET (LOSS) $ (6,113,140) $ (6,406,643)
============== ==============
BASIC PER SHARE DATA:
NET (LOSS) $ (0.68) $ (0.71)
============== --------------
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 8,980,240 8,980,240
============== ==============
</TABLE>
See Notes to Pro Forma Financial Statements.
5
<PAGE>
UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
As Reported As Adjusted
June 30, Pro Forma Company
1999 Adjustments Pro Forma
------------- ------------------- -------------
<CAPTION>
<S> <C> <C> <C> <C>
EXPENSES:
General & Administrative Expenses $ 4,532,984 $ 58,419 (6) $ 4,591,403
Interest and Financing Expenses 7,831,021 40,000 (3) 8,171,021
300,000 (3)
Interest Income (343,572) (343,572)
Amortization of Financing Costs 2,900,749 2,900,749
El Rancho Property Carrying Costs 1,113,587 (109,205)(2) 1,008,671
2,718 (5)
1,571 (5)
(LOSS) FROM CONTINUING OPERATIONS
-------------- --------------
BEFORE DISCONTINUED OPERATIONS (16,034,769) (16,328,272)
-------------- --------------
INCOME FROM DISCONTINUED OPERATIONS:
Net Gain on Sale of Net Assets
of Discontinued Operations
(less applicable state income
taxes of $1,335,500) 3,657,688 3,657,688
Income from Discontinued
Racetrack Operations (less
applicable state income taxes
of $119,348) 4,486,384 4,486,384
-------------- --------------
INCOME FROM DISCONTINUED
RACETRACK OPERATIONS 8,144,072 8,144,072
-------------- --------------
NET (LOSS) $ (7,890,697) $ (8,184,200)
============== ==============
BASIC AND DILUTED PER SHARE DATA:
(LOSS) BEFORE DISCONTINUED
OPERATIONS $ (1.38) $ (1.40)
NET GAIN ON SALE OF NET ASSETS OF
DISCONTINUED OPERATIONS 0.32 0.32
INCOME FROM DISCONTINUED
RACETRACK OPERATIONS 0.39 0.39
-------------- --------------
NET (LOSS) $ (0.67) $ (0.69)
============== ==============
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 11,554,476 11,554,476
============== ==============
</TABLE>
See Notes to Pro Forma Financial Statements.
6
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEETS
AND STATEMENTS OF OPERATIONS
(1) In connection with extending the closing date of on the sale of the El
Rancho property, Turnberry made non-refundable deposits in April 2000 and
May 2000 to the Company in the amounts of $1,100,000 and $400,000,
respectively.
Debit Credit
-------------------- -------------------
Cash $ 1,100,000 $
Cash 400,000
Deferred Gain on Disposition 1,500,000
-------------------- -------------------
$ 1,500,000 $ 1,500,000
==================== ===================
(2) In connection with extending the closing date of on the sale of the El
Rancho property, Turnberry agreed to pay the carrying costs on the El
Rancho property from March 1, 2000 until the closing date.
Debit Credit
-------------------- -------------------
Carrying Costs $ 109,205
Deferred Gain on Disposition $ 109,205
(3) In connection with the sale of the El Rancho property, the Company used
$19,256,094 to pay down the Credit Suisse debt, accrued interest and
related expenses.
Debit Credit
-------------------- --------------------
Current Maturities of LTD $ 17,895,167 $
Deferred Gain on Disposition 19,256,094
Interest Expense 340,000
Accrued Interest 1,020,927
-------------------- --------------------
$ 19,256,094 $ 19,256,094
==================== ====================
(4) Pro forma adjustment to record the sale of the El Rancho property and the
Company's purchase of a $23,000,000 promissory note of the buyer which will
be convertible at the Company's option into a 33 1/3% equity interest in
the buyer, depending upon certain circumstances.
Debit Credit
-------------------- --------------------
Cash & Cash Equivalents $ 983,721 $
Note Receivable 23,000,000
Deferred Gain on Disposition 18,167,829
Property Held for Sale 42,149,755
Accrued Expenses 1,795
-------------------- --------------------
$ 42,151,550 $ 42,151,550
==================== ====================
7
<PAGE>
(5) For both the year ended June 30, 1999 and the nine months ended March 31,
2000, the pro forma adjustments eliminate the effects of certain reimbursed
carrying costs previously recorded.
Debit Credit
-------------------- --------------------
Carrying Costs $ 4,289
Accounts Payable $ 4,289
(6) For both the year ended June 30, 1999 and the nine months ended March 31,
2000, the pro forma adjustments eliminate the effects on Legal expenses
associated with the Credit Suisse debt repaid in connection with the sale
of the El Rancho property.
Debit Credit
-------------------- --------------------
General & Administrative
Expenses $ 58,419
Accrued Expenses $ 58,419
8
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
(c) Exhibits.
The following exhibits are filed as part of this Report:
10.1 Agreement of Sale Between Orion Casino Corporation (the "Seller") and
Turnberry/Las Vegas Boulevard, LLC (the "Buyer").
10.2 Note Purchase Agreement Between Orion Casino Corporation, as
Purchaser, and Turnberry/Las Vegas Boulevard, LLC, as Issuer, Dated as
of March 1, 2000.
10.3 $23,000,000.00 Promissory Note dated May 18th, 2000, from
Turnberry/Las Vegas Boulevard, LLC, (the "Maker") to Orion Casino
Corporation, (the "Payee").
10.4 Security Agreement, dated as of May 18, 2000, by and among
Turnberry/Las Vegas Boulevard, LLC, (the "Joint Venture"), the members
of the Joint Venture parties to this Agreement (said members being
collectively called the "Pledgers"), and Orion Casino Corporation, a
Nevada corporation (the "Purchaser").
9
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
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.
June 7, 2000 /s/Robert J. Quigley
Robert J. Quigley, President, and
Chairman of the Board
June 7, 2000 /s/William H. Warner
William H. Warner
Treasurer
(Principal Financial and
Accounting Officer)
10
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Document
10.1 Agreement of Sale Between Orion Casino Corporation (the "Seller") and
Turnberry/Las Vegas Boulevard, LLC (the "Buyer").
10.2 Note Purchase Agreement Between Orion Casino Corporation, as
Purchaser, and Turnberry/Las Vegas Boulevard, LLC, as Issuer, Dated as
of March 1, 2000.
10.3 $23,000,000.00 Promissory Note dated May 18th, 2000, from
Turnberry/Las Vegas Boulevard, LLC, (the "Maker") to Orion Casino
Corporation, (the "Payee").
10.4 Security Agreement, dated as of May 18, 2000, by and among
Turnberry/Las Vegas Boulevard, LLC, (the "Joint Venture"), the members
of the Joint Venture parties to this Agreement (said members being
collectively called the "Pledgers"), and Orion Casino Corporation, a
Nevada corporation (the "Purchaser").
Exhibit 10.1
EL RANCHO PROPERTY
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (the "Agreement"), made this _____ day of
_______________, 2000, by and between ORION CASINO CORPORATION, a Delaware
corporation (the "Seller") and TURNBERRY/LAS VEGAS BOULEVARD, LLC, a Nevada
limited liability company (the "Buyer"),
W I T N E S S E T H:
WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase from
Seller that certain premises as hereinafter described in consideration for
payment of the purchase price set forth herein and the covenants contained
herein;
NOW THEREFORE, in witness of the foregoing and other good and valuable
consideration as set forth herein and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
1. Premises. Seller hereby agrees to sell and convey to Buyer, who hereby
agrees to purchase from Seller, all that certain lot or piece of ground situate
at the northeast corner of Las Vegas Boulevard South and Riviera Boulevard,
Clark County, State of Nevada, as more specifically described on Exhibit A,
attached hereto and made a part hereof, together with: (a) all buildings,
structures and improvements and personal property thereon (collectively, the
"Improvements"); (b) any land lying in the bed of any street, road or alley,
opened or proposed, abutting such land to the center line thereof; (c) any
easement, privilege or right-of-way inuring to the benefit of such land; (d) the
appurtenances and hereditaments belonging or otherwise pertaining to such land;
and, (e) to the extent assignable, all licenses, permits, appraisals,
guaranties, and all leases affecting the Premises as of the date hereof
(collectively, the "Premises").
2. Purchase Price.
(a) The purchase price for the Premises which Seller agrees to accept and
Buyer agrees to pay is FORTY-FIVE MILLION DOLLARS ($45,000,000) which shall be
paid by Buyer to Seller as follows:
(i) The sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) (the
"Initial Deposit") upon the execution of this Agreement, which Deposit
shall be held by Buchanan Ingersoll, P.C. (the "Escrow Agent") in
accordance with the terms of this Agreement.
$100,000
(ii) The sum of FOUR HUNDRED THOUSAND DOLLARS ($400,000) (together
with the Initial Deposit, the "Deposit") upon the Contingency Date (as
defined in paragraph 8 below), which Deposit shall be held by the Escrow
Agent in accordance with the terms of this Agreement.
$400,000
(iii) The sum of FORTY-FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS
($44,500,000.00), the balance of the purchase price, at Closing
(hereinafter defined) in accordance with subsection (b) below.
$44,500,000
(iv) TOTAL PURCHASE PRICE (the "Purchase Price")
$45,000,000
(b) At Closing (as hereinafter defined), the Purchase Price shall be paid
as follows: (i) Buyer shall cause the Escrow Agent to deliver the Deposit to
Seller (unless previously delivered to Seller pursuant to Section 3 below) and
(ii) Buyer shall pay the balance of the Purchase Price, less the credit to which
Buyer shall be entitled under Section 3 below by reason of its delivery of the
Additional Deposit described therein, if applicable, to Seller, in legal tender
of the United States for payment of public and private debts by wire transfer of
immediately available funds. Buyer shall be entitled to set off against the
Purchase Price the sum of $23 million pursuant to that certain Note Purchase
Agreement of even date herewith between Buyer and Seller (the "Note Purchase
Agreement"), such sum representing the purchase price payable by Seller to Buyer
for the promissory note which Seller has agreed to purchase thereunder.
(c) Seller hereby acknowledges that certain deposits in the maximum amount
of $500,000 (collectively, the "Cherry Hill Deposit") have and/or will be made
under that certain Agreement of Sale dated January 25, 2000 by and between
Seller's affiliate, GSRT, LLC, and Buyer's affiliate, Turnberry/Cherry Hill LLC
(the "Cherry Hill Agreement"). In the event that, at the time of Closing
hereunder, the Cherry Hill Agreement has terminated (without a closing
thereunder) for any reason, including a default by the buyer, and the deposit
under the Cherry Hill Agreement was not returned to Turnberry/Cherry Hill LLC,
then the Cherry Hill Deposit shall be an additional deposit hereunder and shall
be applied against and reduce the cash portion of the Purchase Price, whether or
not Seller actually receives the Cherry Hill Deposit. If, at the time of Closing
hereunder, the Cherry Hill Agreement has not terminated, then the Cherry Hill
Deposit shall not be a credit against the Purchase Price.
3. Closing of Title. Closing of title under this Agreement shall be held on
or before March 31, 2000 (the "Closing") at the offices of Gordon & Silver in
Las Vegas, Nevada; provided, however, if (i) on or before March 31, 2000, the
Escrow Agent shall have delivered the Deposit to Seller and Buyer shall have
paid to Seller an additional deposit (the "Additional Deposit") of TWO MILLION
DOLLARS ($2,000,000.00) (which Additional Deposit shall also be credited against
the cash portion of the Purchase Price); and (ii) Buyer pays monthly interest
when due and payable accruing from and after April 1, 2000 through June 1, 2000
at the rate of twelve percent (12%) per annum on $19,000,000 of the indebtedness
owed by Seller to Credit Suisse First Boston Mortgage Capital, LLC ("Credit
Suisse"), then the Closing shall be extended to June 1, 2000. Tender of an
executed deed and of the purchase money are hereby waived.
4. Condition of Title and Survey.
(a) Title to the Premises shall be in fee simple, good and marketable, free
and clear of all liens, encumbrances, easements, restrictions and objections
except for encumbrances of record which do not materially and adversely affect
the value, development or use of the Premises, which encumbrances shall include
but not be limited to the lien of taxes and assessments not yet due and payable
(including installments of special assessments imposed by the City of Las Vegas
for improvement purposes which are not yet due and payable), Nevada Revised
Statutes and local ordinances, and such easements, restrictions, encumbrances,
easements for abutting streets and privileges or rights of or for utilities
which are identified in the Title Commitment (hereinafter defined) and to which
Buyer does not object by written notice to Seller under paragraph 4(c) below
(such encumbrances of record to be collectively referred to as the "Permitted
Exceptions").
(b) Except for the Permitted Exceptions, title to the Premises shall be in
fee simple, good and marketable and insurable as such under an A.L.T.A. Owner's
Policy at regular rates by any reputable title insurance company selected by
Buyer (the "Title Insurer"), search fees and title insurance costs and premiums
to be paid by Buyer.
(c) Promptly after execution of this Agreement by Buyer and Seller, Buyer
shall order from the Title Insurer a commitment to insure title to the Premises
(the "Title Commitment"). If the Title Commitment discloses that title to the
Premises is subject to any defect, encumbrance or other title objection which is
not acceptable to Buyer, Buyer shall have the right to give Seller written
notice specifying such defect, encumbrance or other title objection on or before
the Contingency Date (as defined in Section 8 below), and within ten (10) days
of receipt of such notice, Seller shall, at Seller's sole election, either: (i)
correct such defect, encumbrance or other title objection or demonstrate to
Buyer's reasonable satisfaction Seller's ability to correct such defect as of
Closing and such defect shall be so corrected and shall not be a Permitted
Exception, or (ii) notify Buyer that Seller elects not to do so, in which case
Buyer may either terminate this Agreement by giving written notice to Seller
within five (5) days of receipt of Seller's notice (in which case the Deposit
and the Additional Deposit, if any, shall be refunded to Buyer and the Cherry
Hill Deposit shall be refunded to Turnberry/Cherry Hill LLC upon its execution
and delivery to GSRT, LLC of a release from all obligations under the Cherry
Hill Agreement, which release shall be in form and substance reasonably
satisfactory to GSRT, LLC. If Buyer does not give such notice to Seller, Buyer
shall be deemed to have accepted all such matters as Permitted Exceptions. If
Buyer fails to object to any defect, encumbrance or title exception which
appears in the Title Commitment on or before the Contingency Date, such defect,
encumbrance or title objection shall be deemed a Permitted Exception; provided,
however, that Seller shall remain obligated to convey title in the condition
described in Section 4(a) above.
(d) In the event title in accordance with this Agreement cannot be conveyed
by Seller at Closing, Buyer shall have the option of taking such title as Seller
can give, without abatement of price, or, in the alternative, terminating this
Agreement in which latter event neither party shall have any further rights,
duties or obligations under this Agreement unless otherwise expressly provided
herein, and the Deposit and Additional Deposit, if any, shall be refunded to
Buyer and the Cherry Hill Deposit shall be refunded to Turnberry/Cherry Hill LLC
upon its execution and delivery to GSRT, LLC of a release from all obligations
under the Cherry Hill Agreement, which release shall be in form and substance
reasonably satisfactory to GSRT, LLC . If any such title defects consist of
mortgages, judgments, mechanics', tax liens or other liens or charges in a fixed
sum or capable of computation at a fixed sum (provided that the aggregate of
such sums shall not exceed the Purchase Price) then, to that extent, and
notwithstanding the foregoing, Seller shall pay and discharge on or before
Closing such liens or charges out of the Purchase Price (or, as to non-material
liens and charges only, Seller may adequately provide for payment and discharge
by escrow with the title company or surety bond so long as Buyer is able to
obtain affirmative title insurance coverage against any such matter at no
additional cost).
(e) The Premises as described herein shall be conveyed by Seller to Buyer
by grant, bargain and sale deed.
5. [Intentionally Omitted.]
6. Condition of Premises. Buyer hereby acknowledges that the sale of the
Premises is made on an "AS IS" "WHERE IS" basis, and Buyer expressly
acknowledges that Seller makes no warranty or representation, express or
implied, or arising by operation of law, including, but not limited to, any
warranty of condition, habitability, merchantability or fitness for a particular
purpose with respect to the Premises. Without limiting the foregoing, Seller
hereby specifically disclaims any warranty, guaranty or representation, oral or
written, past, present or future, of, as to or concerning: (i) the nature and
condition of the Premises including, without limitation, the water and soil and
the suitability thereof and the suitability of the Premises for any and all
activities and uses which Buyer may elect to conduct thereon (including, without
limitation, the presence or absence of asbestos, polychlorinated biphenyls,
petroleum, solvents, or any other hazardous substances or wastes) or compliance
with all applicable laws, rules or regulations; and (ii) the compliance of the
Premises or its operation with any laws, ordinances or regulations of any
government or other body; and (iii) any construction defect, error or omission
on the Premises. Except as expressly set forth in this Agreement, Buyer
acknowledges that Buyer will inspect the Premises and rely solely upon its own
investigation of the Premises and not on any representation, warranty or
statement made by Seller or its agents or representatives. The provisions of
this Section will survive Closing and the delivery of the Deed from Seller to
Buyer hereunder. In the event that Seller provides to Buyer copies of any prior
environmental studies, tests, reports or other data, Buyer hereby acknowledges
that Seller makes no representation, warranty or guaranty regarding the
contents, results, methods, validity, completeness or accuracy of such reports
or the qualifications of the firm which prepared such reports and Seller shall
have no liability with respect to such reports or for the consequences of
reliance by Buyer thereon.
7. Premises Data. Seller shall provide Buyer with copies of any surveys,
title reports and environmental reports concerning the Premises which are in
Seller's possession and not otherwise legally privileged (the "Premises Data").
Buyer hereby agrees that it shall be ultimately responsible for the Premises
Data and hereby agrees to maintain the confidentiality of the Premises Data and
protect the Premises Data from disclosure to third parties other than to Buyer's
counsel, lenders and other third parties involved with Buyer in this
transaction. In the event of a termination of this Agreement, Buyer shall
immediately return to Seller all copies of the Premises Data within possession
of Buyer or any of Buyer's affiliates, agents, contractors, officers or
employees.
