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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): November 30, 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
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<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
Item 2. Acquisition or Disposition of Assets.
On November 30, 2000, International Thoroughbred Breeders, Inc. ("ITB" or
the "Company"), through its wholly-owned subsidiary, GSRT, LLC, closed on the
sale (the "Garden State Transaction") of the Garden State Park property (the
"Garden State Park Property") in Cherry Hill, New Jersey, to
Realen-Turnberry/Cherry Hill, LLC ("Realen"). The purchase price was $30 million
and was paid by: (i) previous cash deposits totaling a $1,000,000; (ii) a
promissory note in the face amount of $10 million (the "Note"); and (iii) the
balance of the purchase price paid in cash at the closing.
The cash proceeds of the Garden State Transaction were principally used by
the Company to repay in full the outstanding balances on the Company's debt to
Credit Suisse First Boston Mortgage Capital LLC ("Credit Suisse") of
approximately $14.3 million and to repay in full approximately $3.75 million of
principal and interest on the debt to the Chapter 11 Bankruptcy Trustee for the
estate of Robert E. Brennan which was incurred to purchase 2,904,016 shares of
the Company's Common Stock.
Under the Note, the interest rate 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
aggregate distributions equal to their capital contributions plus an agreed upon
return on their invested capital, the next $10 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 15th anniversary of the issuance of the Note. The Company
may convert the promissory note, at its option, into a 33 1/3% equity interest
in Realen during the six month period prior to the 15th anniversary of the
issuance of the Note. If not then converted, the Note will be payable at
maturity on said 15th anniversary in an amount equal to (i) the difference, if
any, between $10 million and total payments previously made to the Company under
the Note and (ii) 33 1/3% of any excess of the fair market value of Realen's
assets over the sum of its liabilities (other than the Note) and any unreturned
equity investment of its owners.
- 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 SEPTEMBER 30, 2000
<TABLE>
ASSETS
As Reported As Adjusted
September 30, Pro Forma
2000 Pro Forma Balance
(UNAUDITED) Adjustments Sheet
------------ ------------------ ----------------
<CAPTION>
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 344,178 $ 1,062,603 (4) $ 2,406,591
(75,000)(7)
(300,000)(7)
1,374,810 (7)
Restricted Cash and Investments 1,671,173 (504,342)(3) 1,166,831
Prepaid Expenses 266,603 500 (4) 267,403
300 (4)
Other Current Assets 523,784 (500,000)(5) 9,866
(13,918)(5)
----------- ---------------
TOTAL CURRENT ASSETS 2,805,738 3,850,691
----------- ---------------
NET ASSETS OF DISCONTINUED
OPERATIONS - Long Term 30,000,000 (28,696,544)(4) 250,000
(1,053,456)(4)
LAND, BUILDINGS AND EQUIPMENT:
Land and Buildings 214,097 214,097
Equipment 1,196,666 (700,000)(4) 496,666
----------- ---------------
1,410,763 710,763
LESS: Accumulated Depreciation 401,747 401,747
----------- ---------------
TOTAL LAND, BUILDINGS AND
EQUIPMENT, NET 1,009,016 309,016
----------- ---------------
OTHER ASSETS:
Notes Receivable 23,000,000 10,000,000(4) 33,700,000
700,000(4)
Deposits and Other Assets 906,204 146,664(4) 1,052,868
----------- ---------------
TOTAL OTHER ASSETS 23,906,204 34,752,868
----------- ---------------
TOTAL ASSETS $ 57,720,958 $ 38,162,575
=========== ===============
</TABLE>
See Notes to Pro Forma Financial Statements.
- 3 -
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
As Reported As Adjusted
September 30, Pro Forma
2000 Pro Forma Balance
(UNAUDITED) Adjustments Sheet
------------ ----------------- ------------
<CAPTION>
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts Payable $ 37,185 $ $ 37,185
Accrued Expenses 895,571 50,000 (4) 945,571
Current Maturities of Long-Term Debt 18,654,555 (3,652,226)(2) 229,559
(104,749)(2)
(14,668,021)(3)
Net Liabilities of Discontinued
Operations - Current 1,462,709 (1,000,000)(1) 386,310
61,583 (1)
(137,982)(6)
------------ -----------
TOTAL CURRENT LIABILITIES 21,050,020 1,598,625
------------ -----------
DEFERRED INCOME 2,786,589 1,000,000 (1) 3,062,188
(61,583)(1)
3,758,162 (2)
14,544,889 (3)
(18,539,933)(4)
(513,918)(5)
137,982 (6)
(50,000)(4)
----------- -----------
LONG-TERM DEBT, Net of Current Portion 482,000 482,000
----------- -----------
COMMITMENTS AND CONTINGENCIES - -
</TABLE>
CONTINUED ON FOLLOWING PAGE
- 4 -
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2000
<TABLE>
As Reported As Adjusted
September 30, Pro Forma
2000 Pro Forma Balance
(UNAUDITED) Adjustments Sheet
--------------- ------------- -----------------
<CAPTION>
<S> <C> <C>
STOCKHOLDERS' EQUITY:
Series A Preferred Stock, $100.00 Par Value,
Authorized 500,000 Shares, Issued
and Outstanding 362,486 Shares 36,248,575 36,248,575
Common Stock, $2.00 Par Value, Authorized
25,000,000 Shares, Issued 11,884,276 Shares
and Outstanding 8,980,266 Shares 23,768,551 23,768,551
Capital in Excess of Par 26,144,328 26,144,328
(Deficit) (subsequent to June 30, 1993,
date of quasi-reorganization) (45,473,648) 617,413 (44,856,235)
--------------- -----------------
TOTAL 40,687,806 41,305,219
LESS: Treasury Stock, 2,904,016 Shares, at cost (7,260,040) (7,260,040)
LESS: Deferred Compensation, Net (25,417) (25,417)
--------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 33,402,349 34,019,762
--------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 57,720,958 $ 39,162,575
=============== =================
</TABLE>
See Notes to Pro Forma Financial Statements.
- 5 -
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
As Reported
Three Months
Ended As Adjusted
September 30, Pro Forma Company
2000 Adjustments Pro Forma
------------ ------------ -----------
REVENUE:
Revenue $ 76,407 (75,000)(7) $ 1,407
Interest Income 30,810 $ 1,785 (3) 32,595
---------- ----------
TOTAL REVENUES 107,217 34,002
---------- ----------
EXPENSES:
General & Administrative Expenses 571,992 571,992
Interest and Financing Expenses 4,977 1,187 (2) 389,159
1,995 (3)
81,000 (3)
300,000 (3)
---------- ----------
TOTAL EXPENSES 576,969 961,151
---------- ----------
NET (LOSS) $ (469,752) $ (927,149)
========== ==========
BASIC AND DILUTED PER SHARE DATA:
NET (LOSS) $ (0.05) $ (0.10)
========== ==========
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 8,980,244 8,980,244
========== ==========
See Notes to Pro Forma Financial Statements.
- 6 -
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2000
As Reported As Adjusted
June 30, Pro Forma Company
2000 Adjustments Pro Forma
---------- ------------ ------------
REVENUE:
Revenue $ 337,334 (300,000)(7) $ 37,334
Interest Income 109,254 $ 1,785 (3) 111,039
---------- -----------
TOTAL REVENUES 446,588 148,372
---------- -----------
EXPENSES:
General & Administrative Expenses 2,644,384 2,644,384
Interest and Financing Expenses 3,771,401 1,187(2) 2,780,773
1,995(3)
81,000(3)
300,000(3)
(1,374,810)(7)
El Rancho Property Carrying Costs 1,011,634 1,011,634
---------- -----------
TOTAL EXPENSES 7,427,419 6,436,791
---------- -----------
NET (LOSS) $ (6,980,831) $ (6,288,419)
========== ===========
BASIC AND DILUTED PER SHARE DATA:
NET (LOSS) $ (0.78) $ (0.70)
========== -----------
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 8,980,244 8,980,244
========== ===========
See Notes to Pro Forma Financial Statements.
