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 earliest event reported) December 26, 1996
------------------------
MTR GAMING GROUP, INC.
(exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
33-22521 84-1103135
-------- ----------
(Commission File Number) (IRS Employer Identification Number)
1461 GLENNEYRE STREET, SUITE F, LAGUNA BEACH, CALIFORNIA
(Address of principal executive offices)
92651
(Zip Code)
Registrant's Telephone Number, Including Area Code: (714) 376-3010
--------------
N/A
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
Prepayment of Loans Made by Bennett Management
and Development Corp.
- ---------------------
On December 26, 1996, the Registrant's wholly owned
subsidiary, Mountaineer Park, Inc. ("Mountaineer"), prepaid in full the
outstanding $8,711,273.16 balance of a construction loan made by Bennett
Management and Development Corp. of Syracuse, New York ("Bennett"). The Bennett
loan, which was in the original principal amount of $10.2 million and was drawn
in 1994 and 1995 pursuant to a June 27, 1994 Construction Loan Agreement, as
later amended, was secured by a first priority credit line deed of trust on
Mountaineer's real property and a perfected security interest evidenced by a
UCC-1 Financing Statement with respect to its personal property.
The Bennett loan required Mountaineer on January 2, 1997 to
pay Bennett either $500,000 in cash or $750,000 worth of the Registrant's common
stock if the loan was not prepaid by January 1, 1997. Prior to a September 19,
1996 amendment of the Construction Loan Agreement, which was effective October
31, 1996, the January 2 payment would have been $2.5 million worth of the
Registrant's common stock. The prepayment permitted Mountaineer to avoid the
January 2 payment. Bennett has delivered releases of the liens against
Mountaineer's real and personal property. The prepayment was from the proceeds
of a new $11.1 million loan discussed below.
Pursuant to the Bennett Construction Loan Agreement, as
amended, for a period commencing upon prepayment and terminating at the close of
business (Eastern Time) ten (10) business days thereafter, the Registrant has
the option to repurchase all (but not part) of the 1,530,000 shares of the
Registrant's common stock previously issued to Bennett in connection with the
loan for a price per share equal to 90% of the average closing bid price of the
Shares as reported by Nasdaq for the twenty (20) consecutive trading days
immediately preceding the date of prepayment, but in no event less than $1.125
per share (the "Repurchase Option").
In consideration of the efforts of Meyer, Duffey & Associates,
a New York consulting and investment firm, in introducing the Registrant to
potential sources of permanent financing from commercial bank lenders for
Mountaineer (though no transactions have been consummated with respect to such
financing and, indeed, no substantive negotiations have commenced), the
Registrant may assign the Repurchase Option to Meyer, Duffey & Associates.
$11.1 Million Loan and $5,376,500 Revolving Line of Credit
- ----------------------------------------------------------
On December 26, 1996, Mountaineer borrowed $11.1 million from
Madeleine L.L.C. of New York, New York, which had provided Mountaineer a $5
million second mortgage loan on July 2, 1996, enabling Mountaineer to prepay the
Bennett loan. The total loan of $16.1 million, which is governed by the parties'
Amended and Restated Term Loan Agreement and Amended and Restated General
Security Agreement, is evidenced by
<PAGE>
Mountaineer's Promissory Note and is secured by a first priority Credit Line
Deed of Trust with respect to Mountaineer's real property and a perfected
security interest evidenced by a UCC-1 Financing Statement with respect to its
personal property.
The loan bears interest at the rate of 12% per annum and calls
for payments of interest only with the principal due at the end of a three-year
term. The loan is guaranteed by the Registrant. As part of the transaction, the
Registrant has agreed to issue the lender, over a period of thirteen months,
550,000 shares of the Registrant's common stock and warrants to purchase an
additional 1,632,140 shares for $1.06 per share. A further fee of $888,000 (8%
of the loan amount) is due on July 2, 1997, but will be waived by the lender if
the loan has been prepaid prior to that date. In that event, however, the
Registrant has agreed to pay a fee of approximately $250,000 to Bridge Capital,
L.L.C., which arranged the transaction. If not prepaid by November 15, 1997, the
loan is also subject to annual fees of stock, cash, and warrants. Annual fees
with respect to the $5 million loan made in July of 1996 have been deferred from
July 2 to November 15, 1997.