8. Due Diligence. Commencing on the date of this Agreement and continuing
until March 15, 2000 (the "Contingency Date"), Buyer may, at its sole cost and
expense, inspect, examine, survey, study and appraise the Premises to determine
the boundaries, acreage, zoning status, municipal code compliance, physical and
environmental condition of the Premises (the "Due Diligence Investigation"). If
any of the foregoing determinations, as revealed in the Due Diligence
Investigation, is not reasonably acceptable to Buyer, Buyer may terminate this
Agreement by providing written notice to Seller with a simultaneous copy to
Escrow Agent on or before the Contingency Date specifying in reasonable detail
the reason for Buyer's termination of this Agreement, in which event the parties
shall have no further rights or obligations under this Agreement, and the
Deposit and the Additional Deposit, if any, shall be refunded to Buyer and if
the Cherry Hill Deposit has been delivered to GSRT, LLC then GSRT, LLC and
Seller shall cause the Cherry Hill Deposit to be refunded to Turnberry/Cherry
Hill LLC upon its execution and delivery to GSRT, LLC of a release from all
obligations under the Cherry Hill Agreement, which release shall be in form and
substance reasonably satisfactory to GSRT, LLC. The Contingency Date is of the
essence and Buyer shall be deemed to have waived its right to terminate the
Agreement as provided above in the event that Buyer fails to provide written
notice thereof on or before the Contingency Date. Notwithstanding the foregoing,
the termination of this Agreement by Buyer pursuant to this provision shall be
ineffective if Seller resolves the problem specified in Buyer's written notice
of termination to Buyer's sole satisfaction on or before March 31, 2000.
9. Representations and Warranties.
(a) Seller hereby represents and warrants that: (i) it is a corporation
organized and existing under the laws of the State of Nevada and in good
standing in such State; (ii) the execution and delivery of this Agreement was
authorized by Seller in accordance with its articles of incorporation and
by-laws; and (iii) this Agreement, as executed, is enforceable against Seller in
accordance with the terms hereof.
(b) Buyer hereby represents and warrants that: (i) it is a limited
liability company organized and existing under the laws of the State of Nevada
and in good standing in such State; (ii) the execution and delivery of this
Agreement was authorized by Buyer in accordance with its governing documents;
and (iii) this Agreement, as executed, is enforceable against Buyer in
accordance with the terms hereof.
10. Closing Obligations.
(a) At Closing, Seller shall deliver to Buyer possession of the Premises by
delivery of the following documents and items:
(i) an executed and acknowledged deed;
(ii) key(s) to the Premises;
(iii) an assignment of any assignable permits, licenses and
certificates relating to the Premises;
(iv) an assignment of any assignable warranties relating to the
Premises;
(v) a bill of sale conveying to Buyer title to any personal property,
fixtures or furnishings transferred to Buyer pursuant to Section 17 hereof;
(vi) a copy of the certificate of the secretary of the Board of
Directors of Seller evidencing the authorization for: (i) the execution and
delivery of this Agreement and of all other documents and instruments
delivered pursuant to or in connection herewith, and (ii) the consummation
of the transaction contemplated hereby;
(vii) an ALTA statement or owner's affidavit in such form as required
by the Title Insurer; and
(viii) an executed affidavit indicating that the transaction
contemplated hereby is exempt from the withholding requirement imposed by
Section 1445A of the Internal Revenue Code and the rules and regulations
promulgated thereunder.
(b) At Closing, Buyer shall deliver to Seller:
(i) the Purchase Price set forth in Section 2 above, subject to
Buyer's right of set off as provided in Section 2(b) and the prorations
provided for in Section 12;
(ii) the Note, executed by Buyer;
(iii) certified copies of Buyer's operating agreement and other
governing documents;
(iv) such evidence of Buyer's (and its members') authorization of
Buyer's execution, delivery and performance of this Agreement as Seller
reasonably may require; and
(v) such other closing documents as may be required under the Note
Purchase Agreement.
(c) At Closing, Buyer and Seller shall execute and deliver such other
documents, instruments, certifications and confirmations as may be reasonably
required to effect and consummate the transaction contemplated hereby.
11. [Intentionally Omitted.]
12. Apportionments.
(a) Seller shall be responsible for all real estate taxes and assessments,
water and other utility charges, imposed against the Premises for all tax years
preceding the year in which the Closing is held, and shall pay and discharge the
same at or before Closing. All real estate taxes and assessments, water and
other utility charges for the current tax year in which Closing is held shall be
apportioned between the parties as of the date of Closing on a calendar or
fiscal year basis as applicable.
(b) Buyer shall pay all realty transfer taxes and recording fees imposed
upon this transaction.
13. Access to Premises. From the date of Seller's acceptance hereof to the
date of Closing, upon reasonable advance notice from Buyer, Seller shall permit
Buyer with reasonable access to and entry upon the Premises and the improvements
thereon to conduct the Due Diligence Investigation. Buyer hereby indemnifies and
holds Seller harmless from and against any and all losses, liabilities, expenses
and damages or actions or claims with respect thereto resulting from claims
suffered or incurred by Seller, arising out of, or with respect to the entry
upon, inspection, measurement or testing of the Premises. Prior to entering on
the Premises, Buyer shall furnish to Seller evidence that Buyer has secured
liability insurance in such amounts as Seller shall reasonably require insuring
the activities of Buyer on the Premises and naming Seller as an additional
insured under such insurance policies.
14. Condemnation and Risk of Loss.
(a) In the event of a loss or damage to all or a material portion of the
Premises as a result of the exercise of the power of eminent domain not caused
directly or indirectly by Buyer, between the date of this Agreement and the date
of Closing, Buyer shall have the right to either: (i) terminate this Agreement
by written notice to Seller within ten (10) days after indication that the power
of eminent domain is to be exercised against the Premises, whereupon neither
party shall have any further rights, duties or obligations under this Agreement
unless otherwise expressly stated herein; or, (ii) require the completion of
Closing, in which event Buyer, upon completing Closing, shall be entitled to the
eminent domain award or compensation and to an assignment of all claims to such
compensation or award and under any existing insurance policies. Seller shall
execute and deliver to Buyer any and all documents reasonably required before or
after Closing to ensure that Buyer receives all such payments.
(b) Buyer's obligations and liabilities under this Agreement shall not be
discharged or diminished by reason of loss or damage to the Premises as a result
of fire or casualty between the date of this Agreement and the date of Closing
and Buyer shall be obligated to proceed to Closing in spite thereof. This
provision is expressly intended to vary the Uniform Vendor and Purchaser Risk
Act, NRS 113.030 and 040.
15. Event of Default.
(a) In the event of failure by Buyer to perform or comply with any of the
terms and provisions of this Agreement to be performed and complied with by
Buyer within the time or times provided herein (an "Event of Default"), Seller's
sole and exclusive remedy shall be to terminate this Agreement and receive or
retain the Deposit and the Additional Deposit, if any, as liquidated damages
hereunder, provided, however, that this Section 15(a) shall not apply and Seller
shall have all rights and remedies at law and in equity in respect of a claim
against the Buyer for Buyer's contributive share of the Seller's and Buyer's
joint and several liability to indemnify the Escrow Agent pursuant to Section 19
hereof. The parties hereby acknowledge that actual damages incurred by Seller in
the event of a breach to which such liquidated damages apply cannot be
accurately determined, and the parties hereby agree that the amounts herein
designated as liquidated damages constitute a reasonable estimation of the
actual damages which Seller would suffer as a result of Buyer's failure to
timely perform and comply with all of its obligations hereunder.
(b) In the event of a failure of Seller to perform or comply with any of
the terms and provisions of this Agreement to be performed and complied with by
Seller within the time or times provided herein, Buyer shall have all rights and
remedies at law and equity.
16. Non-Waiver. The failure of Seller or Buyer in any one or more instances
to insist upon the strict performance of any one or more of the agreements,
terms, covenants, conditions or obligations of this Agreement, or to exercise
any right, remedy or election herein contained, shall not be construed as a
waiver or relinquishment of the right to insist upon such performance or
exercise in the future, and such right shall continue and remain in full force
and effect with respect to any subsequent breach, act or omission.
17. Property Included. This sale and the Purchase Price includes, and
Seller represents and warrants as of the date of Closing that Seller has, good
and marketable title, free and clear of all liens (but subject to Permitted
Exceptions, if any), to the following:
(a) All buildings and improvements, all electric, plumbing, heating and
utility lines, fixtures and systems, all shrubbery and plantings and, in
general, all fixtures and appurtenances relating to and forming a part of the
Premises; and
(b) All easements, property, interests or rights Seller may have in any
abutting land, in and to the center of the beds of any streets within or
adjoining the Premises, and in any facilities in or appurtenant to the Premises
and in and to the center of the beds of any streets adjoining and abutting the
Premises; and all awards for any future taking or condemnation affecting the
Premises or such street beds.
18. Broker. Seller and Buyer each warrant and represent to the other that
each has had no dealings, negotiations or communications with any brokers,
listing agents or other intermediaries in connection with this Agreement or the
sale of the Premises. Each party hereto agrees to indemnify and hold the other
party hereto harmless for any costs and liabilities incurred as a result of
misrepresentations contained in this Section 18. This Section 18 shall survive
Closing and the delivery of the Deed from Seller to Buyer.
19. Escrow Agent. Escrow Agent shall be responsible solely for the
safekeeping of the Deposit. Escrow Agent shall not be liable to Seller or Buyer
for the performance or non-performance of any term of this Agreement by Seller
or Buyer and shall not be required to determine any questions of fact or law.
Escrow Agent shall not be obligated to deliver the Deposit in the event either
Seller or Buyer has disputed such delivery. In the event litigation is commenced
involving the Deposit or this Agreement, Escrow Agent shall have the right to
place the Deposit with the clerk of court in which the litigation is pending, or
if Escrow Agent is a party to such litigation, to interplead all interested
parties in any court of competent jurisdiction and place the Deposit with the
clerk of such court. Seller and Buyer each jointly and severally agree to
indemnify, hold harmless and defend Escrow Agent from any cost, expense or
liability which it incurs in connection with any dispute involving the Deposit,
except for liability which is determined to result from Escrow Agent's gross
negligence or intentional misconduct.
20. No Recording. Neither this Agreement nor any memorandum or assignment
hereof shall be filed in any public place of record.
21. Assignment. Buyer shall have the right to assign its right to purchase
the Premises under this Agreement provided that (i) Buyer or an entity
controlled by or under common control with Buyer owns the assignee or an
interest therein, or (ii) Buyer has obtained the prior written consent of
Seller.
22. Binding Effect. This Agreement of Sale shall inure to the benefit of
and be binding upon Seller and Buyer, and their respective successors,
executors, administrators, heirs and assigns.
23. Entire Agreement; Amendments. This Agreement constitutes the entire
understanding between the parties hereto and the parties shall not be bound by
any agreements, understandings or conditions respecting the subject matter
hereof other than those expressly set forth and stipulated in this Agreement,
except that the first full paragraph on page 2 of that certain letter agreement
dated January 25, 2000, among Seller, GSRT, LLC, International Thoroughbred
Breeders, Inc., Buyer and Turnberry/Cherry Hill LLC shall remain in full force
and effect with respect to the Cherry Hill Deposit. No amendments or
modifications of this Agreement shall be effective unless set forth in a written
amendment signed by both Seller and Buyer.
24. Section Headings. The Section headings which appear in this Agreement
are included solely for convenience of reference and are not intended to govern,
supplement, limit or in any way affect the terms hereof.
25. Time of the Essence. All times provided for herein are and shall be of
the essence of this Agreement.
26. Notices. Any notice given pursuant to this Agreement shall be valid
only if given in writing by first class mail with sufficient postage attached or
by any reputable overnight delivery service which provides receipt of delivery,
addressed as follows:
Notices to Seller shall be addressed to:
Orion Casino Corporation
P.O. Box 1232
Route 70 and Haddonfield Road
Cherry Hill, NJ 08034
Attn: Mr. Francis W. Murray
with a copy to:
Schnader Harrison Segal & Lewis LLP
1600 Market Street, Suite 3600
Philadelphia, Pennsylvania 19103
Attn: David S. Petkun, Esquire
Notices to Buyer shall be addressed to:
Turnberry/Las Vegas Boulevard, L.L.C.
19501 Biscayne Blvd., Suite 400
Aventura, FL 33180
Attn: Ray Parello
with a copy to:
Turnberry/Las Vegas Boulevard, L.L.C.
19501 Biscayne Blvd., Suite 400
Aventura, FL 33180
Attn: Legal Department
Notices to Escrow Agent shall be addressed to:
Buchanan Ingersoll, P.C.
One Oxford Centre, 20th Floor
301 Grant Street
Pittsburgh, PA 15219
Attn: Jack Kessler, Esquire
The date of delivery of any notice provided for in this Agreement shall be the
date of deposit in the U.S. mails with sufficient postage or, if sent by
overnight delivery service, one (1) day after deposit with such delivery
service. The person and place to which notice may be given may be changed from
time to time by Seller or Buyer respectively upon written notice to the other,
effective five (5) days after delivery of such notice.
27. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada.
28. Counterparts. This Agreement may be executed in one or more identical
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same instrument.
29. Standstill. Seller agrees that it will not, and will not permit any
subsidiary or affiliate to, solicit, discuss with or contact any party other
than Buyer in any manner whatsoever regarding the possible sale or transfer of
the Premises until the earlier of (i) the date Buyer terminates this Agreement
pursuant to Section 8 or any other provision hereof, or (ii) March 31, 2000.
IN WITNESS WHEREOF, the parties hereto, each intending to be legally bound
by this writing, have caused this Agreement to be executed the day and year
first above written.
SELLER:
ORION CASINO CORPORATION a Delaware
corporation
Attest: [Corporate Seal]:
By: By:
Name:
Title:
BUYER:
Witness: TURNBERRY/LAS VEGAS BOULEVARD, LLC,
a Nevada limited liability company
By: By:
Name:
Title:
JOINDER OF ESCROW AGENT
Intending to be legally bound hereby, the undersigned hereby agrees to act
as Escrow Agent in accordance with the terms of this Agreement:
ESCROW AGENT:
Witness: BUCHANAN INGERSOLL, P.C.
By: By:
Name:
Title:
Date:
EXHIBIT A
Description of Premises
Ehibit 10.2
NOTE PURCHASE AGREEMENT
Between
ORION CASINO CORPORATION, as Purchaser,
and
TURNBERRY/LAS VEGAS BOULEVARD, L.L.C., as Issuer,
Dated as of March 1, 2000
TABLE OF CONTENTS
ARTICLE 1 - ISSUANCE AND SALE OF NOTE......................................1
SECTION 1.1 Authorization of Note.......................................1
SECTION 1.2 Purchase and Sale of the Note...............................1
SECTION 1.3 Definitions, etc............................................1
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................2
SECTION 2.1 Organization and Authority..................................2
SECTION 2.2 Membership Interests; Operating Agreement...................2
SECTION 2.3 Contravention; Authority....................................2
SECTION 2.4 Consents....................................................3
SECTION 2.5 Compliance with Other Instruments, etc......................3
SECTION 2.6 Compliance with Law, etc....................................4
SECTION 2.7 Litigation..................................................4
SECTION 2.8 Broker's or Finder's Commissions............................4
SECTION 2.9 Other Names.................................................4
SECTION 2.10 Solvency...................................................4
SECTION 2.11 Transactions with Affiliates...............................5
SECTION 2.12 Business Plan..............................................5
SECTION 2.13 Turnberry Development, LLC.................................5
ARTICLE 3 - CONDITIONS OF OBLIGATION OF PURCHASER TO PURCHASE THE NOTE....7
SECTION 3.1 Opinion of Counsel of the Company...........................7
SECTION 3.2 Performance of Obligations..................................7
SECTION 3.3 Representations True; No Note Event of Default..............7
SECTION 3.4 Consents and Approvals......................................7
SECTION 3.5 Operating Agreement.........................................7
SECTION 3.6 Proceedings, Instruments, etc. -...........................7
SECTION 3.7 Closing Documents...........................................8
SECTION 3.8 Legislation.................................................8
SECTION 3.9 No Proceedings..............................................8
SECTION 3.10 Purchase Agreement.........................................8
SECTION 3.11 Security Agreement.........................................8
ARTICLE 4 - NEGATIVE COVENANTS.............................................8
SECTION 4.1 Covenants of the Company....................................8
SECTION 4.2 Infrastructure Costs.......................................10
ARTICLE 5 - AFFIRMATIVE COVENANTS.........................................10
SECTION 5.1 Existence..................................................11
SECTION 5.2 General Maintenance of Properties and Business, etc........11
SECTION 5.3 Notice of Certain Events and Conditions....................11
SECTION 5.4 Inspection.................................................12
SECTION 5.5 Payment of Taxes and Claims................................12
SECTION 5.6 Payment; Performance of Contracts..........................13
SECTION 5.7 Financial Statements. (a)..................................13
SECTION 5.8 Copies of Management Letters, etc..........................14
SECTION 5.9 Management.................................................14
ARTICLE 6 - NOTE CONVERSION OPTION........................................14
SECTION 6.1 (a)........................................................14
ARTICLE 7 - ADDITIONAL RIGHTS AND OBLIGATIONS.............................15
SECTION 7.1 Right of First Refusal.....................................15
SECTION 7.2 Repurchase of Note.........................................16
ARTICLE 8 - DEFINITIONS; MISCELLANEOUS....................................17
SECTION 8.1 Definitions................................................17
SECTION 8.2 Directly or Indirectly.....................................23
SECTION 8.3 Accounting Terms...........................................23
SECTION 8.4 Governing Law..............................................24
SECTION 8.5 Independence of Covenants..................................24
SECTION 8.6 Construction...............................................24
ARTICLE 9 - MISCELLANEOUS.................................................24
SECTION 9.1 Notices....................................................24
SECTION 9.2 Survival...................................................25
SECTION 9.3 Successors and Assigns; Transfer of the Note...............25
SECTION 9.4 Amendment and Waiver.......................................26
SECTION 9.5 Severability...............................................26
SECTION 9.6 Indemnification Against Claims, etc........................27
SECTION 9.7 Counterparts...............................................28
SECTION 9.8 Reproduction of Documents..................................28
SECTION 9.9 Captions...................................................28
SECTION 9.10 No Agency.................................................28
SECTION 9.11 Entire Agreement..........................................28
SECTION 9.12 No Waiver.................................................28
SECTION 9.13 Expenses..................................................28
SECTION 9.14 Subordination; Estoppel...................................29
EXHIBITS
Exhibit A................................Form of Note
Exhibit B................................Form of Security Agreement
Exhibit C................................Terms of Repurchase Note
SCHEDULES
Schedule 2.1...........................................Subsidiaries, Etc.
Schedule 2.2........................................Membership Interests
Schedule 2.11...............................Transactions with Affiliates
NOTE PURCHASE AGREEMENT
This NOTE PURCHASE AGREEMENT ("Agreement"), dated as of March 1, 2000,
among Orion Casino Corporation, a Nevada corporation, as purchaser
("Purchaser"), and Turnberry/Las Vegas Boulevard, L.L.C., a Nevada limited
liability company, as issuer (the "Company"). In consideration of the premises
and mutual covenants and agreements contained in this Agreement, the parties
hereto agree as follows:
ARTICLE 1 - ISSUANCE AND SALE OF NOTE
SECTION 1.1 Authorization of Note.