- 7 -
<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 Garden
State Park property, Realen made non-refundable deposits in the amount of
$1,000,000 and incurred legal fees associated with the extensions of
$61,583, both of which were deferred and classified as net liabilities of
discontinued operations, current.
Debit Credit
--------------- --------------
Net Liabilities of Discontinued
Operations - Current $ 1,000,000 $
Net Liabilities of Discontinued
Operations - Current 61,583
Deferred Gain on Disposition 61,583
Deferred Gain on Disposition 1,000,000
--------------- --------------
$ 1,061,583 $ 1,061,583
=============== ==============
(2) In connection with the sale of the Garden State Park property, the Company
used $3,758,162 to retire the debt including the related interest, which
was incurred to purchase 2,904,016 shares of the Company's Common Stock, to
the Chapter 11 Bankruptcy Trustee for the estate of Robert E. Brennan.
Debit Credit
--------------- --------------
Current Maturities of LTD $ 3,652,226 $
Current Maturities of LTD -
Accrued Interest 104,749
Interest 1,187
Deferred Gain on Disposition 3,758,162
--------------- --------------
$ 3,758,162 $ 3,758,162
=============== ==============
- 8 -
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEETS
AND STATEMENTS OF OPERATIONS
(3) In connection with the sale of the Garden State Park property, the Company
used proceeds in the amount of $14,544,889 and $506,127 of previously
deposited escrow funds and accrued interest to retire the Credit Suisse
debt, accrued interest and related expenses. For both the year ended June
30, 2000 and the three months ended September 30, 2000, the pro forma
adjustments eliminate the effects on Legal expenses and Fees associated
with the Credit Suisse debt repaid in connection with the sale of the
Garden State Park property.
Debit Credit
------------- ---------------
Current Maturities of LTD $ 14,668,021 $
Deferred Gain on Disposition 14,544,889
Interest Expense 1,995
Legal Fees 81,000
Financing Fee 300,000
Escrow Funds 504,342
Accrued Interest Income 1,785
------------- -------------
$ 15,051,016 $ 15,051,016
============= =============
(4) Pro forma adjustment to record the sale of the Garden State Park property
and a $10,000,000 promissory note of the buyer which will be convertible at
the Company's option into a 331/3% equity interest in the buyer, depending
upon certain circumstances. In addition, the Company sold two large bronze
sculptures located on the Garden State Park property that were previously
purchased by the Company from a son of Robert E. Brennan for $700,000. The
sales price of the sculptures was $700,000. The Company also determined
that an adjustment was needed to reduce personal property that was not
included in the sale to its fair value after the sale.
Debit Credit
------------ --------------
Cash & Cash Equivalents $ 1,062,603 $
Note Receivable 10,000,000
Note Receivable 700,000
Deferred Gain on Disposition 18,589,933
Net Assets of Discontinued
Operations, Long-Term 28,696,544
Net Assets of Discontinued
Operations, Long-Term 1,053,456
Artwork 700,000
Other Assets 146,664
Prepaid Expenses 800
Accrued Expenses 50,000
----------- -------------
$ 30,500,000 $ 30,500,000
=========== =============
- 9 -
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEETS
AND STATEMENTS OF OPERATIONS
(5) In connection with the sale of the Garden State Park property,
Turnberry/Las Vegas Boulevard, LLC repaid to the Company a loan which had
been made by the Company in connection with the sale of the El Rancho
property in May 2000.
Debit Credit
--------- ---------
Deferred Gain on Disposition $ 513,918 $
Notes Receivable - Current 500,000
Accrued Interest Receivable 13,918
--------- ---------
$ 513,918 $ 513,918
========= =========
(6) In connection with the sale of the Garden State Park property, a note
associated with certain equipment at the Garden State Park facility was
paid by Realen. Realen will take title to the equipment.
Debit Credit
---------- ---------
Current Maturities of Long-Term Debt $ 137,982
Deferred Gain on Disposition $ 137,982
(7) For both the year ended June 30, 2000 and the three months ended September
30, 2000, the pro forma adjustments eliminate the effects on the rental
income and interest expense associated with the Credit Suisse debt and the
Trustee debt repaid in connection with the sale of the Garden State Park
prperty.
- 10 -
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
(c) Exhibits.
The following exhibits are filed as part of this Report:
10.1 Note Agreement between GSRT, LLC, and Realen-Turnberry/Cherry
Hill, LLC, as Issuer, dated as of November 29, 2000.
10.2 $10,000,000.00 Promissory Note dated November 29, 2000, from
Realen-Turnberry/Cherry Hill, LLC to GSRT, LLC.
10.3 Security Agreement, dated as of November 29, 2000, by and among
Realen-Turnberry/Cherry Hill, LLC, its sole member Realen-
Turnberry/Cherry Hill Associates and GSRT, LLC..
- 11 -
<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.
December 8, 2000 /s/Francis W. Murray
--------------------------------
Francis W. Murray, President and
Chief Executive Officer
December 8, 2000 /s/William H. Warner
-------------------------------------
William H. Warner
Secretary/Treasurer
(Principal Financial and
Accounting Officer)
- 12 -
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Document
10.1 Note Agreement between GSRT, LLC, and Realen-Turnberry/Cherry Hill,
LLC, as Issuer, dated as of November 29, 2000.
10.2 $10,000,000.00 Promissory Note dated November 29, 2000, from Realen-
Turnberry/Cherry Hill, LLC to GSRT, LLC.
10.3 Security Agreement, dated as of November 29, 2000, by and among
Realen- Turnberry/Cherry Hill, LLC, its sole member
Realen-Turnberry/Cherry Hill Associates and GSRT, LLC.
Ehibit 10.1
--------------------------------------------------------------------------------
NOTE AGREEMENT
between
GSRT, LLC, as Payee
and
REALEN-TURNBERRY/CHERRY HILL, LLC, as Issuer
Dated as of November 29, 2000
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1 - ISSUANCE OF NOTE 1
1.1 Authorization of Note. 1
1.2 Issuance of the Note 1
1.3 Definitions, etc. 1
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY 1
2.1 Organization and Authority. 1
2.2 Membership Interests; Operating Agreement. 2
2.3 Contravention; Authority. 2
2.4 Consents. 3
2.5 Compliance with Other Instruments, etc. 3
2.6 Compliance with Law, etc. 3
2.7 Litigation. 3
2.8 Broker's or Finder's Commissions. 4
2.9 Other Names. 4
2.10 Solvency. 4
2.11 Transactions with Affiliates. 4
SECTION 2A - REPRESENTATIONS AND WARRANTIES OF THE PAYEE 4
SECTION 3 - CONDITIONS TO OBLIGATION OF PAYEE TO ACCEPT THE NOTE 6
3.1 Opinion of Counsel of the Company. 6
3.2 Performance of Obligations. 6
3.3 Representations True; No Note Event of Default. 6
3.4 Consents and Approvals. 7
3.5 Operating Agreement. 7
3.6 Proceedings, Instruments, etc. 7
3.7 Closing Documents. 7
3.8 Legislation. 7
3.9 No Proceedings. 7
3.10 Agreement of Sale. 7
3.11 Security Agreement. 8
SECTION 4 - NEGATIVE COVENANTS 8
4.1 Covenants of the Company. 8
SECTION 5 - AFFIRMATIVE COVENANTS 9
5.1 Existence. 9
5.2 Maintenance of Properties and Business, etc. 9
5.3 Notice of Certain Events and Conditions. 10
5.4 Inspection. 11
5.5 Payment of Taxes and Claims. 11
5.6 Payment; Performance of Contracts. 12
5.7 Financial Statements. 12
5.8 Copies of Management Letters, etc. 12
5.9 Management. 13
5.10 Notice and Payment of Subject Costs and Expenses 13
SECTION 6 - NOTE CONVERSION OPTION 14
ii
<PAGE>
6.1 Grant of Note Conversion Option. 14
6.2 Access to Information 15
SECTION 7 - DEFINITIONS; MISCELLANEOUS 15
7.1 Definitions. 15
7.2 Directly or Indirectly. 22
7.3 Accounting Terms. 22
7.4 Governing Law. 22
7.5 Independence of Covenants. 22
7.6 Construction. 22
7.7 Notices. 23
7.8 Survival. 24
7.9 Successors and Assigns; Transfer of the Note. 24
7.10 Amendment and Waiver. 24
7.11 Severability. 25
7.12 Indemnification Against Claims, etc. 25
7.13 Counterparts. 26
7.14 Reproduction of Documents. 26
7.15 Captions. 26
7.16 No Agency. 26
7.17 Entire Agreement. 26
7.18 No Waiver. 27
7.19 Expenses. 27
7.20 Subordination; Estoppel. 26
7.21 Set-Off for Certain Excess Conveyance Obligation Costs,
Chiller Obligations and Excess Environmental Costs 27
EXHIBITS
Exhibit A...........................................................Form of Note
Exhibit B.............................................Form of Security Agreement
SCHEDULES
Schedule 2.11...................................... Transactions with Affiliates
iii
<PAGE>
NOTE AGREEMENT
This NOTE AGREEMENT ("Agreement") is dated as of November 29, 2000, between
GSRT, LLC, a Delaware limited liability company (the "Payee"), and
Realen-Turnberry/Cherry Hill, LLC, a Delaware 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:
1. ISSUANCE OF NOTE
1.1 Authorization and Terms of Note.
The Company has duly authorized the execution, delivery, and issuance of a
promissory note having a principal amount of $10,000,000 and a maturity date of
the fifteenth (15th) 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 Payee, 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.
1.2 Issuance of the Note.
(a) Consideration. On the terms and subject to the conditions hereof, the
Company agrees to issue and the Payee agrees to accept the Note in payment of
$10 million of the purchase price payable by the Company to the Payee pursuant
to that certain Agreement of Sale dated as of January 25, 2000, between the
Company and the Payee, as amended (the "Agreement of Sale").
(b) The Closing. The Note is to be issued and delivered at closing under
the Agreement of Sale (the date and time of such closing being hereinafter
called the "Closing Date").
1.3 Definitions, etc. Certain terms used in this Agreement and/or the Note
are defined in Section 7 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.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Payee as follows:
2.1 Organization and Authority. The Company:
a) is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware;
b) 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;
<PAGE>
c) is duly qualified to do business as a foreign limited liability company
and is in good standing in New Jersey, if required by New Jersey law to be so
qualified; and
d) has no Subsidiaries, 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.
2.2 Membership Interests; Operating Agreement. On the date hereof and on
the Closing Date, 100% of the outstanding membership interests of the Company
are owned, of record and beneficially, by Realen-Turnberry/Cherry Hill
Associates, a Delaware general partnership the sole general partners of which
are Realen Garden State Park Associates, L.P., a Pennsylvania limited
partnership, and Soffer/Cherry Hill Partners, L.P., a Florida limited
partnership. There are no Liens, encumbrances, subscriptions, options, warrants,
calls or other rights, agreements or commitments (other than the conversion
rights of Payee hereunder) 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 Payee of the
membership interests pursuant to the provisions of Section 6.1 of this
Agreement. 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.
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,
2
<PAGE>
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). The Sole 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 the Sole Member, and
constitutes the legal, valid and binding obligation of the Sole Member,
enforceable against the Sole Member 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).
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 and issuance 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.
2.5 Compliance with Other Instruments, etc. The Company is not: (a) in
violation of any term of its Operating Agreement or certificate of formation; 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.
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 violations(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.
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.
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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.
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 and delivery of the Note or with respect to any of the transactions
contemplated hereby.
2.9 Other Names. The Company was formed as a Delaware limited liability
company under the name "Turnberry/Cherry Hill LLC" and, by a certificate of
amendment filed with the Delaware Secretary of State, has changed its name to
"Realen-Turnberry/Cherry Hill, LLC." Jeffrey Soffer originally was Managing
Member of the Company. The businesses conducted by the Company and the Sole
Member prior to the date hereof have not been conducted, during the past four
(4) months, under any names other than their present names or, in the case of
the Company, under its original name stated above.
2.10 Solvency. The Company is and, immediately after giving effect to the
issuance 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.
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.
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2A. REPRESENTATIONS AND WARRANTIES OF THE PAYEE
The Payee hereby represents and warrants to the Company as follows:
2A.1 Organization and Authority. The Payee:
a) is a limited liability company duly formed, validly existing and in good
standing under the laws of the State of Delaware;
b) has all requisite power and authority to own and operate its properties,
toconduct its business as currently conducted and as currently proposed to be
conducted; and
c) is duly qualified to do business as a foreign limited liability company
and is in good standing in each jurisdiction in which the failure to so qualify
might have a Material Adverse Effect.
2A.2 Power and Authority. The Payee 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 action on the part of the Payee. This Agreement has
been duly executed and delivered by the Payee and constitutes the legal, valid
and binding obligation of the Payee, enforceable against the Payee 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).
2A.3 No Conflicts; Consents and Approvals. The execution, delivery and
performance of this Agreement by the Payee, and the consummation of the
transactions contemplated in this Agreement, will not:
a) 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 Payee under any of the terms, conditions or provisions of the certificate of
formation or operating agreement of the Payee, or any material note, bond,
mortgage, indenture, deed of trust, license, contract, undertaking, agreement,
lease or other instrument or obligation to which the Payee is a party and which
is material to the Payee, including but not limited to the Conveyance Obligation
and the Lease, as each such term is defined in the Agreement of Sale, and the
instruments and agreements governing, securing and evidencing the Indebtedness
of the Payee (or its Affiliates) to CSFB;
b) violate any material order, writ, injunction, decree, statute, rule or
regulation, applicable to the Payee or its properties or assets; or
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c) require any action or consent or approval of, or review by, or
registration with any governmental entity.
2A.4 Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the best knowledge of the Payee, threatened,
against the Payee which, individually or in the aggregate, might have a material
adverse effect on the ability of the Payee to consummate the transactions
contemplated in this Agreement. The Payee 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 Payee to consummate the transactions contemplated by this
Agreement.
2A.5 Investment Intent. The Payee 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 Payee 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")
(the Note and the Conversion LLC Interest being 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 if
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.
3. CONDITIONS TO OBLIGATION OF PAYEE TO ACCEPT THE NOTE
The Payee's obligation to accept 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 Payee, in its sole discretion), prior to
or on the Closing Date, of the following conditions:
3.1 Opinion of Counsel of the Company. The Payee 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 Payee.
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
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the Payee shall have received a certificate from the Chief Financial Officer of
the Company, dated the Closing Date, to such effect.
3.3 Representations True; No Note Event of Default. The representations and
warranties of the Company set forth in Section 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 not exist on the Closing Date any Note Event of
Default, assuming for this purpose that the Note had been outstanding
immediately prior to the Closing Date. The Payee 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.
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.
3.5 Operating Agreement. The Company's certificate of formation,
certificate of amendment thereof, and the Operating Agreement in the form
delivered to the Payee under Section 3.7 shall be in full force and effect
without further amendment or modification thereto, and the Payee shall have
received evidence of the filing of such certificate of formation and certificate
of amendment.
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 Payee and its counsel, and the Payee
and its counsel shall have received copies of all documents that the Payee 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 Payee and the Payee's counsel).
3.7 Closing Documents. The Payee 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 all amendments thereto and of the Operating
Agreement in effect as of the Closing Date, (ii) certifying the approvals by the
Member and all of the partners of the Member of this Agreement, the Note and the
other agreements, documents and instruments contemplated by this Agreement or
the Note, and the transactions contemplated therein, respectively, and (iii)
certifying the incumbency and signatures of the officers, manager(s) or other
representatives of the Company, the Sole Member and the Sole Member's general
partners authorized to execute this Agreement, the Note and each of the
foregoing agreements, documents and instruments. The Payee 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 Payee and its
counsel may reasonably request in connection with the consummation of the
transactions contemplated by this Agreement and the Note.