The shares and warrants, as well as the warrants issued to the
lender in connection with the $5 million loan made in July, are entitled to
protection from dilution in certain circumstances. The Registrant has agreed to
register the shares and warrants for public sale pursuant to the terms of the
warrants and the Registration Rights Agreement entered July 2, 1996. Amendment
No. 1 to Registration Rights Agreement, which was entered in connection with the
transaction, limits the lender's right to demand registration to once per
calendar year absent default by Mountaineer or the Registrant, prepayment of the
loan, or a change in control of the Registrant.
The Registrant will use the net proceeds of the loan
(approximately $2.4 million after prepayment of the Bennett loan and certain
costs of the transaction) for further improvements at Mountaineer and for
general corporate purposes. Specific projects under consideration are the
construction of a convention facility, expansion of the 101 room Mountaineer
Lodge, construction of a bowling alley, a second addition to the popular
Speakeasy Gaming Saloon, the purchase of additional video slot machines, and the
construction of a production facility capable of broadcasting Mountaineer's live
racing product to other racetracks and off track wagering facilities, though all
such proposals are subject to, among other things, approval by the Registrant's
board of directors and any applicable governmental approvals. There can be no
assurances, however, that all or any of the projects under consideration will be
undertaken.
Pursuant to the Amended and Restated Term Loan Agreement, the
lender also provided Mountaineer a $5,376,500 revolving line of credit to be
used for capital improvements, the acquisition of equipment and/or other gaming
businesses, or the acquisition of properties for use in the gaming and lottery
businesses consistent with the current business of Mountaineer.
<PAGE>
Borrowing under the line of credit is conditioned upon (i)
compliance with all loan documents; (ii) affirmation that all prior warranties
and representations remain true; (iii) submission of a notice of borrowing that
is for a sum not less than $500,000 and which contains a detailed description of
the use of proceeds; and (iv) maintenance by Mountaineer for the six calendar
months preceding the date of the notice of borrowing (at Mountaineer's election,
exclusive of the months of December and January) a monthly average of $750,000
in earnings before interest, taxes, depreciation, and amortization.
Loans under the line of credit bear interest at 15% per annum.
In connection with the line of credit, Mountaineer has agreed to pay an annual
fee of $376,500, the first of which is payable over 13 months. The Registrant
has agreed to guarantee any loans made under the line of credit.
Item 7. Financial Statements and Agreements.
(c) Exhibits
1. Amended and Restated Term Loan Agreement, dated as of July 2, 1996, as
amended and restated as of December 10, 1996, among Mountaineer Park, Inc., MTR
Gaming Group, Inc., and Madeleine L.L.C.
2. Amended and Restated General Security Agreement dated July 2, 1996, as
amended and restated as of December 10, 1996, made by Mountaineer Park, Inc. in
favor of Madeleine L.L.C.
3. Credit Line Deed of Trust, Leasehold Deed of Trust, Security Agreement,
Assignment, Fixture Filing and Financing Statement by and among Mountaineer
Park, Inc. as grantor, Deborah A. Sink and Carl D. Andrews as trustees, and
Madeleine L.L.C. as the secured party, dated December 10, 1996.
4. Promissory Note dated December 10, 1996 made by Mountaineer Park, Inc.
in the principal amount of $16,100,000 in favor of Madeleine L.L.C.
5. Registration Rights Agreement dated July 2, 1996 between Winners
Entertainment, Inc. and Madeleine L.L.C. (incorporated by reference from the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996,
Exhibit 10(11))
6. Amendment No. 1 to Registration Rights Agreement dated December 10, 1996
between MTR Gaming Group, Inc. and Madeleine L.L.C.
<PAGE>
7. Promissory Note dated December 10, 1996 made by Mountaineer Park, Inc.
in the principal amount not to exceed $5,376,500 in favor of Madeleine L.L.C.