The Note. The Company has duly authorized the execution, delivery, offer,
issuance and sale of a promissory note having a principal amount of $23,000,000
minus Excess Demolition Costs (as hereinafter defined) and a maturity date of
the thirtieth (30th) anniversary of the date of issuance (which, together with
any note or notes issued in substitution therefor or upon transfer to a Person
other than the Purchaser, is herein collectively referred to as the "Note"). The
Note shall have such terms, provisions and conditions as are set forth in the
form of the Note attached as Exhibit A hereto and made a part hereof.
SECTION 1.2 Purchase and Sale of the Note
(a) Purchase and Sale. Subject to the terms and conditions hereof, the
Company agrees to issue and sell to the Purchaser, and the Purchaser agrees to
purchase from the Company, the Note.
(b) The Closing. The Note is to be sold and delivered at a closing to be
held on such date and at such time as shall be agreed upon by Purchaser and the
Company, and in any event not later than June 1, 2000, time being of the essence
with respect to such date (such date and time being hereinafter called the
"Closing Date"), at the offices of Gordon & Silver, Ltd., 3960 Howard Hughes
Parkway, Las Vegas, Nevada or at such other location to which the parties may
agree.
(c) Closing Deliveries. At the Closing, the Company shall deliver to the
Purchaser the Note in the principal amount of $23,000,000 minus Excess
Demolition Costs, duly executed by the Company, dated the Closing Date,
registered in the name of the Purchaser, and the Purchaser shall pay the
purchase price for the Note in the amount of $23 million minus Excess Demolition
Costs (the "Purchase Price") by instructing the Company to offset the Purchase
Price against the amount payable by the Company to the Purchaser under the
Purchase Agreement (as hereinafter defined).
SECTION 1.3 Definitions, etc.
Certain terms used in this Agreement are defined in Article 8 hereof;
references to a "Schedule" or "Exhibit" are, unless otherwise specified, to the
Schedules and Exhibits attached to this Agreement. All of the Schedules and
Exhibits attached to this Agreement are hereby incorporated by reference herein
in their entirety.
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
SECTION 2.1 Organization and Authority.
The Company:
(i) is a limited liability company duly organized, validly existing
and in good standing under the laws of Nevada;
(ii) has all requisite power and authority to own and operate its
properties, to conduct its business as currently conducted and as currently
proposed to be conducted; and
(iii) has no Subsidiaries, and other than as set forth in Schedule 2.1
hereto, does not own, directly or indirectly, more than one percent (1%) of
the total outstanding capital stock or similar class of equity securities
of any Person, and does not, directly or indirectly, exercise control or
have the ability, directly or indirectly to exercise control, over any
Person.
SECTION 2.2 Membership Interests; Operating Agreement.
The outstanding membership interests of the Company are owned, of record
and beneficially, by the Turnberry Affiliate and other Persons (if any)
identified in, and having the percentage ownership interests set forth in,
Schedule 2.2 hereto. Except as listed in Schedule 2.2, there are no Liens,
encumbrances, subscriptions, options, warrants, calls or other rights,
agreements or commitments relating to the purchase from or issuance by the
Company of any membership interests. No further approval or authority of the
Members will be required for the issuance and sale to the Purchaser of the
membership interests pursuant to the provisions of Section 6.1 of this
Agreement. Except as set forth in Schedule 2.2 hereto, the Company is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any outstanding membership interests in the Company. The
representations and warranties set forth in this Section 2.2 will be updated as
of the Closing by the Company's delivery to the Purchaser of an Amended and
Restated Schedule 2.2 and, as so updated, will be true and correct on and as of
the Closing Date.
SECTION 2.3 Contravention; Authority.
(a) Contravention. The execution, delivery and performance by the Company
of this Agreement, and the execution, delivery, offer, sale and issuance by the
Company of the Note and each of the other documents and agreements related to
any of the foregoing, the consummation by the Company of the transactions
contemplated hereby and thereby, and the incurrence by the Company of the debt
represented by the Note will not, with or without the giving of notice, the
passage of time or both, (i) result in any breach or violation of, or conflict
with, any statute, law (including any judicial decision), or any judgment, writ,
injunction, order, rule, award, decree or regulation of any court, governmental
authority or arbitration board or other tribunal; (ii) violate or result in any
breach of any of the provisions of, or constitute a default under, give rise to
a right of termination or cancellation of, or accelerate the performance
required by any terms of, as the case may be, any indenture, mortgage,
agreement, lease, license, note, permit, franchise, contract, deed of trust or
other instrument to which the Company is a party or by which the Company or any
of its properties may be bound, or result in the creation of any Lien upon any
of the properties or assets owned by the Company; or (iii) violate or conflict
with any provision of the certificate of formation or Operating Agreement of the
Company.
(b) Validity. The Company has all requisite power and authority to execute,
deliver and perform this Agreement, to execute, deliver, issue, sell and pay or
satisfy its obligations under the Note, and to consummate the transactions
contemplated hereunder. This Agreement has been and, upon consummation of the
Closing, the Note will have been, duly and validly authorized, executed and
delivered by the Company, and this Agreement constitutes and, upon consummation
of the Closing, the Note will constitute, legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and except as enforceability
may be subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Each Member
has all requisite power and authority to execute, deliver and perform the
Security Agreement, and to consummate the transactions contemplated thereunder.
The Security Agreement has been duly and validly authorized, executed and
delivered by each of the Members, and constitutes the legal, valid and binding
obligation of each of them, enforceable against each of them in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 2.4 Consents.
The execution, delivery and performance by the Company of this Agreement
and the consummation of the transactions contemplated hereby, and the execution,
delivery, offer, issuance and sale by the Company of the Note, are within its
powers, have been duly authorized by all necessary action on its part and do not
and will not require any consent or approval of any Person (other than consents
or approvals which have been obtained) or any authorization, consent or approval
by, or registration, qualification, declaration or filing with, or notice to any
federal, state, municipal or other governmental body, official, department,
commission, board, bureau, agency or instrumentality, domestic or foreign (other
than actions and filings that have been taken or made). The Company has obtained
all consents, approvals or authorizations of, made all declarations or filings
with, and given all notices to, all federal, state or local governmental or
public authorities or agencies which are necessary for the conduct by the
Company of its businesses as now conducted or as proposed to be conducted and
which the failure to so obtain, make or give might have a Material Adverse
Effect.
SECTION 2.5 Compliance with Other Instruments, etc.
The Company is not: (a) in violation of any term of its Operating Agreement
(with respect to the Company); or (b) in default in the performance, observance
or fulfillment of any of the obligations, covenants or conditions contained in,
and is not otherwise in default under, (i) any evidence of Indebtedness for
Money Borrowed or any other evidence of Indebtedness or any instrument or
agreement under or pursuant to which any evidence of Indebtedness for Money
Borrowed or other evidence of Indebtedness has been issued; or (ii) any other
material instrument or agreement to which it is a party or by which it is bound
or any of its properties is affected.
SECTION 2.6 Compliance with Law, etc.
The Company is not in violation of laws, ordinances or governmental rules
and regulations to which it is subject, except where such violation(s) would not
have a Material Adverse Effect. The Company is not in default with respect to
any order, decision, finding, writ, injunction, judgment or decree of any court
or other governmental or public body, department, official, authority or agency
or arbitrator or arbitration panel except where such default would not have a
Material Adverse Effect.
SECTION 2.7 Litigation.
There is no suit, claim, action, proceeding or investigation pending or, to
the best knowledge of the Company, threatened, against the Company which,
individually or in the aggregate, might have a Material Adverse Effect, or a
material adverse effect on the ability of the Company to consummate the
transactions contemplated in this Agreement. The Company is not subject to any
outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen, individually or in the aggregate, might have a material
adverse effect on the ability of the Company to consummate the transactions
contemplated by this Agreement or that could question the validity or
enforceability of this Agreement or the Note.
SECTION 2.8 Broker's or Finder's Commissions.
No broker's or finder's fee or similar fee or commission will be payable by
the Company with respect to the issuance, offer, sale and delivery of the Note
or with respect to any of the transactions contemplated hereby.
SECTION 2.9 Other Names.
The businesses conducted by the Company and its Members prior to the date
hereof have not been conducted, during the past four (4) months, under any names
other than their present names.
SECTION 2.10 Solvency.
The Company is and, immediately after giving effect to the issue, sale and
delivery of the Note and the consummation of the other transactions contemplated
by this Agreement will be, Solvent.
For purposes of this Section 2.10, the term "Solvent" shall mean that:
(a) the assets of the Company, at a fair valuation, exceed the total
liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities) of the Company; and
(b) the Company does not have an unreasonably small capital with which to
engage in its current or anticipated business.
For purposes of this Section 2.10, the "fair valuation" of the assets of
the Company shall be determined on the basis of the amount which may be realized
within a reasonable time, either through collection or sale of such assets at
the regular market value (including the sale of the entire business of the
Company as a going concern), conceiving the latter as the amount which could be
obtained for the property in question within such period by a capable and
diligent businessman from an interested buyer who is willing to purchase under
ordinary selling conditions. For the purpose of this Section 2.10, contingent
and unmatured liabilities shall be computed at amounts that, in light of all
facts and circumstances existing at the time of determination thereof, can
reasonably be expected to become actual or matured liabilities.
SECTION 2.11 Transactions with Affiliates.
Except as disclosed in Schedule 2.11, the Company is not a party to any
contract, agreement or arrangement (whether written or oral) with any Member of
the Company (or any of their Material Related Persons) or any of their
respective Affiliates the terms of which are not commercially reasonable or are
less favorable to the Company than the Company could obtain in a comparable
arm's-length transaction with an unrelated Person.
SECTION 2.12 Business Plan.
The Company contemplates developing the El Rancho Property in accordance
with a proposed plan, a copy of which has been delivered to the Purchaser, and
in conformity with a proposed time schedule, which also has been delivered to
the Purchaser. Such plan and time schedule are preliminary and may be modified
at the sole discretion of the Members, and is subject to delays caused by force
majeure or other matters beyond the reasonable control of the Company or its
Members.
SECTION 2.13 Turnberry Development, LLC.
Turnberry Development, LLC is an existing limited liability company which
is the developer, and the owner's agent and supervisor, of Turnberry Place.
ARTICLE 2A - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
SECTION 2A.1 Organization and Authority.
The Purchaser:
(i) is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada;
(ii) has all requisite power and authority to own and operate its
properties, to conduct its business as currently conducted and as currently
proposed to be conducted; and
(iii) is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the failure to so qualify might have
a Material Adverse Effect.
SECTION 2A.2 Corporate Power and Authority.
The Purchaser has all requisite power and authority to enter into this
Agreement, to consummate the transactions contemplated hereunder, and to perform
its obligations under this Agreement. This Agreement and the transactions
contemplated hereunder have been duly and validly authorized by all necessary
corporate action on the part of the Purchaser. This Agreement has been duly
executed and delivered by the Purchaser and constitutes the legal, valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms except as enforceability may be limited by applicable
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and except as enforceability
may be subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 2A.3 No Conflicts; Consents and Approvals.
The execution, delivery or performance of this Agreement by the Purchaser,
and the consummation of the transactions contemplated in this Agreement, will
not:
(i) violate, or conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or entitle any
Person (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate or call a default under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Purchaser under any of the terms, conditions or provisions of the
certificate of incorporation or bylaws of the Purchaser, or any material note,
bond, mortgage, indenture, deed of trust, license, contract, undertaking,
agreement, lease or other instrument or obligation to which the Purchaser is a
party and which is material to the Purchaser, including but not limited to the
instruments and agreements governing, securing and evidencing the Indebtedness
of the Purchaser (or its Affiliates) to CSFB;
(ii) violate any order, writ, injunction, decree, statute, rule or
regulation, applicable to the Purchaser or its properties or assets; or
(iii) require any action or consent or approval of, or review by, or
registration with any governmental entity.
SECTION 2A.4 Litigation.
There is no suit, claim, action, proceeding or investigation pending or, to
the best knowledge of the Purchaser, threatened, against the Purchaser or any of
its Affiliates which, individually or in the aggregate, might have a material
adverse effect on the ability of the Purchaser to consummate the transactions
contemplated in this Agreement. The Purchaser is not subject to any outstanding
order, writ, injunction or decree which, insofar as can be reasonably foreseen,
individually or in the aggregate, might have a material adverse effect on the
ability of the Purchaser to consummate the transactions contemplated by this
Agreement.
SECTION 2A.5 Investment Intent.
The Purchaser is acquiring the Note solely for its own account for
investment and not with a view to, or for resale in connection with, any
distribution thereof in violation of the Securities Act or applicable state
securities laws. The Purchaser hereby acknowledges (i) that neither the Note nor
the membership interest in the Company issuable upon conversion of the Note as
provided for in Section 6.1 of this Agreement (the "Conversion LLC Interest,"
and together with the Note, sometimes collectively referred to herein as the
"Securities") have been or will be registered under the provisions of the
Securities Act, and must be held indefinitely unless they are subsequently
registered thereunder or an exemption from such registration is available; (ii)
that any sale of the Securities made in reliance upon Rule 144 (as defined
herein) or Rule 144A (as defined herein) can be made only in accordance with the
terms and conditions of such Rules and, further, that i such Rules are not
applicable, any resale of the Securities under circumstances in which the
seller, or the Person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the Securities Act, may require compliance
with some other exemption under the Securities Act (as defined herein) or the
rules and regulations of the Securities and Exchange Commission (as defined
herein), or other governmental authority substituted therefor; and (iii) that
the Company is under no obligation to register the Securities under the
Securities Act or to comply with the terms and conditions of any exemption
thereunder.
ARTICLE 3 - CONDITIONS OF OBLIGATION OF PURCHASER TO
PURCHASE THE NOTE
The Purchaser's obligation to purchase the Note and to consummate the other
transactions contemplated by this Agreement on the Closing Date shall be subject
to the satisfaction (or waiver by the Purchaser, in its sole discretion), prior
to or on the Closing Date, of the following conditions:
SECTION 3.1 Opinion of Counsel of the Company.
The Purchaser shall have received an opinion, dated the Closing Date, from
outside counsel to the Company, in connection with the transactions contemplated
by this Agreement, as to (i) the Company's power and authority, (ii) due
authorization, execution and delivery, (iii) enforceability, (iv) usury and (v)
non-contravention of laws, regulations or (to such counsel's knowledge) orders,
in form and substance reasonably satisfactory to the Purchaser.
SECTION 3.2 Performance of Obligations.
The Company shall have performed and complied with all of its agreements
and conditions contained herein prior to or on the Closing Date, and the
Purchaser shall have received a certificate from the Chief Financial Officer of
the Company, dated the Closing Date, to such effect.
SECTION 3.3 Representations True; No Note Event of Default.
The representations and warranties of the Company set forth in Article 2 of
this Agreement shall be true and correct in all respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date. There shall exist on the Closing
Date no Note Event of Default, assuming for this purpose that the Note had been
outstanding immediately prior to the Closing Date. The Purchaser shall have
received a certificate from the Chief Financial Officer of the Company, dated as
of the Closing Date, to the effect of each of the foregoing sentences, as
applicable.
SECTION 3.4 Consents and Approvals.
The Company shall have obtained all necessary consents, waivers, approvals
and authorizations required to consummate the transactions contemplated by this
Agreement.
SECTION 3.5 Operating Agreement.
The Company's certificate of formation and the Operating Agreement in the
form delivered to the Purchaser under Section 3.7 shall be in full force and
effect without further amendment or modification thereto, and the Purchaser
shall have received evidence of the filing of such certificate.
SECTION 3.6 Proceedings, Instruments, etc.
All proceedings and actions taken on or prior to the Closing Date in
connection with the transactions contemplated by this Agreement and all
instruments incident thereto shall be in form and substance reasonably
satisfactory to the Purchaser and its counsel, and the Purchaser and its counsel
shall have received copies of all documents that the Purchaser or its counsel
may request in connection with such proceedings, actions and transactions
(including, without limitation, copies of court documents, certifications and
evidence of the correctness of the representations and warranties contained
herein and certifications and evidence of the compliance with the terms and the
fulfillment of the conditions of this Agreement, in form and substance
reasonably satisfactory to the Purchaser and the Purchaser's counsel).
SECTION 3.7 Closing Documents.
The Purchaser and its counsel shall have
received from the Company and found satisfactory in form and substance, a
certificate of an authorized officer: (i) certifying complete and accurate
copies of the certificate of formation and Operating Agreement in effect as of
the Closing Date, (ii) certifying the adoption by the Members of resolutions
approving this Agreement, the Note and the other agreements, documents and
instruments contemplated by this Agreement or the Note, and the transactions
contemplated therein, respectively, (iii) certifying the incumbency and
signatures of the officers of the Company authorized to execute this Agreement,
the Note and each of the foregoing agreements, documents and instruments, and
(iv) certifying a complete and accurate copy of the Amended and Restated
Schedule 2.2 referred to in Section 2.2 hereof. The Purchaser and its counsel
shall have also received, and found satisfactory in form and substance, copies
of such other agreements, documents, certificates and instruments as the
Purchaser and its counsel may reasonably request in connection with the
consummation of the transactions contemplated by this Agreement and the Note.
SECTION 3.8 Legislation.
No federal, state, local or foreign law, rule or regulation shall have been
enacted which prohibits the consummation of the transactions contemplated
hereby.
SECTION 3.9 No Proceedings.
No order of any court or governmental authority shall be in effect which
restrains or prohibits the transactions contemplated hereby.
SECTION 3.10 Purchase Agreement.
The Purchase Agreement shall have been executed and delivered by the
Company and the Purchaser and the closing thereunder shall have occurred or be
occurring on the Closing Date.
SECTION 3.11 Security Agreement.
The Security Agreement (and UCC-1 financing statements required thereby)
shall have been executed and delivered by the Company and all of its Members in
favor of the Purchaser on the Closing Date.
ARTICLE 4 - NEGATIVE COVENANTS
SECTION 4.1 Covenants of the Company.