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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.
3.9 No Proceedings. No order of any court or governmental authority shall
be in effect which restrains or prohibits the transactions contemplated hereby.
3.10 Agreement of Sale. The Agreement of Sale shall have been executed and
delivered by the Company and the Payee and the closing thereunder shall be
occurring concurrently with the closing hereunder.
3.11 Security Agreement. The Security Agreement (and UCC-1 financing
statements required thereby) shall have been executed and delivered by the
Company and the Sole Member in favor of the Payee on the Closing Date.
4. NEGATIVE COVENANTS
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 Payee, which consent will not be unreasonably withheld or
delayed:
(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,
Realen 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, (ii) the Company may retain the services of Turnberry, Realen or an
Affiliate thereof to provide pre-development, development, property management,
sales, marketing, construction management or other specific services required by
the Company provided that the entity so retained 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) and (ii) that all compensation paid by the Company is 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 the same or overlapping services to the Company, (iii) any Member,
Turnberry, Realen or Affiliate of any of them may lend money to the Company, as
reasonably necessary for the Company's business, at such interest rates and 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,
provided that if and to the extent any Member, Turnberry, Realen or an Affiliate
of any of them advances money as a loan to the Company which, if advanced as a
capital contribution to the Company by a Member would (taking into account
Section 5.9 of this Agreement and Section 1.1(a)(iii) of the Note) be permitted
to earn a Section 1.1(a) Return (as defined in the Note), then the Company may
pay interest on such loan at a rate per annum equal to the Section 1.1(a) Return
which would have been and would continue to be permitted to be so paid had such
money been advanced as a capital contribution (and, in calculating such
interest, payments of principal of such loans and/or distributions to Members
shall be deemed to be applied to loans and/or capital
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contributions which bear the highest interest rate or return before being
applied to loans and/or capital contributions which bear lower interest rates or
returns), and (iv) the Company may employ persons who are or were employed by
Turnberry, Realen, or Affiliates of Turnberry or Realen (including use of
individuals who are shared employees of the Company and Turnberry, Realen or
their respective 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 Turnberry, Realen or any of their respective Affiliates and
provided that in cases where an employee performs services for the benefit of
the Company and Turnberry, Realen or any of their respective Affiliates, a fair
allocation of the compensation expenses shall be made between such entities;
(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 and 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 Cherry Hill Property or (iii) any project,
development or venture other than development of the Cherry Hill 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,
except if and so long as such Subsidiary is wholly owned by the Company and
engaged solely in the operation or development of the Premises (as defined in
the Agreement of Sale);
(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.
5. AFFIRMATIVE COVENANTS
The Company covenants and agrees that, for so long as the Note is
outstanding, the Company shall:
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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.
5.2 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 in a commercially reasonable manner 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 commercially reasonable 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).
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5.3 Notice of Certain Events and Conditions. Give prompt written notice to
the Payee 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, (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, and
(f) any claim, action, suit or proceeding against the Company based upon or
arising out of either of the Leases, the Conveyance Obligation or the Asset
Purchase Agreement. The Company will provide the Payee 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 Payee.
5.4 Inspection. Permit the Payee, 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 the Company with its officers, managers,
Realen, Turnberry and independent accountants (and by this provision the Company
hereby authorizes Realen, Turnberry and said accountants to discuss with the
Payee the affairs, 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 Payee 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 Payee. The
Payee acknowledges that the Payee 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 Payee's possession) made available to the Payee in
connection with this Agreement using the same standard of care to protect such
confidential data or information as is used to protect the Payee's confidential
information.
5.5 Payment of Taxes and Claims. Pay and discharge promptly when due:
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(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.
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.
5.7 Financial Statements. (a) Furnish to the Payee, 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 Payee, 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 Payee, at the time of the delivery to the Payee 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 or of its
manager (or a general partner of such manager), (i)
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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.
5.8 Copies of Management Letters, etc. Furnish to the Payee, 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.
5.9 Management. Be managed by Realen-Turnberry/Cherry Hill Associates, as
sole member of the Company, or by Turnberry, Realen or an Affiliate thereof
under the direction, control and supervision of such sole member, (i) in a
commercially reasonable 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 such member's duties
to the Company and, if applicable, such other Person's duties to the Company,
under the Delaware Limited Liability Company Act (regardless of any other
standard set forth in the Operating Agreement).
5.10 Notice and Payment of Subject Costs and Expenses.
(a) Notify the Payee in writing when it incurs more than $800,000 and again
when it incurs more than $1,000,000 of aggregate costs and expenses, on a
cumulative basis from inception of the Company, of or for the following: (A)
Chiller Obligations; (B) Excess Conveyance Obligation Costs; (C) Excess
Environmental Costs; (D) losses, damages, costs and expenses (including
reasonable attorneys' fees) from claims against the Company arising out of any
breach or claimed breach by the Payee of (x) any of Leases or (y) the Asset
Purchase Agreement insofar as such breach relates to the Leases, the Premises,
or any property (real, personal or mixed) leased by GSRT, Inc. to Tenant; or (E)
losses, damages, costs and expenses (including reasonable attorneys' fees) from
any representation or warranty made by the Payee in the Agreement of Sale or any
officer's certificate delivered by the Payee at closing under the Agreement of
Sale being untrue or incorrect as of the Closing Date. Amounts actually paid by
the Company towards the items set forth in clauses (A) through (E) above,
excluding any portions thereof which shall not have been commercially reasonable
for the Company to incur, are herein collectively called "Subject Costs and
Expenses"). The notice required hereby shall be given by the Company reasonably
promptly after it incurs obligations or liabilities which, when paid, would
cause aggregate Subject Costs and Expenses to reach $800,001 and again
reasonably promptly after it incurs obligations or liabilities which, when paid,
would cause aggregate Subject Costs and Expenses to reach $1,000,001. Before and
after aggregate Subject Costs and Expenses reach $800,001, the Payee shall have
the right to receive information from
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time to time reasonably requested by the
Payee, to inspect and copy records and documents of the Company, and to discuss
the Company's affairs with management and with representatives of and
independent contractors retained by the Company whose activities are relevant to
the Subject Costs and Expenses or the accounting therefor, for the purpose of
keeping advised as to the affairs of the Company which could give rise to, or
have given rise to, the Company's incurring any Subject Costs and Expenses as
well as the Company's funding (by borrowing or by obtaining capital
contributions from Members) of payment thereof. Before discussing affairs of the
Company with any such persons other than management of the Company, the Payee
will provide to the Company advance notice of and an opportunity to participate
in such discussion. The Payee shall maintain the confidentiality of all
information received by it under this Section 5.10 and Section 6.2 below, except
as necessary to enforce its rights hereunder or to comply with requirements of
law or court order.
(b) Notify the Payee in writing when aggregate Subject Costs and Expenses
at any time paid or to be paid by the Company, on a cumulative basis from
inception of the Company, first equal or exceed $6,000,000. Once aggregate
Subject Costs and Expenses paid or to be paid, on a cumulative basis, first
equal or exceed $6,000,000, the Payee will have the right to join with the
Members of the Company in making loans to the Company to fund payment of such
excess Subject Costs and Expenses over $6,000,000 and all Subject Costs and
Expenses thereafter to be paid by the Company. The Payee shall have the right,
exercisable at its option, to participate in such loans by Members to the extent
of one-third (1/3) of the principal amount thereof, and, if the Members of the
Company fund any of such Subject Costs and Expenses by making capital
contributions (in lieu of loans) to the Company, the Payee nevertheless may
elect to fund one-third of the Subject Costs and Expenses by making loans to the
Company. All such loans by the Payee will bear interest at the rate of 33-1/3%
per annum and the interest and principal thereof will be paid to the Payee
ratably as and when the Company pays interest and principal on loans by Members
or pays distributions and the "Section 1.1(a) Return" (as defined in the Note)
on distributions to Members. Loans by the Payee under this Section 5.10(b) will
not be evidenced by the Note and, instead, the Company will issue such evidence
of indebtedness as the Payee reasonably may request in order to evidence the
Company's indebtedness to the Payee in respect of such loans.