The Company covenants and agrees that, for so long as the Note is
outstanding, the Company shall not, without the prior written consent of the
Purchaser:
(a) Related Transactions. Enter into any transaction (including,
without limitation, the purchase, sale or exchange of property, the
rendering of any services or the payment of management fees or other
amounts) with any Member, Material Related Person or employee of the
Company or any Affiliate of any of the foregoing, except that:
(i) the Company may retain the services of Turnberry Development,
LLC or an Affiliate thereof to manage the Company, including
management of all of the day-to-day business of the Company and all
major management decisions, provided that the annual compensation in
respect thereof shall not exceed four percent (4%) of annual project
costs, such management fee to be adjusted upwards (but never
downwards) every 10 years to reflect the then current market-rate
management fee for comparable services, if applicable;
(ii) the Company may retain the services of Turnberry
Development, LLC or an Affiliate thereof to act as sales and marketing
agent of the Company on the same basis and terms as Turnberry
Development, LLC or an Affiliate thereof presently provides sales and
marketing services for Turnberry Place, it being understood and agreed
that the compensation in respect thereof would be a marketing fee for
any period equal to 2% of reasonably projected revenue from
condominium sales for such period and a sales commission of 4% of each
condominium sale;
(iii) The Company may retain the services of Turnberry
Development, LLC or an Affiliate thereof to provide construction
management or other specific services required by the Company provided
that Turnberry Development, LLC or such Affiliate has the capability
and competency to provide such services and the compensation therefor
does not exceed that amount which the Company would otherwise pay for
such services if it were to hire a non-affiliated third party to
perform them; and further provided as to clauses (i), (ii) and (iii)
above that such compensation is paid by the Company solely for
services actually rendered to the Company and that such compensation
will be reduced by amounts (if any) paid or payable by the Company to
any other Person for providing management, sales or marketing or
construction management services to the Company;
(iv) any Member or Affiliate of a Member may lend money to the
Company, as reasonably necessary for the Company's business, on such
other terms as are not less favorable to the Company than could be
obtained by the Company in an arm's length transaction with an
unaffiliated lender;
(v) the Company may employ persons who are or were employed by
Affiliates of the Company (including use of individuals who are shared
employees of the Company and its Affiliates at the same time) provided
that the compensation payable by the Company does not exceed that
amount which the Company would otherwise pay for such services if it
were to hire persons who had no present or prior connection to any
Affiliate of the Company and provided that in cases where an employee
performs services for the benefit of the Company and Turnberry Place
or any other Affiliate of the Company, a fair allocation of the
compensation expense is made between such entities; and
(vi) the Company may accrue an incentive fee ("Incentive Fee") to
Shopping Center Management d/b/a Turnberry Associates, or to Turnberry
Development, LLC or an Affiliate of either of them, in an amount, for
any period, of ten percent (10%) of the Company's Adjusted Net
Operating Income for such period, provided that if the Company's
Adjusted Net Operating Income for any period is negative (an "Adjusted
Net Operating Loss"), the Adjusted Net Operating Loss shall be carried
forward and applied to reduce Adjusted Net Operating Income for
subsequent period(s), and further provided that accrued Incentive Fee
shall not be paid by the Company until the Company has made aggregate
payments of principal and interest under the Note equal to the
difference between $23,000,000 and the amount of Excess Demolition
Costs, if any.
(b) Restricted Payments. Authorize or make any distribution to a
Member or any other Restricted Payment, whether or not to any Member, any
Material Related Person or to their respective Affiliates, or otherwise;
provided, however, that (i) distributions to Members may be made to the
extent not prohibited by the Note, if no Note Event of Default has occurred
and is continuing, and no event which with the giving of notice or the
passage of time, or both, would become an Event of Default under Section
5.1(a) or 5.1(b) of the Note has occurred or is continuing or would result
upon such Restricted Payment, and (ii) compensation may be paid as
permitted by Section 4.1(a) above.
(c) Loan and Guarantees. Make any loan to any Person or make any
Guaranty, except for Guarantees issued in the ordinary course of the
Company's business.
(d) Investments. Make any Investment in (i) any Person other than in
the ordinary course of business, except for Investments in obligations of
or guaranteed by the United States, short-term certificates of deposit or
similar instruments issued by commercial banks and other money market
instruments, (ii) any real property other than the El Rancho Property and
the adjacent Algiers Property or (iii) any project, development, business
or venture other than development of the El Rancho Property or the Algiers
Property and any project, business or venture which is principally
conducted at such real property.
(e) Subsidiaries and Affiliates. Create any Subsidiary of the Company;
(f) Certain Decisions. Approve any decision or take any action other
than in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the Company; or
(g) Admission of Members. Admit any Person as a member in the Company
unless such Person shall have joined in and agreed to be bound as a member
by the Security Agreement.
SECTION 4.2 Infrastructure Costs
In connection with the development of a high rise condominium tower on the
El Rancho Property (if the same is ever developed by the Company), no cost
attributable solely to infrastructure (including but not limited to use of
condominium model and sales office) from Turnberry Place and/or the Turnberry
Affiliate which is managing Turnberry Place shall be allocated to said high rise
condominium tower or to the Company. However, all direct costs and a fair share
of all other allocable costs and expenses associated with the Company's
development of said high rise condominium tower and the physical incorporation
of such tower with Turnberry Place may be paid by the Company.
ARTICLE 5 - AFFIRMATIVE COVENANTS
The Company covenants and agrees that, for so long as the Note is
outstanding, the Company shall:
SECTION 5.1 Existence.
Take and fulfill, or cause to be taken and fulfilled, all actions and
conditions necessary to preserve and keep in full force and effect its
existence, rights and privileges as a limited liability company, and will not
liquidate or dissolve and will take and fulfill, or cause to be taken and
fulfilled, all actions and conditions necessary to qualify, and to preserve and
keep in full force and effect its qualification, to do business in the
jurisdictions in which the conduct of its business or the ownership or leasing
of its properties requires such qualification unless the failure to be so
qualified would not have a Material Adverse Effect.
SECTION 5.2 General Maintenance of Properties and Business, etc.
(a) Maintain its property in such condition and make such reasonable
and necessary renewals, replacements, additions, betterments and
improvements thereof and thereto, so that the business carried on in
connection therewith shall be conducted properly at all times except where
the failure to do so could not reasonably be expected to have a Material
Adverse Effect;
(b) maintain or cause to be maintained, with financially sound
insurers of nationally recognized stature and responsibility, insurance
with respect to its properties and business of such a nature, with such
terms and in such amounts, as a prudent person would maintain with respect
to similar properties and a similar business, and, in any event, will
maintain insurance on all its properties of a character usually insured by
Persons engaged in the same or a similar business similarly situated
against loss or damage of the kinds and in the amounts customarily insured
against and for by such Persons, and carry or cause to be carried, with
such insurers in customary amounts, such other insurance, including public
liability insurance, as is usually carried by Persons engaged in the same
or a similar business similarly situated;
(c) keep proper books of record and accounts in which full, true and
correct entries in all material respects will be made of its dealings and
business transactions in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved;
(d) set aside on its books from its earnings for each Fiscal Year, in
amounts deemed adequate in the reasonable opinion of the Company, all
proper accruals and reserves that, in accordance with generally accepted
accounting principles, should be set aside from such earnings in connection
with its business, including reserves for depreciation, obsolescence and/or
amortization, third party insurance payment and claims and accruals for
taxes based on or measured by income or profits and for all other taxes;
and
(e) use its best efforts to obtain and maintain in full force and
effect, and without revision or amendment that might have a Material
Adverse Effect, all licenses, authorizations, building and other permits,
variances, certificates, consents, approvals, registrations, franchises,
permits, waivers, copyrights, trademarks, service marks, trade names and
patents, commitments, contracts, agreements and arrangements, and all
rights with respect to the foregoing, that are necessary to effectuate the
Company's business plan (as in effect from time to time).
SECTION 5.3 Notice of Certain Events and Conditions.
Give prompt written notice to the Purchaser of (a) any event of default (or
any event which with notice or lapse of time or both would constitute an event
of default) or default (i) under any evidence of Indebtedness (including the
Note) in an aggregate amount of $250,000 or more of the Company or (ii) under
any indenture, mortgage or other agreement or instrument relating to any such
evidence of Indebtedness (including this Agreement or the Note) or (iii) under
any other agreement or instrument relating to the membership interests in the
Company, (b) any threatened or pending action, suit or proceeding against the
Company or its properties or assets which might have a Material Adverse Effect
or which in any manner questions the validity of this Agreement, the Note, the
Conversion Interest or any other document or agreement relating to any of the
foregoing, (c) any event or condition which might have a Material Adverse
Effect, (d) any default beyond any applicable grace period under the terms and
provisions of any material contract to which the Company is a party or by which
it or any of its properties may be bound or affected, and (e) any threatened or
actual suspension, termination or revocation of any material license, permit,
authorization, franchise or other certificate necessary to the proper conduct of
the business of the Company. The Company will provide the Purchaser with
reasonably prompt notice and with copies of all amendments and supplements to
the Company's Operating Agreement, and with such additional information with
respect to all of the foregoing as may be reasonably requested by the Purchaser.
SECTION 5.4 Inspection.
Permit the Purchaser, by its representatives, agents or attorneys, to
examine all books of account, records, reports and other papers of the Company,
to make copies and take extracts from any thereof, to discuss the affairs,
finances and accounts of it with its officers and independent accountants (and
by this provision the Company hereby authorizes said accountants to discuss with
the Purchaser the finances and accounts of the Company) and to visit and
inspect, at reasonable times during normal business hours, the properties of the
Company. Each such inspection shall be at the expense of the Purchaser making
the inspection, unless such inspection shall be made as a result of the
occurrence and during the continuance of any Note Event of Default (in which
event, the expense of such inspection shall be borne by the Company).
Notwithstanding the foregoing sentence, it is understood and agreed by the
Company that all expenses in connection with any such inspection incurred by the
Company, any officers and employees thereof and the attorneys and independent
accountants therefor shall be expenses payable by the Company and shall not be
expenses of the Purchaser. The Purchaser acknowledges that the Purchaser will
hold, and will cause its counsel and agents to hold, in confidence and not
disclose any confidential data or information (other than information that is
now or hereafter becomes in the public domain other than through the actions of
any holder or their agents or that was previously in the Purchaser's possession)
made available to the Purchaser in connection with this Agreement using the same
standard of care to protect such confidential data or information as is used to
protect the Purchaser's confidential information.
SECTION 5.5 Payment of Taxes and Claims.
Pay and discharge promptly when due:
(a) all taxes, assessments, levies, fees, water and sewer rents and
charges and all other governmental charges and levies imposed upon it, its
income or profits or any of its properties, before the imposition of any
interest or penalty; and
(b) all claims of materialmen, mechanics, carriers, warehousemen,
landlords and other similar Persons for labor, materials, supplies and
rentals that, if unpaid, might by law become a Lien upon any of its
property which could reasonably be expected in the judgment of a prudent
business person to have a Material Adverse Effect; provided, however, that
none of the foregoing above need be paid while the same is being contested
in good faith by appropriate proceedings diligently conducted so long as
adequate reserves shall have been established and maintained in accordance
with generally accepted accounting principles with respect thereto, title
of the Company to the particular property shall not be divested thereby and
the right of the Company to use the particular property shall not be
materially adversely affected thereby. The Company will file all federal,
state and local tax returns and all other tax reports as required by law.
SECTION 5.6 Payment; Performance of Contracts.
Duly and punctually pay or cause to be paid the principal of, and interest
on, the Note and will duly and punctually perform or cause to be performed all
actions to be done or performed under this Agreement, the Note, and the Security
Agreement.
SECTION 5.7 Financial Statements.
(a) Furnish to the Purchaser, as soon as available, but in any event within
forty-five (45) days after the close of each of the first three (3) quarterly
accounting periods in each Fiscal Year, (i) an unaudited balance sheet of the
Company prepared in accordance with generally accepted accounting principles as
at the end of such quarter, (ii) an unaudited statement of income of the Company
prepared in accordance with generally accepted accounting principles for that
quarter and for the portion of the Fiscal Year ending with such quarter, (iii)
an unaudited statement of members' equity of the Company prepared in accordance
with generally accepted accounting principles for that quarter, and (iv) an
unaudited statement of cash flows of the Company prepared in accordance with
generally accepted accounting principles; all such statements provided for by
clauses (i), (ii), (iii) and (iv) shall be in reasonable detail and shall set
forth comparable figures for the same accounting period in the preceding Fiscal
Year.
(b) Furnish to the Purchaser, as soon as available, but in any event within
ninety (90) days after the close of each Fiscal Year of the Company, a balance
sheet of the Company prepared in accordance with generally accepted accounting
principles as at the end of such year, and statements of income, retained
earnings and cash flows of the Company prepared in accordance with generally
accepted accounting principles, reflecting their operations during said year.
All such financial statements shall be in reasonable detail and shall set forth
comparable figures for the preceding Fiscal Year, and shall be reviewed (or
audited) by the Company's independent public accountants.
(c) Deliver to the Purchaser, at the time of the delivery to the Purchaser
of the reports and financial statements referred to in paragraphs (a) and (b)
above, a certificate signed by the Chief Financial Officer of the Company, (i)
certifying that such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in application in which the accountants concur), and present fairly the
financial condition of the Company as of the end of such periods and the results
of its operations for the periods then ended, subject, in the case of interim
financial statements, to year-end adjustments; and (ii) setting forth whether
there existed as of the date of such financial statements and whether, to the
best of his or her knowledge, there exists on the date of his or her certificate
or existed at any time during the period covered by such financial statements,
any Note Event of Default , and, if any such Note Event of Default exists on the
date of his or her certificate or existed during such period, specifying the
nature and period of existence thereof and the action the Company is taking, has
taken or proposes to take with respect thereto.
SECTION 5.8 Copies of Management Letters, etc.
Furnish to the Purchaser, promptly after the receipt thereof by the
Company, copies of all management letters or similar documents submitted to the
Company by independent certified public accountants in connection with each
annual and any interim audit of the accounts of the Company.
SECTION 5.9 Management.
Be managed by Turnberry Development, LLC or an Affiliate thereof (i) in a
prudent manner, with the same skill and care as a reasonably prudent person
would exercise under like circumstances, and (ii) in good faith with undivided
loyalty to the Company, all consistent with Turnberry Development, LLC or such
Affiliate's duties to the Company and its members under the Operating Agreement.
ARTICLE 6 - NOTE CONVERSION OPTION
SECTION 6.1
(a) Grant of Note Conversion Option. The Company hereby grants to the
Purchaser an option pursuant to which the Purchaser will have the right, but not
the obligation, to elect to convert the principal amount of the Note then
outstanding into the Conversion LLC Interest representing 30%* of the then
outstanding membership interests in the Company, exercisable, by written notice
to the Company in which the Purchaser joins as a member in, and agrees to be
bound as a member by, the Operating Agreement, at the following times: (i) at
any time during the 180-day period beginning on the fifteenth (15th) anniversary
of the date hereof; (ii) at any time after any claim shall have been made in
writing by the Company, any successor thereto, any Member or any other person
claiming through the Company, or by any governmental agency or official
purporting to have jurisdiction, that any amount of interest or other sum
payable under the Note exceeds any maximum rate or charge permitted by
applicable law, or is civilly or criminally usurious, until such claim is
withdrawn or dismissed; and (iii) at any time during the existence of a Note
Event of Default described in Section 5.1(e) or (f) of the Note or any one or
more Note Events of Default described in Section 5.1(a), (b) or (c) of the Note
wherein the amount involved, individually or in the aggregate, exceeds $100,000.
In addition, this Note automatically shall be converted into the Conversion LLC
Interest on the day immediately preceding the thirtieth (30th) anniversary of
the date of this Note. Upon exercise of such option to convert, or upon
automatic conversion pursuant to the immediately preceding sentence, the Note
automatically shall be deemed converted into a membership interest in the
Company having (A) all rights and obligations incident to a 30%* equity interest
in the Company, (B) an initial capital account in the Company equal to 30%* of
the total capital accounts of all Members (including assignees whether or not
the assignees are admitted as Members) of the Company, including the Purchaser
as of the time immediately after the Purchaser shall have become a Member, and
(C) the same proportional voting rights and other rights as any other Member
pursuant to the Operating Agreement (in addition to its rights hereunder),
without further action by any person. The Company promptly shall confirm, in
writing, the issuance of the Conversion LLC Interest as aforesaid by written
notice to the Purchaser. Promptly upon the Purchaser's receipt of such written
confirmation, the Purchaser shall mark the Note "canceled" and return it to the
Company, except that if any amounts were due and payable under Section
1.1(a)(ii) or Section 1.1(b) of the Note prior to conversion, such amount shall
continue to be due and payable notwithstanding any such conversion and the
Purchaser shall have the right to retain and enforce the Note until all amounts
owing under the Note immediately prior to the conversion shall have been fully
paid and satisfied.
*The Purchaser's Conversion Option will increase from 30% to 33 1/3% if, at
the Closing Date, the Company has not added as a Member having a 10% interest a
third party with whom the Purchaser or an Affiliate of the Purchaser has agreed
to a business transaction in which the Purchaser (or such Affiliate of
Purchaser) is compensated for use of income tax losses.
(b) Access to Information. In order to facilitate the exercise of the
Conversion Option by the Purchaser, the Company shall provide copies of the
Operating Agreement and all amendments thereto to the Purchaser upon the
Purchaser's request from time to time, and the Company and the Members shall
permit the Purchaser, its Affiliates and their representatives to inspect,
during the Company's normal business hours and with two (2) Business Days'
notice, the books and records of the Company and of the Members (with respect to
the Members' books and records, only to the extent that such information relates
to the Company), and to meet with, ask questions of and receive answers from the
management and independent accountants of the Company.
ARTICLE 7 - ADDITIONAL RIGHTS AND OBLIGATIONS
SECTION 7.1 Right of First Refusal.
The Company shall not transfer all or substantially all of its assets
except (i) any ground lease of a part in the El Rancho Property for development
of a casino, or (ii) with the prior written consent of the Purchaser or (iii)
pursuant to a bona fide sale to an unaffiliated third party permitted by this
Section 7.1 as follows:
(a) In the event the Company desires to sell all or substantially all
of its assets in any single transaction or series of related transactions
(for which purpose, sales of individual condominium units in the ordinary
course of business are not a series of related transactions) the Company
shall give written notice (a "Notice of Sale") thereof to the Purchaser
stating that the Company desires to make such sale and setting forth (in
the Notice of Sale and/or attachments thereto) the terms and conditions of
the proposed sale. Such Notice of Sale shall constitute an irrevocable
offer by the Company to the Purchaser to sell the same assets as specified
in the Notice of Sale upon the same terms and conditions as are set forth
therein. Within forty-five (45) days after receipt of the Notice of Sale
(time being of the essence), the Purchaser may elect to purchase all, but
not less than all, of the assets proposed to be sold, as specified in the
Notice of Sale, upon the same terms and conditions as set forth therein, by
delivery of a notice ("Purchaser's Notice") to the Company stating that the
Purchaser elects to purchase such assets on the terms and conditions of the
Notice of Sale, that such election is irrevocable, and the source of
financing for such purchase (if known). Delivery of the Purchaser's Notice
shall constitute a contract among the Company and the Purchaser for the
sale and purchase of the subject assets upon the applicable terms and
conditions of the Notice of Sale.