6. NOTE CONVERSION OPTION
6.1 Grant of Note Conversion Option. The Company hereby grants to the Payee
an option pursuant to which the Payee 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 33-1/3% of the then
outstanding membership interests in the Company, exercisable, by written notice
to the Company in which the Payee 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 immediately preceding the Maturity Date (as defined in
the Note), provided, however, that if the amount of Shared Appreciation (as
defined in the Note) shall not have been finally determined within 30 days prior
to such Maturity Date, then the foregoing 180-day period will be extended until
30 days after the date on which the amount of Shared Appreciation is finally
determined in accordance with the Note; (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
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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) wherein the amount involved,
individually or in the aggregate, exceeds $100,000. Upon exercise of such option
to convert, the Note automatically shall be deemed converted into a membership
interest in the Company having (A) all rights and obligations incident to a
33-1/3% equity interest in the Company, (B) an initial capital account in the
Company equal to 33-1/3% of the total capital accounts of all Members (including
assignees whether or not the assignees are admitted as Members) of the Company,
including the Payee as of the time immediately after the Payee 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 Payee. Promptly upon the Payee's receipt of such written
confirmation, the Payee 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 Payee
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.
6.2 Access to Information. In order to facilitate the exercise of the
Conversion Option by the Payee, the Company shall provide copies of the
Operating Agreement and all amendments thereto to the Payee upon the Payee's
request from time to time, and the Company and the Members shall permit the
Payee, 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.
7. DEFINITIONS; MISCELLANEOUS
7.1 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):
"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 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
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otherwise; provided, however, that neither the Payee nor any Person directly or
indirectly controlled by the Payee 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, Turnberry or Realen, and shall include, without limitation (with
respect to the Company), any subsequent or additional Members and any Material
Related Person.
"Agreement of Sale" shall mean the Agreement of Sale between the Company
and Payee dated as of January 25, 2000, as amended or supplemented from time to
time.
"Asset Purchase Agreement" means the Asset Purchase Agreement dated July 2,
1998, among Greenwood New Jersey, Inc., GSRT, Inc., Freehold Raceway
Association, Atlantic City Harness, Inc., Circa 1850, Inc., and International
Thoroughbred Breeders, Inc., as amended from time to time (including but not
limited to the First Amendment to Asset Purchase Agreement dated as of January
28, 1999, among the parties to the aforesaid Asset Purchase Agreement and Penn
National Gaming, Inc.).
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in Philadelphia, Pennsylvania.
"Cherry Hill Property" means the real property located in Cherry Hill, New
Jersey, conveyed or to be conveyed by the Payee to the Company pursuant to the
Agreement of Sale.
"Chiller Obligations" shall mean that certain indebtedness of GSRT, Inc. to
General Electric Capital Corporation evidenced by GSRT, Inc.'s note dated July
23, 1996 in the original principal amount of $827,890.54 and the obligation of
GSRT, Inc. contained in Section 6 of the Lease Summary dated January 28, 1999,
between GSRT, Inc. and Tenant to reimburse Tenant for Aggregate Chiller Payments
(as defined therein) made by Tenant and to pay interest thereon.
"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.
"Conveyance Obligation" has the meaning given thereto in the Agreement of
Sale.
"Distributable Cash" shall have the meaning given thereto in the Note.
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"Excess Conveyance Obligation Costs" shall mean the aggregate costs
incurred by the Company in excess of $30,000 for completing the subdivision,
preparing any documents and satisfying any other obligations required to convey
to Tenant the ten acre parcel referred to in that certain Memorandum of
Conveyance Obligation dated January 28, 1999 between GSRT, Inc. and Tenant.
"Excess Environmental Costs" shall mean the following costs and expenses:
The Extension Fee in the amount of $146,680 paid by or for the account of
Jeffrey Soffer to Credit Suisse First Boston Mortgage Capital LLC ("CSFB")
pursuant to paragraph 2(c) of that certain letter agreement dated as of August
31, 2000, among CSFB, REPG Garden State Corporation, the Payee, entities which
are Affiliates of the Payee, and Jeffrey Soffer; the amount of premium paid on
or before the date hereof by the Company for insurance against environmental
claims against it or its lenders; and costs and expenses of investigating after
August 23, 2000, and of remediating environmental conditions now existing on, in
or under the Premises which the Company is required by law or by governmental
agency, authority or order of any court to so remediate, including but not
limited to those certain environmental conditions described under the caption
"Conclusions" in that certain draft letter dated August 23, 2000, from Marathon
Engineering & Environmental Services, Inc. to Buyer (the "Draft Report")
summarizing the results of the Phase I and Phase II environmental investigations
of the Premises, and also including but not limited to costs of further
investigations conducted after August 23, 2000 and referred to in such
Conclusions, and costs of removal and/or other remediation of contaminated soil
as referred to in such Conclusions, costs of clean up of soil and groundwater as
referred to in such Conclusions and removal or closure of underground tanks as
referred to in such Conclusions, excluding however, (i) any costs or expenses of
investigating or remediating any condition that would be incurred in the
ordinary course of the development of the Premises, (ii) any costs or expenses
of investigating for any environmental condition which is not referred to in
above-mentioned Conclusions and is either required by a third party buyer or
lender or is undertaken without reasonable cause to believe that such
environmental condition exists, and (iii) any portion of costs or expenses the
incurring of which is not commercially reasonable. By way of example with
respect to clause (i), costs of removal of an underground tank will not be
included in Excess Environmental Costs if such tank would be removed in the
ordinary course of the development of the Premises for the use(s) intended by
the Company.
"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.
"GSRT, Inc." shall mean Garden State Race Track, Inc., a New Jersey
corporation.
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.
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"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 with the Company.
"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 the project being developed by the
Company), banker's acceptances, interest rate swaps or other financial products;
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(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.
"Leases" shall have the meaning given thereto in the Agreement of Sale.
"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 Turnberry, Realen, 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 Sections 4, 5 and 6 of this Agreement, the
term "Member" shall include all Material Related Persons.
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"Note" shall mean the promissory note to be issued to the Payee 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.
"Payee" shall mean GSRT, LLC or any subsequent holder of the Note, and
their respective successors and permitted assigns.
"Permitted Liens" shall mean the following:
a) liens for taxes, assessments, levies or other charges not otherwise
required to be paid pursuant to the provisions of Section 5.5 hereof;
b) liens and the amount thereof in connection with workmen's compensation,
unemployment insurance or other social security obligations;
c) pledges or deposits made with third parties to secure obligations of the
Company (including customer deposits) in the ordinary course of business;
d) 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
e) 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 Agreement of Sale 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).
"Premises" shall mean that certain real property located in Cherry Hill,
Camden County, New Jersey, with buildings thereon and improvements thereto,
which is purchased by the Company from the Payee on the date of this Note
Agreement
"Realen" shall mean Realen Garden State Park Associates, L.P., its
successors and assigns.
"Qualified Institutional Buyer" shall have the meaning set forth in Rule
144A.
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"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, a Material Related Person or any
Affiliate of the Company, a Member or a Material Related Person.
"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 B, to be dated as of the Closing Date,
executed and delivered by each of the Company, its Sole Member and all partners
of the Sole Member in favor of the Payee, pursuant to which the Payee will be
granted a security interest in the Sole Member's 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.
"Sole Member" means Realen-Turnberry/Cherry Hill Associates, a Delaware
general partnership which at the date hereof is the sole member of the Company.
"Subject Costs and Expenses" has the meaning given thereto in Section 5.10
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.
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"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.
"Tenant" means GS Park Racing, L.P., a New Jersey limited partnership.
The phrase "this Agreement" shall mean this Note 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 Soffer/Cherry Hill Partners, L.P., a Florida limited
partnership.
7.2 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.
7.3 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.
7.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, 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 Payee 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 Commonwealth of Pennsylvania or
Delaware and of any federal court located therein and the Payee may bring suit
against the Company in any of such courts. The Company also hereby waives the
right to bring any counterclaims against the Payee (but specifically reserves
the right to assert any defenses and affirmative defenses against the Payee and
compulsory counterclaims) in any suit or action in any court of law or equity in
which the Payee 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.
7.5 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.
7.6 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
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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.
7.7 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 listing all parties:
(a) if to the Payee: GSRT, LLC
Garden State Park
Route 70 and Haddonfield Road
Cherry Hill, NJ 08034
Attention: Mr. Francis W. Murray
Fax No. (856) 488-7585
with a copy to: David S. Petkun, Esquire
Cozen and O'Connor
1900 Market Street
Philadelphia, PA 19103
Attention: David S. Petkun, Esq.;
Fax No.: (215) 665-2013
(b) if 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: Realen-Turnberry/Cherry Hill, LLC
c/o Realen Garden State Park Associates
1000 Chesterbrook Blvd., Suite 100
Berwyn, PA 19312
Attention: Mr. Dennis Maloomian,and
c/o Soffer/Cherry Hill Partners, Limited
Partnership
19501 Biscayne Boulevard, Suite 500
Aventura, FL 33180
Attention: Mr. Jeffrey Soffer
with copies to: Soffer/Cherry Hill, LLC
19501 Biscayne Boulevard, Suite 400
Aventura, FL 33180
Attention: Legal Department
Fax No.: (305) 933-5535, and
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Jack D. Weiner, Esquire
Askot & Weiner
The Belgravia
1811 Chestnut Street, Suite 701
Philadelphia, PA 19103
Fax No.:(215) 972-0838
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.
7.8 Survival. All representations, warranties and covenants made by the
Company in this Agreement or any certificate or other instrument delivered to
the Payee pursuant to this Agreement shall be considered to have been relied
upon by the Payee and shall survive the closing, the delivery to the Payee of
the Note, any payment or prepayment of the Note, regardless of any investigation
made by the Payee or on the Payee's behalf.
7.9 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.
7.10 Amendment and Waiver.
(a) 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 Payee, 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, (x)
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; (y)
amend, supplement or waive any provision of the Note or of Section 6.1 hereof;
or (z) amend, supplement or waive this Section 7.10(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 7.10 shall be delivered by the Company to the
holder(s) of the Note(s) 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(s). 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(s) of the Note(s) as
consideration for or as
24
<PAGE>
an inducement to the entering into by any holder(s) 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 Payee 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.
7.11 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.
7.12 Indemnification Against Claims, etc.
(a) The Company shall indemnify and hold harmless the Payee, the Payee's
directors, officers, employees, agents, and each Person, if any, who controls
the Payee within the meaning of the Securities Act or the Exchange Act, and the
Payee's successors and assigns (any and all of whom are referred to in the
context of this paragraph (a) and paragraph (c) below as the "Indemnified
Party") 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 Payee by the Company pursuant hereto
or in connection with the transactions contemplated hereby.
(b) The Payee 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) and paragraph (c) below as the "Indemnified Party") 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 Payee or of its parent company relating to the transactions
contemplated hereby or by the Agreement of Sale.
(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,
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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 7.12 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 satisfactory to the indemnifying party, 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. The obligations of the parties under this
Section 7.12 shall survive the Closing, the payment or prepayment of the Note,
and the termination of this Agreement.
7.13 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.
7.14 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 Payee at the closing of the purchase of the Note and (c) financial
statements, certificates and other information heretofore or hereafter furnished
to the Payee, may be reproduced by the Payee by any photographic or other
similar process and the Payee 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 Payee in the regular course of business) and that
any enlargement, facsimile or further reproduction of such reproduction shall be
admissible in evidence to the same extent.
7.15 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.
7.16 No Agency. The Payee shall not be deemed to be an agent, partner or
(until conversion into the Conversion LLC Interest) joint venturer of the
Company or of any other Person, and nothing herein contained shall be construed
to impose any liability upon the Payee by reason of the execution or delivery of
this Agreement or the consummation of the transactions contemplated hereby.
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<PAGE>
7.17 Entire Agreement. This Agreement (including the schedules and exhibits
hereto) 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).
7.18 No Waiver. No failure 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.
7.19 Expenses. The Company shall pay all costs of collection of the Note
and (if the Payee is the prevailing party) enforcement of the Note Documents
(including reasonable attorneys' fees and court costs).
The obligations of the Company under this Section 7.19 shall survive the
payment or prepayment of the Note or the termination of this Agreement.
7.20 Subordination; Estoppel.
(a) The Payee 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 or to be incurred
by the Company to finance the acquisition of the Cherry Hill Property and the
development thereof (collectively "Project Financing"). Furthermore, except as
expressly provided in the next sentence, the Payee hereby subordinates its
rights to payment and satisfaction of the Note to the prior indefeasible payment
of all Project Financing. Notwithstanding the foregoing, the Payee 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 Payee 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
Payee 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 Payee thereunder (or, if such is not the case, specifying the
nature of any known Event of Default).
7.21 Waiver of Certain Claims. The Company assumes responsibility for, and
waives any claim against the Payee based upon or arising out of, Subject Costs
and Expenses and all events, actions, inactions and occurrences giving rise to
Subject Costs and Expenses, it being understood and agreed that Payee has agreed
to permit the Company to pay a 33-1/3% rate of return on Special Adjusted
Capital Contributions (as defined in the Note) in consideration of the Company's
waiver in this Section 7.21. The Payee shall have no liability to the Company in
the event of or by reason of Subject Costs and Expenses or any event, action,
inaction or occurrence giving rise to any thereof.
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<PAGE>
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.
GSRT, LLC
By: Garden State Race Track, Inc.,
Sole Member
By: /s/ Francis W. Murray
---------------------
Authorized Officer
REALEN-TURNBERRY/CHERRY HILL, LLC,
a Delaware limited liability company
By: REALEN-TURNBERRY/CHERRY HILL
ASSOCIATES, a Delaware general partnership,
its Sole Member
By: REALEN GARDEN STATE PARK
ASSOCIATES, L.P., a Pennsylvania
limited partnership, General Partner
By: REALEN GSGP, INC., a
Pennsylvania corporation,
its sole General Partner
By: /s/ Dennis Maloomian
-------------------
Dennis Maloomian,
President
By: SOFFER/CHERRY HILL
PARTNERS, LIMITED
PARTNERSHIP, a Florida
limited partnership, General Partner
By: SOFFER/CHERRY HILL,LLC,
a Florida limited
liability company,
its sole General Partner
By: /s/ Jeffrey Soffer
-----------------
Jeffrey Soffer,Managing
Member
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<PAGE>
Exhibit 10.2
PROMISSORY NOTE
$10,000,000.00 November 29, 2000
Philadelphia, Pennsylvania
FOR VALUE RECEIVED, TURNBERRY/REALEN CHERRY HILL LLC, a Delaware limited
liability company (the "Maker"), promises to pay to the order of GSRT, LLC, a
Delaware limited liability company (the "Payee"), the principal sum of Ten
Million Dollars ($10,000,000) (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 hereof 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 exercise by the Payee of its right to convert
this Note into an equity interest in the Maker pursuant to Section 6.1 of the
Note Agreement between the Maker and the Payee of even date herewith (the "Note
Agreement"), the principal of (and interest on) 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 occurrence of a sale of all of the real property of the Maker in
a bona fide, arm's length transaction to a third party who is not a member or
Affiliate (as defined in the Note Agreement) of the Maker, a partner of any such
member or an Affiliate of any partner of any member of the Maker, or, at the
option of the Payee, upon any earlier sale of all of the real property of the
Maker to a member or Affiliate of the Maker, a partner of any such member or an
Affiliate of any partner of any member of the Maker or 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 Section 1.1(a) 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 the Note (equal to
the Note Amount) is reduced to $1,000,000, 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 "Section 1.1(a) Return" is a return calculated on Members' Adjusted
Capital Contributions (as hereinafter defined) from time to time invested in the
Maker, equal to thirty three and one-third percent (33-1/3%) per annum on
Special Adjusted Capital Contributions and fifteen percent (15%) per annum on
Regular Adjusted Capital Contributions (as each such term is defined below). For
the purposes of this Note, distributions to Members will be applied first, to
pay any accrued but unpaid Section 1.1(a) Return on Special Adjusted Capital
Contributions, second to pay any accrued but unpaid Section 1.1(a) Return on
Regular Adjusted Capital Contributions, third to repay the Members' Special
Adjusted Capital Contributions and fourth to repay the Members' Regular Adjusted
Capital Contributions.