(b) If the Purchaser fails to elect to purchase all of the assets
covered by the Notice of Sale within the time period specified in paragraph
(a) above, then the Company may, within (180) days after the end of the
forty-five (45) day period referred to in paragraph (a), sell all of the
assets covered by the Notice of Sale to one or more third parties who or
which are not Affiliates of the Company upon the same terms and conditions
as had been set forth in the Notice of Sale. If the Company shall fail to
sell the assets covered by the Notice of Sale in accordance with the
immediately preceding sentence, the right of first refusal under this
Section 7.1 shall again apply in connection with any subsequent transfer of
such assets in any transaction or series of transactions which constitutes
a transfer of all or substantially all of the Company's assets.
SECTION 7.2 Repurchase of Note.
(a) In the event the Company (or any other Person with whom the
Company has a ground lease) shall attempt to develop the El Rancho Property
or any portion thereof in part as a casino operation and shall be denied or
found unsuitable by the applicable state gaming control authority for, or
otherwise precluded from obtaining or subjected by the applicable state
gaming control authority to unduly burdensome terms and conditions or
significant delays in connection with obtaining, necessary licenses (or is
notified by any such governmental authority that it intends to deny any
such license) due to the Purchaser's interest, or the indirect interest
(through the Purchaser) of International Thoroughbred Breeders, Inc.
("ITB") or any other Person associated with the Purchaser, in the Note or
the El Ranch Property, or any such license is revoked or threatened in
writing to be revoked or to be subjected to unduly burdensome terms and
conditions by the applicable state gaming control authority due to the
Purchaser's interest, or the indirect interest (through the Purchaser) of
ITB or any Person associated with Purchaser, in the Note or the El Rancho
Property (each of which is, and all of which collectively are, hereinafter
called a "License Problem") then, subject to paragraph (b) of this Section
7.2, the Company shall have the right, exercisable at its option, to
repurchase the Note for a purchase price equal to the amount which would be
due and payable at such time under Section 1.2 of the Note as if the
"Maturity Date" under the Note were the date on which the Company shall
have given the written notice to the Purchaser described in paragraph (b)
of this Section 7.2., provided, however, that if the circumstances giving
rise to Company's right to repurchase the Note under this Section 7.2 are
resolved prior to consummation of the repurchase, the Company's right to
repurchase by reason thereof shall terminate; and further provided that
(subject to paragraph (c) of this Section 7.2) such purchase pric shall be
payable by the Company's execution and delivery of its promissory note (the
"Repurchase Note") in the principal amount of such purchase price, payable
on the terms described in Exhibit C hereto. Payment of the Repurchase Note
shall be secured by a pledge by all Members of the Company of the same
collateral as secures the Note, on the same terms as described in the
Security Agreement.
(b) Once the Company determines that a License Problem described in
this Section 7.2 exists giving rise (or which could reasonably be expected
to give rise) to its right to repurchase the Note, it shall promptly give
written notice thereof to the Purchaser and the Purchaser shall have a
reasonable period of time after receipt of such notice, such that progress
of the Project is not unreasonably delayed, to assign the Note or the
Casino Note (as defined below) to another Person whose ownership of the
Note or Casino Note, as applicable, with reasonable certainty (as
reasonably determined by the Company), would not prevent the Company (or
any such other Person with whom the Company has a ground lease) from
obtaining the necessary licenses to operate a casino without the imposition
of unduly burdensome terms and conditions, or to otherwise cure the license
problem to the reasonable satisfaction of the Company.
(c) If the Company exercises its right to repurchase the Note pursuant
to paragraph (a) and (b) of this Section 7.2 and the Purchaser does not
timely cure the License Problem to the reasonable satisfaction of the
Company as aforesaid, and if payment of the purchase price by delivery of
the Repurchase Note will not cure the License Problem to the reasonable
satisfaction of the Company, then the Company shall have the right to pay
the purchase price for the Note in cash (by wire transfer in accordance
with wire transfer instructions which shall be given by the Purchaser).
(d) In connection with a note assignment referred to in paragraph (b)
of this Section 7.2, the Purchaser shall have the right to exchange the
Note for two replacement notes (the "Replacement Notes"), one of which (the
"Casino Note") shall be convertible as provided in Section 6.1 hereof and
shall be payable from Distributable Cash attributable to the casino and
related hotel operation (or ground lease of the casino and hotel operation)
on the El Rancho Property and, if applicable, the Algiers Property, and the
other of which (the "Non-Casino Note") shall not be convertible under
Section 6.1, shall be deemed to be satisfied in full upon a conversion of
the Casino Note under Section 6.1 hereof, and shall be payable as provided
in the Note minus any amounts payable under the Casino Note, provided that
in no event would any payment be required to be made under the Casino Note
which would not have been required to be made under the Note were it still
outstanding. The Purchaser shall have the right to submit the forms of such
Casino Note and Non-Casino Note to the Company, and the Company will be
required to execute and deliver such Replacement Notes upon surrender to
the Company of the Note, so long as the obligation of the Company under the
Replacement Notes on a combined basis is no greater or less, and no
different, than its obligation would have been under the Note were it still
outstanding, provided, however, that the form and substance of the
Replacement Notes submitted by the Purchaser shall be subject to such
changes in form and substance as shall be reasonably required by the
Company to the extent such changes do not adversely affect the interest of
the Purchaser in any respect other than as had been provided in the Note.
ARTICLE 8 - DEFINITIONS; MISCELLANEOUS
SECTION 8.1 Definitions.
Except as the context shall otherwise require, the following terms shall
have the following meanings for all purposes of this Agreement (the definitions
to be applicable to both the singular and the plural form of the terms defined,
where either such form is used in this Agreement):
"Adjusted Net Operating Income" shall mean, for any period, net operating
income for such period, determined in accordance with generally accepted
accounting principles consistently applied by the Company, minus debt service
(principal, interest and creditor fee) payments required to be made within such
period on Indebtedness for Money Borrowed. For such purpose, the Indebtedness
evidenced by the Note shall not be considered to be Indebtedness for Money
Borrowed.
"Affiliate," with respect to any Person, shall mean any other Person who
(a) is a director, officer, manager, member, or employee of such Person or of
any Affiliate of such Person, (b) directly or indirectly controls or is
controlled by or under direct or indirect common control with such Person, (c)
beneficially owns or holds, directly or indirectly, five percent (5%) or more of
any class of voting securities of such Person or any entity of which such Person
beneficially owns or holds, in the aggregate, directly or indirectly, 5% or more
of any class of voting securities or (d) has the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise; provided, however,
that neither the Purchaser nor any Person directly or indirectly controlled by
the Purchaser shall be deemed to be an Affiliate of the Company solely by reason
of ownership of or the exercise of rights resulting from the ownership of any of
the Securities or other securities issued in exchange therefor, or by reason of
having the benefits of any agreements or covenants of the Company contained in
this Agreement. The term "Affiliate," when used herein without reference to any
Person, shall mean an Affiliate of the Company and shall include, without
limitation (with respect to the Company), any subsequent or additional Members
and any Material Related Person.
"Algiers Property" shall mean the real property adjacent to the El Rancho
Property upon which Algiers Hotel is located.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in Las Vegas, Nevada.
"CSFB" shall mean Credit Suisse First Boston Mortgage Capital, LLC, its
successors and assigns.
"Closing Date" shall have the meaning set forth in Section 1.2(b) hereof.
"Company" shall have the meaning set forth in the preamble hereto.
"Conversion Option" shall mean, the right to convert the Note into a
membership interest in, and become a member of, the Company, as more fully
described in Section 6.1 of this Agreement.
"Conversion LLC Interest" shall have the meaning set forth in Section 2A.5
of this Agreement.
"El Rancho Property" shall mean the real property conveyed or to be
conveyed by the Purchaser to the Company, located in Las Vegas, Nevada, pursuant
to the Purchase Agreement.
"Excess Demolition Costs" shall mean the amount, if any, by which the costs
of demolition of the buildings on the El Rancho Property actually incurred by
the Company using the proposal for such demolition provided to the Purchaser by
the Stanford Company shall exceed $3.9 million.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Fiscal Year" shall mean a fiscal year of the Company, which shall end on
December 31st.
The phrase "generally accepted accounting principles" shall mean, as of the
date of any determination with respect thereto, generally accepted accounting
principles as used by the Financial Accounting Standards Board and/or the
American Institute of Certified Public Accountants, consistently applied and
maintained throughout the periods indicated.
"Guaranty" or "Guarantees," with respect to any Person, shall mean all
obligations of such Person guarantying or, in effect, guarantying any
Indebtedness, dividend or other obligation or investment of any other Person in
any manner, whether directly or indirectly, including obligations incurred
through an agreement, contingent or otherwise, by such Person (a) to purchase
such Indebtedness, obligation or investment or any property or assets
constituting security therefor; (b) to advance or supply funds (i) for the
purchase or payment of such Indebtedness, obligation or investment or (ii) to
maintain working capital or equity capital, or otherwise to advance or make
available funds for the purchase or payment of such Indebtedness, obligation or
investment; (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of such Indebtedness, obligation or investment of
the ability of the primary obligor to make payment of such Indebtedness,
obligation or investment; or (d) otherwise to assure the owner of such
Indebtedness, obligation or investment against loss in respect thereof.
The words "hereof", "herein", "hereunder" and other words of similar import
shall be construed to refer to this Agreement as a whole and not to any
particular Section or other subdivision.
The word "holder," with respect to the Note, shall mean the Person(s) in
whose name such Note shall be registered.
"Immediate Family" shall include, with respect to any Material Related
Person, a Person's spouse, parents, children, siblings, mother and
father-in-law, sons and daughters-in-law and brothers and sisters-in-law.
"Indebtedness", with respect to any Person, shall mean all items (other
than capital stock, capital surplus, retained earnings and deferred credits),
which in accordance with generally accepted accounting principles would be
included in determining total liabilities of such Person as shown on the
liability side of a balance sheet of such Person as at the date on which
Indebtedness is to be determined. "Indebtedness" shall also include, whether or
not so reflected, (a) indebtedness, obligations and liabilities secured by any
Lien on property of such Person whether or not the indebtedness secured thereby
shall have been assumed by such Person, (b) all obligations in respect of
capital leases and (c) all Guaranties of any of the above. Notwithstanding the
foregoing, in determining the indebtedness of the Company, there shall be
included all indebtedness of the Company of the character referred to in the
foregoing clauses (a), (b) and (c) deemed to be extinguished under generally
accepted accounting principles but for which such Person remains legally liable.
"Indebtedness for Money Borrowed", with respect to any Person, shall mean
and include the aggregate amount of, without duplication: (a) all obligations of
such Person for borrowed money; (b) all obligations of such Person evidenced by
bonds, debentures, notes (except the Note), or other similar instruments, and
all reimbursement or other obligations of such Person in respect of letters of
credit (except letters of credit or bonds that have not been presented for
payment and which have been issued to secure the obligations of the Company to
any municipality to construct, develop or complete any on-site or off-site
improvements, or to secure a contribution to a municipality for such
improvements which contribution is required of the Company in connection with
the development or the final approval of a residential home project being
developed by the Company), banker's acceptances, interest rate swaps or other
financial products; (c) all obligations of such Person to pay the deferred
purchase price of assets or services, exclusive of trade payables which, by
their terms, are due and payable within ninety (90) calendar days of the
creation thereof; (d) all capitalized lease obligations of such Person; (e) all
obligations or liabilities of others secured by a Lien on any asset owned by
such Person, irrespective of whether such obligation or liability is assumed, to
the extent of such obligation or liability; and (f) any Guarantees of such
Person of any Indebtedness for Money Borrowed of another Person.
"Investment" shall mean as applied to any Person: (a) any direct or
indirect purchase or other acquisition by such Person of capital stock or other
securities of or any limited liability company interest, partnership interest or
joint venture interest in any other Person, or (b) any direct or indirect loan
(including, without limitation, any Guaranty), advance or capital contribution
by such Person to any other Person, including all Indebtedness and accounts
receivable from such other Person which are not current assets or did not arise
from sales to such other Person in the ordinary course of business, and (c) any
direct or indirect purchase or other acquisition by such Person of any assets
other than assets used in the ordinary course of business.
"Lien" shall mean any interest in property securing an obligation owed to,
or a claim by, any Person other than the owner of the property, whether such
interest shall be based on the common law, statute or contract, whether or not
such interest shall be recorded or perfected and whether or not such interest
shall be contingent upon the occurrence of some future event or events or the
existence of some future circumstance or circumstances, and including the lien
or security interest arising from a mortgage, security agreement, encumbrance,
pledge, adverse claim or charge, conditional sale or trust receipt, or from a
lease, consignment or bailment for security purposes. "Lien" shall also include,
without limitation, reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting property. For the purposes of this
Agreement, a Person shall be deemed to be the owner of any property that such
Person shall have acquired or shall hold subject to a conditional sale agreement
or other arrangement (including a leasing arrangement) pursuant to which title
to the property shall have been retained by or vested in some other Person for
security purposes.
"Material Adverse Effect" shall mean a material adverse effect on the
business, results of operations, properties or condition (financial or
otherwise) of the Company.
"Material Related Person" shall mean Jeffrey Soffer (and members of his
Immediate Family) or any other Person who is material to the business of
Turnberry Development, LLC, and their respective Affiliates.
"Member" shall mean each member (or similar equity owner) of the Company,
including any additional or successor members of the Company who may be admitted
after the Closing Date as members of the Company pursuant to the Operating
Agreement (and applicable law) and in a manner not violative of the terms of
this Agreement. For the purposes of Articles 4, 5 and 6 of this Agreement, the
term "Member" shall include all Material Related Persons.
"Note" shall mean the promissory note to be issued to the Purchaser by the
Company as more fully described in Section 1.1(a) hereof.
"Note Event of Default" shall mean an Event of Default as defined in and
under the Note.
"Operating Agreement" shall mean the limited liability company or operating
agreement entered into among the Members of the Company relating to the
existence, governance and operation of the Company, as amended from time to
time.
"Permitted Liens" shall mean the following:
(i) liens for taxes, assessments, levies or other charges not
otherwise required to be paid pursuant to the provisions of Section 5.5
hereof;
(ii) liens and the amount thereof in connection with workmen's
compensation, unemployment insurance or other social security obligations;
(iii) pledges or deposits made with third parties to secure
obligations of the Company (including customer deposits) in the ordinary
course of business;
(iv) statutory liens, including without limitation liens of mechanics,
workmen and contractors, provided that the liens permitted by this clause
(iv) either have not been filed or, if such liens have been filed, either
(x) a stay of enforcement thereof has been obtained, or (y) such liens have
been satisfied of record within thirty (30) days after the date of filing
thereof; and
(v) reservations, exceptions, building or use restrictions,
encroachments, easements, rights-of-way, variances and other similar title
exceptions affecting the real property owned by the Company, provided that
such title exceptions existed as of the consummation of closing under the
Purchase Agreement or do not materially interfere with the Company's use or
proposed use of such property.
"Person" shall mean any individual, corporation, partnership, entity, joint
venture, association, joint stock company, trust, unincorporated organization or
government (or any agency or political subdivision thereof).
"Purchase Agreement" shall mean that certain Agreement of Sale of even date
herewith between the Purchaser and the Company, for the sale by the Purchaser to
the Company of certain real property in Las Vegas, Nevada.
"Purchase Price" shall have the meaning set forth in Section 1.2(a) hereof.
"Purchaser" shall mean Orion Casino Corporation or any subsequent holder of
the Note, and their respective successors and assigns. For the purposes of this
Agreement and the Note, any Person to whom any of the Securities are pledged
will be deemed to have the same rights and preferences with respect to such
Securities under this Agreement and the Note as does the Purchaser, subject to
the terms of the pledge documents and instruments relating thereto.
"Restricted Payment" shall mean (a) any distribution, whether in cash or
property, direct or indirect, in respect of membership interests (or similar
equity interests) of the Company, or (b) any purchase, redemption, retirement or
other acquisition of membership interests (or similar equity interests) of the
Company now or hereafter outstanding, or of any warrants, rights or options
evidencing a right to purchase or acquire any such membership interests (or
similar equity interests); (c) any optional redemption, retirement, purchase or
other acquisition of any Indebtedness for Money Borrowed of the Company that, by
its terms, is subordinate to any other Indebtedness for Money Borrowed of the
Company and (d) any other payment to a Member or any other Affiliate of the
Company or of a Member.
"Rule 144" shall mean Rule 144 under the Securities Act, as presently in
effect and as hereafter amended from time to time, or any superseding or
substituted rule adopted by the SEC from time to time.
"Rule 144A" shall mean Rule 144A under the Securities Act, as presently in
effect and as hereafter amended from time to time, or any superseding or
substituted rule adopted by the SEC from time to time.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities" shall have the meaning set forth in Section 2A.5 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time, and the rules and regulations promulgated thereunder (including,
without limitation, Rule 144 and Rule 144A).
"Security Agreement" shall mean that certain security agreement, the form
of which is attached hereto as Exhibit C, to be dated as of the Closing Date,
executed and delivered by the Company and all of its Members in favor of the
Purchaser pursuant to which the Purchaser will be granted a security interest in
the Members' rights to receive distributions, in order to secure the Company's
obligations under the Note.
"Shared Appreciation" shall have the meaning set forth in Section 1.2 of
the Note.
"Solvent" shall have the meaning set forth in Section 2.11 hereof.
"Subsidiary", with respect to any Person, shall mean any corporation 50% of
the outstanding shares of voting stock or similar interest of which are owned,
directly or indirectly, by such Person. "Subsidiary", when used herein without
reference to any particular Person, shall mean a Subsidiary of the Company.
"Taxes" means any income taxes, franchise taxes, gross receipts taxes,
transfer taxes, real estate transfer taxes, value added taxes, sales taxes, use
taxes, wage and/or employment taxes, excise taxes, real and personal property
taxes, taxes measured on or imposed by capital, levies, imposts, duties
licensing fee, registration fees, withholding taxes, estimate taxes, and charges
of any nature whatsoever relating to any of the foregoing, including without
limitation, interest, penalties, fines, additions to tax, assessments and
deficiencies related thereto.