<PAGE>
"Regular Adjusted Capital Contributions" means, at any time, Adjusted
Capital Contributions other than Special Adjusted Capital Contributions.
"Special Adjusted Capital Contributions" means, at any time, the lesser of (A)
Adjusted Capital Contributions at such time or (B) the aggregate amounts
actually spent by the Maker (or by its Members on behalf of the Maker) for
Subject Costs and Expenses (as defined in Section 5.10 of the Note Agreement)
minus $1 million and minus the aggregate amount of distributions (other than
distributions required to be applied to pay the Section 1.1(a) Return)
theretofore made by the Maker to its Members. (In other words, the amount of
Special Adjusted Capital Contributions is the aggregate amount in excess of $1
million actually spent by the Maker or its Members on Subject Costs and Expenses
less aggregate distributions (except distributions constituting the Section
1.1(a) Return) previously made by the Maker to its Members, except that the
amount of Special Adjusted Capital Contributions can never exceed Adjusted
Capital Contributions).
The Members' "Adjusted Capital Contributions" means, at any time, the
amount by which the Members' aggregate capital contributions to the Maker exceed
aggregate distributions (other than distributions required to be applied to pay
the Section 1.1(a) Return) previously made by the Maker to its Members. For
purposes hereof, loans by Members of Maker, any Affiliate (as defined in the
Note Agreement) of a Member or any Material Related Person (as defined in the
Note Agreement) shall be deemed to be capital contributions to Maker and all
payments of principal of such loans shall be deemed to be distributions by 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, capital expenditures (including amounts expended in
connection with the purchase of the Cherry Hill Property, as such term is
defined in the Note Agreement) 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 fees for services to the
extent expressly permitted by the Note Agreement or approved in writing by the
Payee) or (ii) expenditures prohibited by Section 4.1(a) or (b) of the Note
Agreement.
(iii) The Section 1.1(a) Return described above is predicated on the
understanding between the Maker and the Payee that $23 million of costs and
expenses incurred by the Maker and/or its Members in acquiring and developing
the Premises and constructing improvements thereto (including demolition of
existing structures and improvements) will be
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<PAGE>
funded by loans from financial institutions directly to the Maker, rather than
by loans to Members of the Maker (or to partners of Members) the proceeds of
which are advanced as capital contributions or loans to the Maker. To the extent
that less than $23 million in loans from financial institutions is made to the
Maker for the presently anticipated costs of acquisition, development and
construction in respect of the Premises and such shortfall is made up by capital
contributions by Members of the Maker and/or by loans from Members of the Maker,
any Affiliate (as defined in the Note Agreement) of a Member or any Material
Related Person (a defined in the Note Agreement), the Section 1.1(a) Return
shall be adjusted by reducing the annual rate of return on such shortfall under
$23 million to a rate no greater than the annual rate of interest charged from
time to time to the Members of the Maker or to partners of the Members of the
Maker on loans from financial institutions the proceeds of which (in whole or in
part) are used to make capital contributions to the Maker or are re-lent to the
Maker. Further, no Section 1.1(a) Return shall be permitted on any capital
contribution or loan to Payee which is not made in good faith and is not
reasonably necessary to the Payee's business.
(iv) 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 prior to the Maturity Date (as defined
in Section 1.2) 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
interest payable at maturity, by acceleration or otherwise, and 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 Section 1.1(a) 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 Section 1.1(a) 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
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<PAGE>
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 Section 1.1(a)
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 15% per annum on the deficiency from January 15 until
payment in full is received by the Payee.
1.2 Payment Upon Maturity: 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 fifteenth 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) or by acceleration, being hereinafter called the "Maturity
Date"), without presentment, notice or demand, as follows:
Upon the Maturity Date, provided there has not been a conversion of this
Note into an equity interest in the Maker pursuant to Section 6.1 of the Note
Agreement (and subject to the subordination provisions of Section 7.20 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:
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<PAGE>
(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 accrued but
unpaid Section 1.1(a) Return thereon. If the parties have not reached an
agreement on fair market value of the Maker's assets at least 180 days prior t
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) as soon as reasonably possible
prior to 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 Maker will
not make any distributions to its Members on or after the Maturity Date unless
and 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 180
days prior to 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
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<PAGE>
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 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),
1.1(b) or 1.2 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
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<PAGE>
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 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 of
its real property; or
(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
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<PAGE>
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, subject to the next sentence,
acceleration of payment of this Note prior to the Maturity Date shall not be a
remedy available to the Payee. If an Event of Default specified in Section
5.1(a)(i) above shall exist which shall not have been cured within ten days
after written notice of such Event of Default shall have been given to the
Maker, then, subject to Section 7.20 of the Note Agreement, the entire unpaid
balance of the principal, any accrued but unpaid interest and all other sums
evidenced by this Note (including but not limited to Shared Appreciation and
other sums payable at maturity under Section 1.2 calculated as if the date of
acceleration were the Maturity Date hereunder), at the option of the Payee,
shall become immediately due and payable, without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived.
In the event of the occurrence of an Event of Default described in Section
5.1(c) above (other than such an Event of Default which resulted from an
occurrence, event or act of a third person beyond the control of the Maker or of
any member or Affiliate of the Maker, a partner of any such member or an
Affiliate of any partner of any member of the Maker) which has the effect of
reducing the amount of Distributable Cash otherwise available to the 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 fifteen percent (15%) per annum (the
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<PAGE>
"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 State of New Jersey 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 is made in and shall be construed in
accordance with and governed by the substantive laws of the Commonwealth of
Pennsylvania without reference to conflict of laws principles.
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:
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If to the Maker: Realen-Turnberry/Cherry Hill, LLC
c/o Realen Garden State Park
Associates, L.P.
1000 Chesterbrook Blvd., Suite 100
Berwyn, PA 19312
Attention: Mr. Dennis Maloomian
Fax: , and
c/o Soffer/Cherry Hill, LLC
19495 Biscayne Boulevard, Suite 500
Aventura, FL 33180
Attention: Mr. Jeffrey Soffer
Fax:
with copies to: Soffer/Cherry Hill, LLC
19495 Biscayne Boulevard, Suite 400
Aventura, FL 33180
Attention: Legal Department
Fax: (305) 933-5535, and
Jack D. Weiner, Esquire
Askot & Weiner
The Belgravia
1811 Chestnut Street, Suite 701
Philadelphia, PA 19103
Fax: (215) 972-0838
If to Payee: GSRT, LLC
Garden State Park
Route 70 and Haddonfield Road
Cherry Hill, NJ 08034
Attention: Mr. Francis W. Murray
Fax: (856) 488-7585
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.
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<PAGE>
10. 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.
11. 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
a 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.