The phrase "this Agreement" shall mean this Note Purchase Agreement
(including the annexed exhibits and schedules, and all other collateral
agreements, documents, instruments and certificates executed and/or delivered in
connection herewith), as it may from time to time be amended, supplemented or
modified in accordance with its terms.
"Turnberry" shall mean Turnberry Development, LLC, referred to in Section
2.13 hereof.
SECTION 8.2 Directly or Indirectly.
Any provision in this Agreement referring to action to be taken by any
Person, or that such Person is prohibited from taking, shall be applicable
whether such action is taken directly or indirectly by such Person.
SECTION 8.3 Accounting Terms.
All accounting terms used herein that are not otherwise expressly defined
shall have the respective meanings given to them in accordance with generally
accepted accounting principles at the particular time.
SECTION 8.4 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Nevada, without regard to conflicts of laws principles of
such state. No waiver of any defenses, rights or actions is to be implied by any
provision hereof. If any action or proceeding shall be brought by the Purchaser
in order to enforce any right or remedy under this Agreement or under any
Securities, the Company hereby consents and will submit to the jurisdiction of
any of the courts of the State of New Jersey or Nevada and of any federal court
located therein and the Purchaser may bring suit against the Company in any of
such courts. The Company also hereby waives the right to bring any counterclaims
against the Purchaser (but specifically reserves the right to assert any
defenses and affirmative defenses against the Purchaser and compulsory
counterclaims) in any suit or action in any court of law or equity in which the
Purchaser and the Company are adverse parties. The Company waives any right to a
jury trial in any action with respect to this Agreement, the Securities, and any
other document, agreement or instrument delivered in connection herewith or
therewith.
SECTION 8.5 Independence of Covenants.
Each covenant made by the Company herein is independent of each other
covenant so made. The fact that the operation of any such covenant permits a
particular action to be taken or condition to exist does not mean that such
action or condition is not prohibited, restricted or conditioned by the
operation of the provisions of any other covenant herein.
SECTION 8.6 Construction.
This Agreement is the result of arms-length negotiations between the
parties hereto and has been prepared jointly by the parties. In applying and
interpreting the provisions of this Agreement, there shall be no presumption
that the Agreement was prepared by any one party or that the Agreement shall be
construed in favor of or against any one party.
ARTICLE 9 - MISCELLANEOUS.
SECTION 9.1 Notices.
All notices, advices and communications to be given or otherwise made to
any party to this Agreement shall be deemed given upon receipt thereof if
contained in a written instrument and delivered in person, sent by overnight
courier, sent by first class registered or certified mail, postage prepaid and
return receipt requested, or sent by facsimile telecopier, confirmed by mail,
addressed to such party at the address or telecopier number set forth below or
at such other address or telecopier number as may hereafter be designated in
writing by the addressee to the addressor:
(a) if to the Purchaser:
Orion Casino Corporation
c/o Garden State Park
Route 70 and Haddonfield Road
Cherry Hill, NJ 08034
Attention: Mr. Francis W. Murray
with a copy to:
Cozen and O'Connor
1900 Market Street
Philadelphia, PA 19103
Attention: David S. Petkun, Esquire
(b) if to any other holder of a Security: to it at its
address listed on the books for the registration and
registration of transfer of the Note to be maintained
by the Company, and
(c) if to the Company:
Turnberry/Las Vegas Boulevard, L.L.C.
19501 Biscayne Boulevard, Suite 400
Aventura, FL 33180
Attention: Mr. Ray Parello
with a copy to:
Turnberry/Las Vegas Boulevard, L.L.C.
19501 Biscayne Boulevard
Aventura, FL 33180
Attention: Legal Department
Whenever pursuant to this Agreement, notice is required to be given to any
or all of the holders of the Note, such requirement shall be satisfied if such
notice is given in the manner prescribed to the Persons last known by the
Company to be Noteholders entitled to such notice, at the addresses of such
Persons last known to the Company.
SECTION 9.2 Survival.
All representations, warranties and covenants made by the Company in this
Agreement or any certificate or other instrument delivered to the Purchaser
pursuant to this Agreement shall be considered to have been relied upon by the
Purchaser and shall survive the closing, the delivery to the Purchaser of the
Note, any payment or prepayment of the Note, regardless of any investigation
made by the Purchaser or on the Purchaser's behalf.
SECTION 9.3 Successors and Assigns; Transfer of the Note.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns, and shall inure to the benefit of and be
enforceable by the parties hereto and their respective successors and assigns
permitted hereunder. Notwithstanding the foregoing, unless and until all
Indebtedness of Purchaser to CSFB shall have been paid in full, no transfer or
pledge of the Note, this Agreement, the Security Agreement or any other Note
Document (as defined in the Note) by the Purchaser shall be made or effective
without the prior written consent of CSFB which consent made be withheld in
CSFB's sole discretion, except for an assignment of the Note, this Agreement,
the Security Agreement and the other Note Documents by the Purchaser to CSFB
(and any successor or assign of CSFB who becomes the owner of Purchaser's
Indebtedness to CSFB) as collateral security for the Purchaser's Indebtedness to
CSFB, and the Company acknowledges receipt of notice of such assignment.
Additionally, the Company and the Purchaser hereby agree that all payments from
time to time made under the Note will be paid directly to CSFB, in accordance
with the instructions set forth in Schedule 9.3 hereto, until such time as CSFB
shall have notified the Company that all of the Purchaser's Indebtedness to CSFB
has been paid in full. This Section 9.3 is for the express benefit of, and shall
be enforceable by, CSFB. The Company shall assign this Agreement to any Person
to whom it makes a permitted assignment of the Purchase Agreement at or before
closing thereunder and who then purchases the El Rancho Property, and, by an
instrument in writing reasonably satisfactory to the Purchaser, shall cause such
assignee to assume and agree to be bound by this Agreement, whereupon the
Company shall be relieved of liability hereunder.
SECTION 9.4 Amendment and Waiver.
(a) Subject to Section 9.4(d), the provisions of this Agreement and, when
executed, the Note, may be amended or supplemented, and the observance of any
term hereof or thereof may be waived, with the written consent of the Company
and (i) on or prior to the Closing Date, the Purchaser, and (ii) after the
Closing Date, the holders of eighty percent (80%) of the aggregate outstanding
principal amount of the Note(s); provided, however, that no such amendment,
supplement or waiver shall, without the written consent of all of the holders of
the Note(s) then outstanding, (u) change, with respect to any Note, the amount
or time of any required payment of principal or premium or the rate, amount or
time of payment of interest, or change the funds in which any payment on any
Note is required to be made; (v) amend, supplement or waive any provision of the
Note or of Section 6.1 hereof; or (w) amend, supplement or waive this Section
9.4(a).
(b) The Company shall not solicit, request or negotiate for or with respect
to any proposed waiver or amendment of any of the provisions of this Agreement
or the Note unless each holder of the Note (irrespective of the amount of Note
then owned by it) shall be informed thereof by the Company and shall be afforded
the opportunity of considering the same and shall be supplied by the Company
with such information with respect thereto as such holder shall reasonably
request. Executed or true and correct copies of any waiver effected pursuant to
the provisions of this Section 9.4 shall be delivered by the Company to the
holder of the Note forthwith following the date on which the same shall have
been executed and delivered by the holder or holders of the requisite percentage
of outstanding Note. The Company will not, directly or indirectly, pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any holder of the Note(s) as consideration for or
as an inducement to the entering into by any holder of the Note(s) of any waiver
or amendment of any of the terms and provisions of this Agreement unless such
remuneration is concurrently paid, on the same terms, ratably to the holders of
all of the Notes then outstanding.
(c) The Company shall not be required to pay to the Purchaser any fee in
connection with the waiver by such holder of any provisions of this Agreement or
the Note other than reimbursement for the actual and reasonably incurred
out-of-pocket expenses of such holder in connection with such waiver.
(d) Notwithstanding anything to the contrary set forth herein, unless and
until CSFB shall have notified the Company that all Indebtedness of Purchaser to
CSFB has been paid in full, no amendment, modification, waiver, extension or
supplement of any provision hereof or of the Note, the Security Agreement or any
other Note Document shall be effective unless it shall have been approved, in
writing, by CSFB, which approval may be withheld in CSFB's sole discretion. This
Section 9.4(d) is for the express benefit of CSFB and shall be enforceable by
it.
SECTION 9.5 Severability.
If any term, provision, covenant or restriction of this Agreement is held
by a court or a governmental agency of competent jurisdiction to be invalid,
void or unenforceable, or to cause any party to be in violation of any
applicable provision of law, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and effect and in
no way shall be affected, impaired or invalidated.
SECTION 9.6 Indemnification Against Claims, etc.
(a) The Company shall indemnify and hold harmless the Purchaser, the
Purchaser's directors, officers, employees, agents, and each Person, if any, who
controls the Purchaser within the meaning of the Securities Act or the Exchange
Act, and the Purchaser's successors and assigns (any and all of whom are
referred to in the context of this paragraph (a) as the "Indemnified Parties")
from and against any and all losses, claims, damages and liabilities, joint or
several (including, without limitation, all reasonable legal fees or other
expenses reasonably incurred by any Indemnified Party in connection with the
preparation for or defense of any pending or threatened claim, action or
proceeding, whether or not resulting in any liability), to which such
Indemnified Party may become subject (whether or not such Indemnified Party is a
party thereto) that are caused by or arise out of any inaccuracy,
misrepresentation, breach of warranty or nonfulfillment of any covenant or
agreement on the part the Company contained in this Agreement or in any
statement or certificate furnished to the Purchaser by the Company pursuant
hereto or in connection with the transactions contemplated hereby.
(b) The Purchaser shall indemnify and hold harmless the Company, the
Company's members, directors, officers, employees and agents, and the Company's
successors and assigns (any and all of whom are referred to in the context of
this paragraph (b) as the "Indemnified Parties") from and against any and all
claims, damages and liabilities, joint or several (including, without
limitation, all reasonable legal fees and other expenses reasonably incurred by
any Indemnified Party in connection with the preparation for or defense of any
pending or threatened claim, action or proceeding, whether or not resulting in
any liability), to which such Indemnified Party may become subject (whether or
not such Indemnified Party is a party thereto) that are caused by or arise out
of any litigation initiated against the Company or any member of the Company, on
or before the second anniversary of the Closing Date, by a shareholder of the
Purchaser relating to the transactions contemplated hereby o by the Purchase
Agreement.
(c) Promptly after receipt by an Indemnified Party of notice of any claim,
action or proceeding with respect to which an Indemnified Party is entitled to
indemnity hereunder, such Indemnified Party will notify the indemnifying party
of such claim or the commencement of such action or proceeding; provided,
however, that the failure of an Indemnified Party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Section 9.6 with respect to such Indemnified Party, except to the extent that
the indemnifying party is actually and materially prejudiced by such failure.
The indemnifying party will assume the defense of such claim, action or
proceeding and will employ counsel reasonably satisfactory to the Indemnified
Party and will pay the fees and expenses of such counsel. Notwithstanding the
preceding sentence, the Indemnified Party will be entitled, at the expense of
the indemnifying party to employ counsel, reasonably satisfactor --------
------- to the Company, separate from counsel for the indemnifying party and for
any other party in such action if the Indemnified Party reasonably determines
that a conflict of interest or other reasonable basis exists which makes
representation by counsel chosen by the indemnifying party not advisable;
provided, however, that the indemnifying party shall not be obligated to pay for
the fees and expenses of more than one counsel of all Indemnified Parties. In
the event an Indemnified Party appears as a witness in any action or proceeding
brought against the indemnifying party in which an Indemnified Party is not
named as a defendant, the indemnifying party agrees to reimburse such
Indemnified Party for all out-of-pocket expenses incurred by it (including
reasonable fees and expenses of counsel) in connection with its appearing as a
witness. No claim, demand, action or proceeding against an Indemnified Party to
which Section 9.6(a) or 9.6(b) applies may be settled or compromised by the
Indemnified Party without th written consent of the indemnifying party. The
obligations of the parties under this Section 9.6 shall survive the Closing, the
payment or prepayment of the Note, and the termination of this Agreement.
SECTION 9.7 Counterparts.
This Agreement may be executed and delivered in one or more counterparts,
each of which shall be deemed an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 9.8 Reproduction of Documents.
This Agreement, and all documents relating hereto (other than the Note),
including, without limitation, (a) consents, waivers and modifications that may
hereafter be executed, (b) documents received by the Purchaser at the closing of
the purchase of the Note and (c) financial statements, certificates and other
information heretofore or hereafter furnished to the Purchaser, may be
reproduced by the Purchaser by any photographic or other similar process and the
Purchaser may destroy any original document so reproduced. The Company agrees
and stipulates that, to the extent permitted by applicable law and court or
agency rules, any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by the
Purchaser in the regular course of business) and that any enlargement, facsimile
or further reproduction o such reproduction shall be admissible in evidence to
the same extent.
SECTION 9.9 Captions.
The descriptive headings of the various paragraphs or parts of this
Agreement are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
SECTION 9.10 No Agency.
The Purchaser shall not be deemed to be an agent, partner or joint venturer
of the Company or of any other Person, and nothing herein contained shall be
construed to impose any liability upon the Purchaser by reason of the execution
or delivery of this Agreement or the consummation of the transactions
contemplated hereby.
SECTION 9.11 Entire Agreement.
This Agreement and the Note state the entire agreement reached between the
parties hereto with respect to the transactions contemplated hereby and
supersede all prior or contemporaneous agreements, negotiations, understandings,
discussions, representations and warranties between the parties, whether oral or
written (including, without limitation, the commitment letter).
SECTION 9.12 No Waiver
No forbearance to enforce any provision or right hereunder shall be deemed
a waiver thereof, and no waiver of any breach of any term or covenant herein
shall be construed as a waiver of any other breach of the same, or any other
term or covenant herein.
SECTION 9.13 Expenses.
The Company shall pay all costs of collection of the Note and (if the
Purchaser is the prevailing party) enforcement of the Note Documents (including
reasonable attorneys' fees and court costs).
The obligations of the Company under this Section 9.13 shall survive the
payment or prepayment of the Note or the termination of this Agreement.
SECTION 9.14 Subordination; Estoppel.
(a) The Purchaser hereby subordinates any claim, right or interest it may
have in and to the assets of the Company to the prior lien (if any) of the
holder of any and all Indebtedness for Money Borrowed which is incurred and to
be incurred by the Company to finance the Property and the development thereof
(collectively, "Project Financing"). Furthermore, except as expressly permitted
herein, the Purchaser hereby subordinates its rights to payment and satisfaction
of the Note to the prior indefeasible payment of all Project Financing.
Notwithstanding the foregoing, the Purchaser shall be entitled to receive
payments on the Note from time to time (i) so long as no default beyond
applicable cure periods exists under the Project Financing, and (ii) if and to
the extent distributions by the Company to its Members are not prohibited by the
documents governing the Project Financing, or are made with the consent of or
waiver by the holder of the Project Financing. Within five (5) business days
after any request by the Company, the Purchaser shall confirm in writing its
subordination to Project Financing as provided herein.
(b) Within five (5) business days after any request by the Company, the
Purchaser shall execute customary estoppel certificates which confirm the status
of the Indebtedness evidenced by the Note and the absence of an Event of Default
known to the Purchaser thereunder (or, if such is not the case, specifying the
nature of any known Event of Default).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above by their duly authorized officers or other
representatives.
ORION CASINO CORPORATION
By: S/ Francis W. Murray
Name: Francis W. Murray
Title: Authorized Officer
TURNBERRY/LAS VEGAS BOULEVARD, L.L.C.
By: S/ Jeffrey Soffer
Name: Jeffrey Soffer
Title: President
Exhibit 10.3
PROMISSORY NOTE
Las Vegas, Nevada
$23,000,000.00 May 18, 2000
FOR VALUE RECEIVED, TURNBERRY/LAS VEGAS BOULEVARD, L.L.C., a Nevada limited
liability company (the "Maker"), promises to pay to the order of ORION CASINO
CORPORATION, a Nevada corporation (the "Payee"), the principal sum of Twenty
Three Million Dollars ($23,000,000) minus the amount, if any, of Excess
Demolition Costs (as defined in the Note Purchase Agreement referred to below)
(the difference between $23,000,000 and any Excess Demolition Costs being
hereinafter called the "Note Amount"), in lawful money of the United States of
America and to pay interest in like money from the date hereof on the unpaid
balance of the Note Amount at the rates, in the amounts and at the times set
forth below.
1. PAYMENTS OF PRINCIPAL AND INTEREST:
1.1 Payments before Maturity
(a) Principal.
(i) Subject to conversion of this Note into an equity interest in the
Maker pursuant to Section 6.1 of the Note Purchase Agreement between the
Maker and the Payee dated March 1, 2000 (the "Note Purchase Agreement"),
this Note shall be paid in full, in the amounts described in paragraphs
(a), (b), (c) and (d) of Section 1.2 below, upon the earlier to occur of a
sale of all of the assets of the Maker in a bona fide, arm's length
transaction to a third party who is not an Affiliate (as defined in the
Note Purchase Agreement) of the Maker or of any member of the Maker, or the
dissolution of the Maker.
(ii) Once the Maker has made aggregate distributions to its members,
their successors and assigns (collectively, "Members") cumulatively from
the Maker's inception, equal to the aggregate capital contributions made by
Members of the Maker to the Maker plus the Preferred Return (as hereinafter
defined) thereon, then (x) 100% of the Maker's Distributable Cash (as
hereinafter defined) shall be paid to the Payee hereunder and applied in
accordance with Section 1.4 below, until such time as the unpaid principal
of this Note (equal to the Note Amount) is reduced to $1 million, and (y)
the Maker will not make any distributions to its Members until the Payee
has received aggregate payments of principal and interest under this
Section 1.1(a)(ii) and Section 1.1(b)(i) below equal to the Note Amount,
whereupon the Maker will be permitted to make distributions to Members as
and to the extent permitted by Section 1.1(b)(ii) below. The "Preferred
Return" is a return calculated on Member's Adjusted Capital Contributions
(as hereinafter defined) (A) at an annual rate, on up to $15 million of the
Members' Adjusted Capital Contributions from time to time invested in the
Maker, equal to the lesser of the annual rate then being charged to the
Maker by its third party investor and the current annual rate then being
paid on U.S. Treasury Notes having a maturity of three years, and (B) at a
rate per annum equal to 15% on all amounts of Adjusted Capital
Contributions from time to time invested in excess in $15 million. The
Members "Adjusted Capital Contributions" means the amount by which the
Members' aggregate capital contributions to the Maker exceed aggregate
distributions previously made by the Maker to its Members.
"Distributable Cash" means, for any period for which the same is being
determined, the excess, if any, of (1) the sum of (x) the gross cash
receipts of the Maker during such period (including, without limitation,
operating revenue, proceeds of the sale or exchange of any capital asset or
of all or substantially all of the Maker's assets, proceeds of a
condemnation, recovery of damage awards or insurance proceeds, and proceeds
of any borrowing, mortgage, or refinancing), (y) all cash contributed
during such period to the Maker by its Members, and (z) any amount released
during such period from any reserves maintained by the Maker, over (2) the
sum of (x) all cash expenditures and disbursements of all kinds of the
Maker during such period, including payments of interest and principal on
the Maker's borrowings (except, in the case of this Note, excluding
payments of Participation Interest, Default Interest, Shared Appreciation,
principal and late charges but including any payment to the Payee under
Section 7 hereof) and including disbursements for operating expenses,
general and administrative expenses, the Incentive Fee (as defined in the
Note Purchase Agreement), capital expenditures (including amounts expended
in connection with the purchase of the El Rancho Property) and other costs
incidental to the business or management of the Maker, and (y) amounts
added during such period to, or set aside during such period for, a reserve
for working capital, contingencies, replacements or capital expenditures of
the Maker; provided that in no event shall Distributable Cash be reduced by
(i) distributions or other amounts paid to Members of the Maker or their
Affiliates (except for the Incentive Fee and other fees for services to the
extent expressly permitted by the Note Purchase Agreement or approved in
writing by the Payee) or (ii) expenditures prohibited by Section 4.1 or 4.2
of the Note Purchase Agreement.
(iii) Except for principal required to be paid pursuant to Section
1.1(a)(i) above or upon acceleration of this Note by the Payee during the
existence of an Event of Default (as defined in Section 5 of this Note),
the principal of this Note shall not be paid or prepaid in full without the
written consent of the Payee. The Maker may from time to time make a
partial prepayment of principal out of its Distributable Cash until the
Note Amount is reduced to $1,000,000, upon and after which any amount of
principal purported to be paid or prepaid by the Maker prior to the
Maturity Date (as hereinafter defined) shall be deemed to constitute an
advance payment on account of Participation Interest under Section 1.1(b)
hereof.
(b) Interest. Interest shall accrue hereunder monthly (but, except for
Default Interest accruing during the continuation of an Event of Default, will
only be payable from Distributable Cash) at the annual rate of 22%, such rate to
be adjusted upwards or downwards periodically to equal Participation Interest
(and also to be adjusted at and after the Maturity Date to equal Bonus Interest
and any Default Interest). The Maker shall pay to the Payee Participation
Interest payments as follows:
(i) Once the Adjusted Capital Contributions of the Members of the
Maker have been reduced to $0 and the Maker has paid the Preferred Return
thereon to its Members, and after the Maker has made payments of principal
under Section 1.1(a)(ii) of this Note reducing the Note Amount to $1
million, then (x) 100% of the Maker's Distributable Cash will be paid as
Participation Interest to the Payee until the Payee has received aggregate
payments of Participation Interest equal to $1 million; and (y) the Maker
will not make any distributions to its Members until the Payee has received
$1 million in Participation Interest under this Section 1.1(b)(i),
whereupon the Maker will be permitted to make distributions to its Members
as and to the extent permitted by Section 1.1(b)(ii) below.
(ii) Once the Adjusted Capital Contributions of the Members of the
Maker have been reduced to $0 and the Maker has paid the Preferred Return
thereon to its Members, and after the Maker has made payments of principal
under Section 1.1(a)(ii) of this Note reducing the Note Amount to $1
million and the Maker has paid $1 million of Participation Interest
pursuant to Section 1.1(b)(i) above: Participation Interest shall be paid
to the Payee from time to time in each case in an amount equal to
thirty-three and one-third percent (33 1/3%) of the Maker's Distributable
Cash; and the Maker will not make any distributions to its Members except,
concurrently with making each such Participation Interest payment, if no
Event of Default exists, the remaining 66 2/3% of such Distributable Cash
may be distributed to Members (but the existence of such Event of Default
and resulting prohibition against distributions to Members of the Maker
shall not affect required payments of Participation Interest, and 100% of
Distributable Cash shall be applied to pay Participation Interest until all
amounts due to the Payee hereunder shall have been paid in full).
(c) Determination of Distributable Cash. After Adjusted Capital
Contributions have been reduced to $0 and the Maker has paid the Preferred
Return thereon to the Maker's Members, payments of principal and Participation
Interest under Sections 1.1(a)(ii) and 1.1(b) shall be made to the Payee from
time to time as and when Distributable Cash is determined (which determination
shall be made not less frequently than annually) by the managing member or other
manager of the Company, but, in the case of payments of Participation Interest
under Section 1.1(b)(ii), in no event shall such payments be made less
frequently than whenever a distribution is made by the Maker to its Members,
until this Note shall have been paid in full. An annual reconciliation between
any amounts paid during each calendar year and any amount due for such calendar
year shall be made on or before February 28 of the year immediately subsequent
to the subject calendar year and also on and as of the Maturity Date. The Maker
will provide to the Payee on or before January 31 of each year, beginning
January 31, 2001, such financial information as is reasonably necessary or
requested by the Payee to reconcile the actual principal and/or Participation
Interest due for the previous calendar year against the amount(s) thereof
calculated by the Maker quarterly as aforesaid. If the reconciliation discloses
an excess or deficiency in the principal or Participation Interest payments, if
any, made with respect to the subject calendar year, then (x) in the event of an
excess, the next payments due to the Payee by the Maker under this Note shall
have credited against them the amount of the excess, and (y) in the event of a
deficiency, the Maker shall pay to the Payee, within five business days after
the Maker's receipt of the reconciliation, the full amount of the deficiency,
together with interest at 10.0% per annum on the deficiency from January 15
until payment in full is received by the Payee.
1.2 Payment Upon Maturity:
The Maker and the Payee anticipate that, as a result of the conversion
provisions of the Note Purchase Agreement, a payment at maturity under
this Section 1.2 would not be required, except as provided in Section
1.1(a) of this Note. However, if the value or amount of this Note at
any time becomes relevant or the subject of any dispute, whether in a
bankruptcy of the Maker or otherwise, the value and amount of this
Note at such time shall be the amount payable under this Section 1.2.
Subject to the foregoing, except as otherwise expressly provided in
this Note, the Note Agreement or any agreement or instrument securing
payment of this Note (this Note, the Note Agreement and any such
security agreement or instrument being herein collectively called the
"Note Documents"), the entire unpaid principal balance of this Note,
together with accrued but unpaid Participation Interest and all other
interest, sums and costs payable by the Maker to the Payee pursuant to
the terms of the Note Documents shall be due and payable on the
thirtieth (30th) anniversary of the date hereof (such date, together
with the date payment of the entire amount of this Note shall become
due under Section 1.1(a)(i), being hereinafter called the "Maturity
Date"), without presentment, notice or demand, as follows:
Upon the Maturity Date, subject to conversion of this Note into an equity
interest in the Maker pursuant to Section 6.1 of the Note Purchase Agreement
(and subject to the subordination provisions of Section 9.14 of the Note
Purchase Agreement), the Maker's obligations under this Note shall be satisfied
upon the payment of an amount equal to the sum of the following:
(a) The Maker shall pay to the Payee any Participation Interest due but
unpaid at such time, if the Maker shall have made distributions to its Members
in violation of any provision of Section 1.1(b) hereof.
(b) The Maker shall pay to the Payee an amount equal to the excess (if any)
of the Note Amount over the aggregate amount of interest and principal payments
theretofore made (including but not limited to any payment made under Section
1.2(a) above) by the Maker to the Payee under this Note.
(c) After satisfaction of (a) and (b) above, the Maker shall pay to the
Payee (as "Bonus Interest" and/or principal, as described in Section 1.4 below)
an amount (the "Shared Appreciation") equal to thirty three and one-third
percent (33 1/3%) of the Residual Value (as defined below) of the Maker. For
purposes of this Note, "Residual Value" shall mean the fair market value of the
Maker's assets minus (i) the amount of its liabilities (other than this Note)
which, in accordance with generally accepted accounting principles consistently
applied by Maker, should be reflected on a balance sheet of the Maker as of the
Maturity Date, (ii) the amounts required to be paid to the Payee by Section
1.2(a) and (b) on the Maturity Date, and (iii) an amount equal to the Adjusted
Capital Contributions (if any) of Members of the Maker and any unpaid Preferred
Return thereon. If the parties have not reached an agreement on fair market
value of the Maker's assets prior to the Maturity Date, then, at the request of
the Maker or the Payee, the fair market value shall be determined (subject to
the parties agreeing to the fair market value on or before the Maturity Date) by
either (x) a mutually acceptable appraiser or (y) the average of two certified
appraisals derived from the Valuation Process set forth in Section 1.3 below.
(d) Any unpaid late payment charges and Default Interest due and unpaid
under Sections 2 and 5.3 hereof.
Notwithstanding any provision of this Note to the contrary, the amount
described in Section 1.2(c) shall be payable in amounts equal to thirty-three
and one-third percent (33 1/3%) of the Maker's Distributable Cash in existence
from time to time; and the Maker will not make any distributions to its Members
except, concurrently with making a payment under Section 1.2(c), if no Event of
Default exists, the remaining 66 2/3% of such Distributable Cash may be
distributed to Members (but the existence of such Event of Default and resulting
prohibition against distributions to Members of the Maker shall not affect
required payments of amounts owing under Section 1.2(c), and 100% of
Distributable Cash shall be applied to pay such amounts until all amounts due to
the Payee hereunder shall have been paid in full).
1.3 Valuation Process:
The "Valuation Process" shall mean the appraisal process for
determining the fair market value of the Maker's assets that may be
instituted at the request of either party if the parties have not
agreed on a fair market value or selected a mutually acceptable
appraiser on or before the Maturity Date. Within five business days
after the institution of the Valuation Process, each party shall
submit the name of an MAI appraiser and these two appraisers shall
select a third appraiser within five business days after the
designation of the second initial appraiser. Each appraiser shall
submit an appraisal of the Maker's assets, using the parameters set
forth below, within 60 days after the third appraiser is selected. The
average of these three appraisals shall be the fair market value,
except if any one of such appraisals is more than 120%, or less than
80%, of the average of the two closest appraisals, then such appraisal
shall be disregarded and the average of the other two appraisals shall
be the fair market value. The Payee and the Maker shall each pay for
the appraiser it selects and shall pay equally for the third
appraiser. Each appraiser shall be instructed to determine the value
of the Maker's assets: (i) free and clear of all encumbrances or liens
securing the payment of money; (ii) without regard to any pending or
threatened foreclosure proceeding by Payee or any bids made at
foreclosure; (iii) taking into account the future earning capacity of
the properties of the Maker, including (without limitation) any
projected lease rental or condominium price escalations and lease
turnover, by application (in the case of real properties) of generally
accepted appraisal procedures including, in any case, a discounted
cash flow analysis; and (iv) otherwise in accordance with MAI
standards. All assets of the Maker at the Maturity Date, including
(without limitation) cash, notes receivable and investments, shall be
included in determining the fair market value. There then should be
subtracted from the fair market value of the Maker's assets,
determined as aforesaid, all liabilities of the Maker (except this
Note) which, in accordance with generally accepted accounting
principles consistently applied, should be reflected on a balance
sheet of the Maker as of the Maturity Date.
1.4 Manner of Payment; Application of Payments:
All payments and prepayments by the Maker under this Note shall be
made by wire transfer to the Payee in accordance with wire transfer
instructions provided by the Payee. All payments and prepayments shall
be applied first to principal until the unpaid principal amount of
this Note (the Note Amount) is reduced to $1,000,000; thereafter, all
payments and prepayments (such prepayments being deemed, pursuant to
Section 1.1(a)(iii) above, to constitute advance payments on account
of Participation Interest) under this Note shall be applied solely to
interest and any late charges, except that the last $1,000,000
received by the Payee under this Note upon and after the Maturity Date
shall be applied to principal.
2. LATE CHARGE:
In the event that any interest of any type or principal under this Note is
not paid when due at a time when the Maker shall make a distribution to its
Members in violation of any provision of Section 1.1(a)(ii) or 1.1(b) hereof,
the Maker shall pay to the Payee a late charge in an amount equal to 4% of the
principal and/or interest then due under this Note to cover the additional
expense incident to such delinquency. This provision shall not be construed to
obligate the Payee to accept any overdue installment or to limit the Payee's
rights and remedies for the Maker's default as set forth in this Note.
3. USURY LIMITATIONS:
Notwithstanding any provision of this Note to the contrary, the interest
payable under this Note shall not in any event exceed the maximum rate of
interest permitted to be charged under any applicable usury statute or
regulation. If any claim is made by the Maker or any successor or Member of the
Maker or other person or entity claiming through the Maker that interest payable
hereunder for any period exceeds, in whole or in part, the maximum rate of
interest permitted by any applicable law, then the Payee's right to convert this
Note into an equity interest in the Maker pursuant to Section 6.1 of the Note
Agreement shall be accelerated so as to become immediately and at any time
thereafter exercisable, and if exercised, this Note shall be converted into a
membership interest in the Maker effective as of the beginning of the interest
period for which interest hereunder is claimed to be usurious or violative of
such law and otherwise on terms described in Section 6.1 of the Note Agreement.
If this Note is subject to a law which sets maximum interest charges and that
law is finally interpreted so that, notwithstanding any conversion of this Note
to equity, the interest or other charges collected or to be collected under this
Note exceeds the permitted limits, then (i) any such interest or other charges
shall be reduced by the amount necessary to reduce the charge to the permitted
limit; and (ii) any sums already collected from the Maker which exceeded
permitted limits will be refunded to the Maker. The Payee may choose to make
such refund by reducing the principal owed under this Note or by making a direct
payment to the Maker. If a refund reduces principal, the reduction will be
treated as a partial prepayment without any prepayment charge under this Note.
4. NOTE DOCUMENTS:
This Note has been issued and accepted on the terms and conditions of and
is secured by the Note Purchase Agreement and certain other documents
(collectively with the Note, the "Note Documents"), including, inter alia, a
Security Agreement dated as of even date herewith (the "Security Agreement"),
with respect to the Distributable Cash and Members' rights to distributions in
the Maker. Any failure by the Maker to comply with the terms, covenants or
conditions of the Note Documents, or any of them, after the expiration of any
applicable grace period, shall constitute an Event of Default under this Note.
5. EVENTS OF DEFAULT:
5.1 In addition to the default set forth in Section 4 above, any one or
more of the following shall constitute an "Event of Default" under
this Note:
(a) If the Maker shall fail to pay any of the interest or principal
due hereunder either (i) at a time when the Maker shall make a distribution
to its Members in violation of any provision of Section 1.1(a)(ii) or
1.1(b) hereof, unless such violation shall be cured within one (1) business
day, or (ii) on the earlier of the 15th anniversary of the date hereof or
the Maker's sale of all or substantially all of its assets.
(b) Failure of the Maker to pay any other principal, interest or other
sum on the date when it is due under this Note if such failure shall
continue without being fully cured for ten (10) days after notice thereof
is given by the Payee to the Maker; or
(c) The nonperformance by any Member of the Maker of, or noncompliance
by any Member of the Maker with, any provision of the Security Agreement,
or the nonperformance by the Maker of, or noncompliance by the Maker with,
any agreement, condition, covenant, provision or stipulation contained in
any Note Document, if in any such case such nonperformance or noncompliance
shall continue for a period of twenty (20) days after notice of such
default is delivered to the Maker by the Payee, or if the default is a
non-monetary default and is capable of being remedied but cannot reasonably
be remedied within the twenty (20) day period, then the Maker or Member, as
applicable, shall have such additional time as is reasonably necessary to
complete the remedy, but in no event greater than ninety (90) days from the
date of the Maker's receipt of notice of the default, so long as the Maker
or Member commences remedial actions during the initial twenty (20) day
period and diligently and vigorously prosecutes the remedy to completion
during such ninety (90) day period; or
(d) If any representation or warranty made by the Maker or any Member
of the Maker in the Note Documents shall be untrue in any material respect
when made; or
(e) If the Maker shall make a general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts as they
become due, or shall file a petition in bankruptcy, or shall be adjudicated
a bankrupt or insolvent, or shall file a petition seeking any relief under
any present or future statute, law or regulation, relating to bankruptcy or
insolvency or shall file an answer admitting or not contesting the material
allegations of a petition filed against it in any such proceeding or shall
seek or consent to or acquiesce in the appointment of any trustee or
receiver of the Maker or any material part of its properties; or
(f) If, within sixty (60) days after the commencement of any
proceeding against the Maker seeking any relief under any present or future
statute, law or regulation relating to bankruptcy or insolvency, such
proceeding shall not have been dismissed, or if, within sixty (60) days
after the appointment, without the consent or acquiescence of the Maker, of
any trustee or receiver of the Maker or of any material part of its
properties, such appointment shall not have been vacated.
5.2 If an Event of Default specified in Section 5.1(a), (b), (c) or (d)
above shall exist, 100% of the Maker's Distributable Cash shall be
applied to pay amounts due and payable under the Note Documents and no
distributions shall be made to Members of the Maker until all such
amounts due to the Payee shall have been paid in full (whereupon
distributions to the Members may be made to the extent permitted by
Sections 1.1(a)(ii), 1.1(b)(ii) and the last paragraph of Section 1.2
of this Note). If any Event of Default shall exist, the Payee may
forthwith, and without further delay undertake any one or more of the
actions or remedies specified in the Security Agreement or other Note
Documents or available at law or in equity, except that acceleration
of payment of this Note shall not be a remedy available to the Payee.
In the event of the occurrence of an Event of Default described in
Section 5.1(c) above which has the effect of reducing the amount of
Distributable Cash otherwise available to Maker or the Residual Value
of the Maker, the amount payable under this Note shall include,
without limitation, 33 1/3% of the amount of such reduction in
Distributable Cash and/or Residual Value, as applicable.
All costs of collection of this Note and (if the Payee is the
prevailing party) enforcement of the Note Documents incurred by the
Payee, including reasonable attorneys' fees and court costs, shall be
paid by the Maker and such payment shall be secured by the Security
Agreement.
5.3 In addition to the above-stated rates of interest, after an Event of
Default described in Section 5.1(a) or 5.1(b) shall continue to exist
for a period of thirty (30) days, default interest ("Default
Interest") on the amounts due and payable to the Payee hereunder shall
accrue and be payable at a rate which is equal to thirteen percent
(13%) per annum (the "Default Rate"). Default Interest at the Default
Rate shall continue to accrue on any judgment entered on this Note
until the judgment and interest and costs have been paid in full.