REALEN-TURNBERRY/CHERRY HILL, LLC,
a Delaware limited liability company
By: REALEN-TURNBERRY/CHERRY HILL
ASSOCIATES, a Delaware general partnership,
its Sole Member
By: REALEN GARDEN STATE PARK
ASSOCIATES, L.P., a Pennsylvania
limited partnership, General Partner
By: REALEN GSGP, INC., a
Pennsylvania corporation,
its sole General Partner
By: /s/ Dennis Maloomian
Dennis Maloomian,
President
By: SOFFER/CHERRY HILL
PARTNERS, LIMITED
PARTNERSHIP, a Florida
limited partnership, General Partner
By: SOFFER/CHERRY HILL,
LLC, a Florida limited
liability company,
its sole General Partner
By: /s/ Jeffrey Soffer
Jeffrey Soffer, Managing
Member
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Exhibit 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of November 29, 2000, by and among
Realen-Turnberry/Cherry Hill, LLC, a Delaware limited liability company (the
"Company"), the members of the Company parties to this Agreement (said members
being collectively called the "Pledgors"), and GSRT, LLC, a Delaware limited
liability company (the "Seller"),
W I T N E S S E T H
- - - - - - - - - -
Background. As evidenced by that certain promissory note of the Company of
even date herewith payable to the order of the Seller (the "Note"), the Company
is indebted to the Seller under the terms and conditions of the Note and the
accompanying Note Agreement of even date herewith between the Company and the
Seller (such agreement, as amended or modified from time to time as permitted by
the terms thereof, being hereinafter called the "Note Agreement"). Section 3.11
of the Note Agreement requires the Pledgors to enter into this Security
Agreement in order to secure the Company's obligations under the Note.
NOW, THEREFORE, in consideration of the foregoing and to induce the Seller
to accept the Note from the Company in payment of a portion of the purchase
price of the Cherry Hill Property (as defined in the Note Agreement), 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 Company, whether pursuant to the operating
agreement of the Company 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 Company's obligations
under the Note and the Note Agreement, whether now existing or hereafter arising
(the "Obligations"), the Pledgors hereby pledge to the Seller the Collateral and
grant the Seller 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 Seller's agent, in trust for the
Seller, and shall deliver them forthwith to the Seller in the exact form
received with, as applicable, the Pledgor's endorsement when necessary, to
be received and applied by the Seller, subject to the terms hereof, as part
of the Collateral.
<PAGE>
(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 Seller) distributions from the Company 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 Company shall
deliver to the Seller all Distributable Cash from time to time held by it, and
the Pledgors shall deliver to the Seller 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 Seller 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
Company will cause a payment under the Note to become due simultaneously
therewith, and the Seller 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 Seller, to the extent necessary to
pay Obligations then due, an amount equal to any distribution previously made to
such Pledgor by the Company in violation of the prohibition against such
distribution contained in Section 1.1(a)(ii), Section 1.1(b)(i) or (ii), or 1.2
of the Note.
3. The Pledgors represent and warrant to the Seller 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 Seller that,
at the date hereof, all members of the Seller and their percentage ownership
interests therein are set forth in Section 2.2 of the Note Agreement.
4. (a) Each Pledgor warrants and will, at the Pledgor's own expense, defend
the Seller'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.
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(b) Each Pledgor promptly shall notify the Seller 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 Company, and any termination of
such Pledgor's equity interest in the Company. In no event shall the Company
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 Seller, 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 Seller may reasonably request to effectuate the purposes
of this Agreement or to perfect the Seller's security interest hereunder.
6. Upon satisfaction in full of all Obligations and the satisfaction of all
additional costs and expenses of the Seller as provided herein, this Agreement
shall terminate and the Seller shall deliver to each Pledgor, at such Pledgor's
expense, any of the Collateral in the Seller'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 Seller 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 Company.
(b) No course of dealing between any Pledgor or the Company and the Seller,
nor any failure to exercise, nor any delay in exercising, any right, power or
privilege of the Seller hereunder, under the Note or under the Note 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
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. All notices or other communications ("Notices") required or permitted
hereunder shall be in writing and shall be deemed given upon receipt thereof if
mailed by registered or certified mail, return receipt requested, postage
prepaid, or if delivered in person or by courier service, or by telecopier and
confirmed by mail, addressed as follows to the person entitled to receive the
same, or addressed to such other address or telecopier number as may hereafter
be designated by such person by notice hereunder to all other parties.
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<PAGE>
If to a Pledgor:
to such Pledgor at its address given beneath its signature to
this Agreement.
If to the Seller:
GSRT, LLC
c/o Garden State Park
Route 70 and Haddonfield Road
Cherry Hill, NJ 08034
Attention: Mr. Francis W. Murray
If to the Company, to such address as is provided in Section 7.7 of
the Note Agreement.
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 Commonwealth of Pennsylvania 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 Company, each of the Pledgors and the Seller.
12. The Seller and the Company may, at any time or from time to time, in
such manner and upon such terms as it may deem proper, 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 Company which may at any time be due or owing
to the Seller or anyone, or elect not to enforce any of the Seller'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 Seller otherwise might have to proceed against the Company
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, except as otherwise expressly provided in the Note Agreement and
the Note; and
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(d) any and all procedural errors, defects and imperfections in any action
by the Seller 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 Company 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 Seller
may now have or hereafter acquire against the Company 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. Without limiting the foregoing, it is expressly agreed that a
Pledgor will not have or be entitled to assert any subrogation right against the
Company unless and until the Note shall have been paid in full in cash such that
the conversion right contained in Section 6.1 of the Note Agreement shall have
expired without being exercised. 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 Seller and shall forthwith
be paid to the Seller to be credited and applied against the Obligations,
whether matured or unmatured, in accordance with the terms of the Note and the
Note 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
Delaware 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
Delaware 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 Seller, 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 Agreement) who becomes a member
of the Company or a transferee of a member of the Company after the date hereof
shall join in and agree to be bound as a Pledgor hereunder by executing and
delivering to the Seller 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 Seller shall look solely to the
Collateral and not to any Pledgor personally for satisfaction of the
Obligations.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
GSRT, LLC
By: Garden State Race Track, Inc.,
its Sole Member
By: /s/ Francis W. Murray
---------------------
Authorized Officer
REALEN-TURNBERRY/CHERRY HILL, LLC
By: REALEN-TURNBERRY/CHERRY HILL
ASSOCIATES, a Delaware general
partnership, its Sole Member
By: REALEN GARDEN STATE PARK
ASSOCIATES, L.P., a Pennsylvania
limited partnership, General Partner
By: REALEN GSGP, INC., a
Pennsylvania corporation,
its sole General Partner
By: /s/ Dennis Maloomian
--------------------
Dennis Maloomian,
President
By: SOFFER/CHERRY HILL
PARTNERS, LIMITED
PARTNERSHIP, a Florida
limited partnership, General Partner
By: SOFFER/CHERRY HILL,
LLC, a Florida limited
liability company,
its sole General Partner
By: /s/ Jeffrey Soffer
------------------
Jeffrey Soffer,Managing
Member
PLEDGOR AND TRANSFEREE SIGNATURES APPEAR ON ATTACHED
PLEDGOR/TRANSFEREE SIGNATURE PAGES
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<PAGE>
PLEDGOR/TRANSFEREE SIGNATURE PAGE
The undersigned, being a member or transferee of a member of
Realen-Turnberry/Cherry Hill, LLC, a Delaware limited liability company (the
"Company"), or a successor thereto, hereby joins in and agrees to be bound as a
Pledgor under the Security Agreement dated November 29, 2000, among the Company,
its members, and GSRT, LLC.
REALEN-TURNBERRY/CHERRY HILL
ASSOCIATES, a Delaware general partnership
By: REALEN GARDEN STATE PARK
ASSOCIATES, L.P., a Pennsylvania
limited partnership, General Partner
By: REALEN GSGP, INC., a
Pennsylvania corporation,
its sole General Partner
By: /s/ Dennis Maloomian
--------------------
Dennis Maloomian,
President
By: SOFFER/CHERRY HILL
PARTNERS, LIMITED
PARTNERSHIP, a Florida
limited partnership, General Partner
By: SOFFER/CHERRY HILL,
LLC, a Florida limited
liability company,
its sole General Partner
By: /s/ Jeffrey Soffer
------------------
Jeffrey Soffer,Managing
Member
Addresses of Member's
general partner: Soffer/Cherry Hill Partners,
Limited Partnership
19501 Biscayne Blvd., Suite 500
Aventura, Florida 33180,
Attention: Mr. Jeffrey Soffer, and
Realen Garden State Park
Associates, L.P.
1000 Chesterbrook Blvd., Suite 100
Berwyn, PA 19312
Attn: Mr. Dennis Maloomian
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