The remedies of the Payee provided in this Note and in the Note
Documents shall be cumulative and concurrent, and may be pursued
singly, successively and together at the sole discretion of the Payee,
and may be exercised as often as occasion therefor shall occur, and
the failure to exercise any such right or remedy shall in no event be
construed as a waiver or release of the same.
6. WAIVERS:
The Maker and all endorsers, sureties and guarantors waive presentment for
payment, demand, notice of demand, notice of non-payment or dishonor, protest
and notice of protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, or enforcement of the payment of
this Note. Liability under this Note shall be unconditional and shall not be
affected in any manner by any indulgence, extension of time, renewal, waiver or
modification granted or consented to by the Payee.
7. TAXES:
The Maker shall pay the cost of any revenue, tax or other stamps now or in
the future required by law at any time to be affixed to this Note or any Note
Document and if any such taxes shall be imposed with respect to debts evidenced
or secured by the Note Documents, or with respect to notes evidencing such
debts, the Maker agrees to pay such taxes or to reimburse the Payee upon demand
the amount of such taxes paid by the Payee, whether or not Distributable Cash
then exists.
8. JURISDICTION
The Maker irrevocably consents to the non-exclusive jurisdiction of any of
the courts of the States of Nevada and Delaware and of any federal courts
located therein and agrees that the Payee may bring suit against the Maker in
any of such courts. The Maker also waives the right to bring any counterclaims
against the Payee in any suit or action in any court of law or equity in which
the Payee and the Maker are adverse parties.
9. MISCELLANEOUS:
9.1 Successors and Assigns
The words the "Payee" and the "Maker" whenever occurring herein shall be
deemed and construed to include the respective successors and assigns of
the Payee and the Maker.
9.2 Governing Law.
This instrument shall be construed according to and be governed by the laws
of the State of Nevada.
9.3 Notices
All notices permitted or required under this Note shall be in writing, and
shall be (a) sent by registered or certified mail, postage prepaid, (b)
sent by a national overnight courier service, (c) sent by facsimile
transmission (with electronic confirmation), or (d) hand delivered,
addressed to the addressee at the addresses set forth below:
If to the Maker: Turnberry/Las Vegas Boulevard, L.L.C.
19495 Biscayne Boulevard, Suite 400
Aventura, FL 33180
Attention: Mr. Ray Parello
with a copy to: Turnberry/Las Vegas Boulevard, L.L.C.
19495 Biscayne Boulevard, Suite 400
Aventura, FL 33180
Attention: Legal Department
If to Payee: Orion Casino Corporation
c/o Garden State Park
Route 70 and Haddonfield Road
Cherry Hill, NJ 08034
Attention: Mr. Francis W. Murray
with a copy to: David S. Petkun, Esquire
Cozen and O'Connor 1900
Market Street Philadelphia,
PA 19103 Fax: 215-665-2013
or at such other address as the addressee may designate by notice given in
accordance with this paragraph.
Notices shall be deemed received by the addressee (a) if sent by mail, two
business days after properly delivered to the U.S. Postal Service, (b) if sent
by overnight courier, one business day after delivered to the overnight courier
service, (c) if transmitted by facsimile, upon proper transmission to the
addressee, and (d) if hand delivered, upon delivery.
10. PAYMENTS TO PAYEE'S LENDER:
10.1
Notwithstanding anything to the contrary set forth in this Note, the Note
Agreement or any other Note Document, any amounts payable to Payee
hereunder shall be subject to the provisions of Section 9.3 of the Note
Purchase Agreement.
11. NON-RECOURSE LIABILITY OF MAKER'S MEMBERS:
No Member of the Maker shall be personally liable for any of the
indebtedness evidenced by this Note. However, each such Member is granting a
security interest in distributions from the Maker payable to or (except for
distributions which are not prohibited by the terms of this Note) received by
such Member as provided in the Security Agreement, and each Member of the Maker
shall be liable to the extent of any distributions received by such Member in
violation of the terms hereof.
12. RESIGNATION OF MEMBER:
If, upon resignation of a Member, the resigned Member would have a right to
receive the fair value of its interest in the Maker, then the Payee shall have
the right to sell this Note to the Company at any time for purchase price,
payable in cash, equal to the fair value of a 33 1/3% interest in the Maker.
IN WITNESS WHEREOF, the Maker has duly executed this Note under seal the
day and year first above mentioned.
TURNBERRY/LAS VEGAS BOULEVARD, L.L.C.
By: Turnberry/Las Vegas Boulevard, L.P.
Sole Member
By: Turnberry/Las Vegas Boulevard, Inc.,
General Partner
By: S/ Jeffrey Soffer
Jeffrey Soffer, President
Exhibit 10.4
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of May 18, 2000, by and among Turnberry/Las
Vegas Boulevard, L.L.C., a Nevada limited liability company (the "Joint
Venture"), the members of the Joint Venture parties to this Agreement (said
members being collectively called the "Pledgors"), and Orion Casino Corporation,
a Nevada corporation (the "Purchaser"),
W I T N E S S E T H
- - - - - - - - - -
Background. As evidenced by that certain promissory note of the Joint
Venture of even date herewith payable to the order of the Purchaser (the
"Note"), the Joint Venture is indebted to the Purchaser under the terms and
conditions of the Note and the accompanying Note Purchase Agreement of even date
herewith between the Joint Venture and the Purchaser (such agreement, as amended
or modified from time to time as permitted by the terms thereof, being
hereinafter called the "Note Purchase Agreement"). Section 3.11 of the Note
Purchase Agreement requires the Pledgors to enter into this Security Agreement
in order to secure the Joint Venture's obligations under the Note.
NOW, THEREFORE, in consideration of the foregoing and to induce the
Purchaser to accept the Note from the Joint Venture, the parties hereto,
intending to be legally bound, agree as follows:
1. The term "Collateral" shall mean (i) all right, title and interest of
the Pledgors in all Distributable Cash, as defined in the Note, whether now
owned or hereafter acquired by the Pledgors,(ii) all rights of the Pledgors to
receive, and all interests of the Pledgors in, all distributions from time to
time made or to be made by the Joint Venture, whether pursuant to the operating
agreement of the Joint Venture or otherwise, whether now owned or hereafter
acquired by the Pledgors, and (iii) all proceeds of all of the foregoing.
2.(a) As security for the prompt satisfaction of the Joint Venture's
obligations under the Note and the Note Purchase Agreement, whether now existing
or hereafter arising (the "Obligations"), the Pledgors hereby pledge to the
Purchaser the Collateral and grant the Purchaser a lien on and security interest
therein.
(b) If a Pledgor shall become entitled to receive or shall receive, in
connection with any of the Collateral, any:
(i) Distribution payable in property, other than cash; or
(ii) Distributions or payments of any sort, then, except as otherwise
provided with respect to cash distributions in paragraph 2(c) below: the
Pledgor shall accept the same as the Purchaser's agent, in trust for the
Purchaser, and shall deliver them forthwith to the Purchaser in the exact
form received with, as applicable, the Pledgor's endorsement when
necessary, to be received and applied by the Purchaser, subject to the
terms hereof, as part of the Collateral.
(c) Unless an Event of Default (as defined in the Note) shall have occurred
and be continuing: the Pledgors shall be entitled to receive for their own use
(and not as agent of the Purchaser) distributions from the Joint Venture of
Distributable Cash except to the extent distributions are prohibited by the
Note. Upon the occurrence and during the continuation of an Event of Default,
the Joint Venture shall deliver to the Purchaser all Distributable Cash from
time to time held by it, and the Pledgors shall deliver to the Purchaser all
distributions received by them before such Event of Default to the extent such
distributions were prohibited by the Note, and all distributions from time to
time received by them during the continuance of the Event of Default, for
application towards the costs and expenses referred to in paragraph 2(d)(i) and
then to the Obligations, until all Obligations then due, and all Obligations
which become due upon distribution of Collateral to the Pledgors under paragraph
2(d)(iv) below, have been paid in full.
(d) Collateral shall be applied as follows:
(i) First, to the costs and expenses of enforcement of the rights of
the Purchaser hereunder and under the other Note Documents (as defined in
the Note), including reasonable attorneys' fees and legal expenses;
(ii) Second, to the satisfaction of the Obligations to the extent then
due and payable;
(iii) Third, to the payment of any other amounts required by
applicable law (including, without limitation, Section 9-504(l)(c) of the
Uniform Commercial Code or its successor provision, if any); and
(iv) Fourth, to the Pledgors to the extent of any surplus proceeds,
provided, however, that any application of Collateral or surplus proceeds
to the Pledgors (or any of them) under this paragraph 2(d)(iv) or for the
benefit of the Pledgors (or any of them) under paragraph 2(d)(iii) which
would constitute a distribution to the Pledgors (or any of them) from the
Joint Venture will cause a payment under the Note to become due
simultaneously therewith, and the Purchaser is hereby authorized to
withhold from the Collateral or surplus proceeds all amounts becoming so
due under the Note and to apply the same towards payment of such amounts.
(e) Each Pledgor agrees to pay to the Purchaser, to the extent necessary to
pay Obligations then due, an amount equal to any distribution previously made to
such Pledgor by the Joint Venture in violation of the prohibition against such
distribution contained in Section 1.1(a)(ii) or Section 1.1(b)(i) or (ii) of the
Note.
3. The Pledgors represent and warrant to the Purchaser that the execution
and delivery of this Agreement and the performance of its terms will not result
in any violation of or constitute a default under the terms of any agreement,
indenture or other instrument, license, judgment, decree, order, law, statute,
ordinance or other governmental rule or regulation, applicable to the Pledgors
or any of them. The Pledgors further represent and warrant to the Purchaser
that, at the date hereof, all members of the Purchaser and their percentage
ownership interests therein are set forth in Schedule 2.2 to the Note Purchase
Agreement.
4. (a) Each Pledgor warrants and will, at the Pledgor's own expense, defend
the Purchaser's right, title, special property and security interest in and to
the Collateral in which such Pledgor has an interest against the claims of any
person, firm, corporation or other entity.
(b) Each Pledgor promptly shall notify the Purchaser in writing of any
change in such Pledgor's percentage ownership interest in or allocable share of
profits, losses or distributions of or from the Joint Venture, and any
termination of such Pledgor's equity interest in the Joint Venture. In no event
shall the Joint Venture admit any new member or permit any transfer of a
membership interest (in whole or in part) unless the proposed new member or
transferee shall have joined in and agreed to be bound as a Pledgor hereby.
5. Each Pledgor shall at any time, and from time to time, upon the written
request of the Purchaser, execute and deliver such further documents (including
but not limited to Uniform Commercial Code financing statements) and do such
further acts and things as the Purchaser may reasonably request to effectuate
the purposes of this Agreement or to perfect the Purchaser's security interest
hereunder.
6. Upon satisfaction in full of all Obligations and the satisfaction of all
additional costs and expenses of the Purchaser as provided herein, this
Agreement shall terminate and the Purchaser shall deliver to each Pledgor, at
such Pledgor's expense, any of the Collateral in the Purchaser's possession
belonging to such Pledgor as shall not have been applied pursuant to this
Agreement.
7.(a) Beyond the exercise of reasonable care to assure the safe custody of
any Collateral held by it as collateral security hereunder, the Purchaser shall
have no duty or liability to preserve rights pertaining thereto and shall be
relieved of all responsibility for such Collateral upon surrendering it or
tendering surrender of it to the Joint Venture.
(b) No course of dealing between any Pledgor or the Joint Venture and the
Purchaser, nor any failure to exercise, nor any delay in exercising, any right,
power or privilege of the Purchaser hereunder, under the Note or under the Note
Purchase Agreement or any other Note Document (as defined in the Note) shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
(c) The rights and remedies provided herein and in all other agreements,
instruments, and documents delivered pursuant to or in connection with the Note
Purchase Agreement, are cumulative and are in addition to and not exclusive of
any rights or remedies provided by law, including, but without limitation, the
rights and remedies of a secured party under the Uniform Commercial Code.
(d) The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision or part thereof in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction or any other
clause or provision in this Agreement in any jurisdiction.
8. Any notice or other communication (a "Notice") required or permitted
hereunder shall be in writing and shall be validly given if mailed by registered
or certified mail, return receipt requested, postage prepaid, or if delivered in
person or by courier service, telex, telecopier, telegram or cable, addressed as
follows to the person entitled to receive the same.
If to a Pledgor: to such Pledgor at its address given beneath its signature
to this Agreement.
If to the Purchaser:
Orion Casino Corporation
c/o Garden State Park
Route 70 and Haddonfield Road
Cherry Hill, NJ 08034
Attention: Mr. Francis W. Murray
If to the Joint Venture, to such address as is provided in Section 9.1 of
the Note Purchase Agreement.
Any Notice shall be deemed to have been validly given hereunder when so
mailed or sent by telex, telegram, cable or courier. Any person shall have the
right to specify, from time to time, as its address or addresses for purposes of
this Agreement, any other address or addresses upon Notice thereof to each other
person then entitled to receive Notices hereunder.
9. This Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the parties hereto.
10. This Agreement shall be construed in accordance with the substantive
law of the State of Nevada without regard to principles of conflicts of laws and
is intended to take effect as an instrument under seal.
11. This Agreement may be amended only by a written instrument signed by
the Joint Venture, each of the Pledgors and the Purchaser and, if required by
the Note Purchase Agreement, approved by Credit Suisse First Boston Mortgage
Capital, LLC ("CSFB").
12. The Purchaser may, at any time or from time to time, in such manner and
upon such terms as it may deem proper, subject to obtaining such written consent
of CSFB as may be required by the Note Purchase Agreement, agree to extend or
change the time of payment or the manner or place of payment of, or otherwise
modify or waive any of the terms of, or release, exchange, settle or compromise
any or all of the Obligations or any collateral security therefor, or
subordinate payment of the same, or any part thereof, to the payment of any
other indebtedness, liabilities or obligations of the Joint Venture which may at
any time be due or owing to the Purchaser or anyone, or elect not to enforce any
of the Purchaser's rights with respect to any or all of the Obligations or any
collateral security therefor, all without notice to, or further assent of any
Pledgor and without releasing or affecting any Pledgor's obligations hereunder.
13. Each Pledgor hereby waives the following:
(a) promptness, diligence, presentment, demand, notice of acceptance
and any other notice with respect to any of the Obligations or any Note
Document, except for such notice as may be expressly required under a Note
Document;
(b) any defense or circumstance which might otherwise constitute a
legal or equitable discharge of any guarantor, including, without
limitation, any obligation which the Purchaser otherwise might have to
proceed against the Joint Venture prior to exercising any rights hereunder;
(c) all benefits under any present or future laws exempting any
property, real or personal, or any part of any proceeds thereof, from
attachment, levy or sale under execution, or providing for any stay of
execution to be issued on any judgment recovered under the Note or any
other Note Document or in any replevin or foreclosure proceedings, or
otherwise providing for any valuation, appraisal or exemption; and
(d) any and all procedural errors, defects and imperfections in any
action by the Purchaser in replevin, foreclosure or other court process or
in connection with any other action related to the Note, any Note Document
or the transactions contemplated therein.
14. Each Pledgor hereby expressly agrees that it shall not exercise,
against the Joint Venture or any other Pledgor or transferee thereof, or any
guarantor, grantor of collateral, endorser or Person, any: (a) right which such
Pledgor may now have or hereafter acquire by way of subrogation under this
Agreement, by law or otherwise or by way of reimbursement, indemnity,
exoneration, or contribution; (b) right to assert defenses as the primary
obligor of the Obligations; or (c) right to enforce any remedy which the
Purchaser may now have or hereafter acquire against the Joint Venture or any
other Pledgor, or any other guarantor, maker, endorser or Person; in any case,
whether any of the foregoing rights may arise in equity, under contract, by
payment, statute, common law or otherwise until all Obligations have been
indefeasibly paid in full in cash. If in violation of the foregoing any amount
shall be paid to any Pledgor on account of any such rights at any time, such
amount shall be held in trust for the benefit of the Purchaser and shall
forthwith be paid to the Purchaser to be credited and applied against the
Obligations, whether matured or unmatured, in accordance with the terms of the
Note and the Note Purchase Agreement.
15. Each Pledgor hereby consents that any action or proceeding against it
may be commenced and maintained in any court within the State of New Jersey or
Nevada or in any United States District Court located within either such State;
and each Pledgor agrees that the courts of the States of New Jersey and Nevada
and any United States District Court located within either such State shall have
in personam jurisdiction with respect to each Pledgor and the Collateral.
Notwithstanding the foregoing, the Purchaser, in its absolute discretion, may
also initiate proceedings in the courts of any other jurisdiction in which a
Pledgor may be found or in which any of its properties or Collateral may be
located.
16. This Agreement may be signed in any number of counterpart copies, each
of which shall be an original and all of which shall constitute one and the same
instrument. Each Person (as defined in the Note Purchase Agreement) who becomes
a member of the Joint Venture or a transferee of a member of the Joint Venture
after the date hereof shall join in and agree to be bound as a Pledgor hereunder
by executing and delivering to the Purchaser a counterpart Pledgor/Transferee
Signature Page in the form attached hereto.
17. Subject to paragraph 2(e) hereof: each Pledgor shall not be personally
liable in respect of the Obligations; and the Purchaser shall look solely to the
Collateral and not to any Pledgor personally for satisfaction of the
Obligations.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ORION CASINO CORPORATION
By: S/ Francis W. Murray
Authorized Officer
TURNBERRY/LAS VEGAS BOULEVARD, L.L.C.
By: Turnberry/Las Vegas Boulevard, L.P.
its Sole Member
By: Turnberry/Las Vegas Boulevard, Inc.,
General Partner
By: S/ Jeffrey Soffer
Jeffrey Soffer, President
PLEDGOR AND TRANSFEREE SIGNATURES APPEAR ON ATTACHED
PLEDGOR/TRANSFEREE SIGNATURE PAGES
PLEDGOR/TRANSFEREE SIGNATURE PAGE
The undersigned, being a member or transferee of a member of Turnberry/Las
Vegas Boulevard, L.L.C., a Nevada limited liability company (the "Joint
Venture"), or a successor thereto, hereby joins in and agrees to be bound as a
Pledgor under the Security Agreement dated May 18, 2000, among the Joint
Venture, its members, and Orion Casino Corporation.
Name: Turnberry/Las Vegas Boulevard, L.P.
By: Turnberry/Las Vegas Boulevard, Inc.
Title: General Partner
By: S/ Jeffrey Soffer
Jeffrey Soffer, President
Address: 19501 Biscayne Boulevard
Suite 500
Aventura, Florida 33180