8. Warrant Certificate No. 6 issued to Madeleine L.L.C., dated December 10,
1996, to purchase 125,552 shares of common stock of MTR Gaming Group, Inc. at
$1.06 per share for five years commencing December 10, 1996.
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.
MTR GAMING GROUP, INC.
By /s/ Edson R. Arneault
Edson R. Arneault,
President
Date: January 7, 1997
<PAGE>
EXHIBIT 1
AMENDED AND RESTATED TERM LOAN AGREEMENT
Dated as of July 2, 1996
as amended and restated as of December 10, 1996
among
MOUNTAINEER PARK, INC., as Borrower,
MTR GAMING GROUP, INC., as Guarantor
and
MADELEINE L.L.C., as Lender
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS; CERTAIN TERMS
SECTION 1.01. Definitions.............................................1
SECTION 1.02. Accounting and Other Terms..............................8
ARTICLE II AMOUNT AND TERMS OF THE TERM LOAN
SECTION 2.01. Term Commitment.........................................8
SECTION 2.02. Making the Term Loan....................................8
SECTION 2.03. Term Loan Interest......................................9
(a) Loan..............................................9
(b) Interest Payment..................................9
SECTION 2.04. Repayment...............................................9
SECTION 2.05. Termination or Reduction of Commitment..................9
SECTION 2.06. Optional Prepayment of the Term Loan....................9
ARTICLE III AMOUNT AND TERMS OF THE LINE LOANS
SECTION 3.01. Line Commitment.........................................9
SECTION 3.02. Making the Line Loans..................................10
SECTION 3.03. Line Loan Interest.....................................10
(a) Loans............................................10
(b) Interest Payment.................................10
SECTION 3.04. Repayment..............................................10
SECTION 3.05. Termination of Line Commitment.........................10
ARTICLE IV FEES, PAYMENTS, DEFAULT INTEREST AND OTHER
COMPENSATION
SECTION 4.01. Fees and Other Consideration...........................11
(a) Loan Fee.........................................11
(b) Administration Fee...............................11
(c) Audit and Collateral Monitoring Fees.............11
(d) Common Stock.....................................11
(e) Warrants.........................................13
SECTION 4.02. Payments and Computations..............................14
SECTION 4.03. Taxes..................................................14
SECTION 4.04. Default Interest.......................................15
SECTION 4.05. Principal Repayments...................................15
SECTION 4.06. Refinance of Term Loan.................................15
ARTICLE V CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 5.01. Conditions to Funding of the Tranche B Portion of the Term
Loan...................................................15
(a) Payment of Fees, Etc.............................16
- i -
<PAGE>
(b) Representations and Warranties; No Event of Default.16
(c) Legality.........................................16
(d) Delivery of Documents............................16
(e) Proceedings; Receipt of Documents................18
(f) Material Adverse Change..........................18
(g) Due Diligence....................................18
SECTION 5.02. Conditions to Funding of Line Loans....................18
(a) Payment of Fees, Etc.............................18
(b) Representations and Warranties; No Event of Default.19
(c) Legality.........................................19
(d) Delivery of Documents............................19
(e) Material Adverse Change..........................19
(f) Other Conditions.................................19
SECTION 5.03. Conditions of Funding each Line Loan...................19
(a) Representations and Warranties; No Event of Default.19
(b) Borrowing Notice.................................20
(c) Use of Proceeds..................................20
(d) EBITDA Average...................................20
ARTICLE VI REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties of the Borrower and the
Guarantor..............................................20
(a) Organization, Good Standing, Etc.................20
(b) Authorization, Etc...............................20
(c) Governmental Approvals...........................20
(d) Enforceability of Loan Documents.................21
(e) Certificates.....................................21
(f) Subsidiaries.....................................21
(g) Litigation.......................................21
(h) Financial Condition..............................21
(i) Compliance with Law, Etc.........................21
(j) ERISA............................................21
(k) Taxes, Etc.......................................21
(l) Regulation U.....................................22
(m) Adverse Agreements, Etc..........................22
(n) Holding Company and Investment Company Acts......22
(o) Permits, Etc.....................................22
(p) Title to Properties..............................22
(q) Full Disclosure..................................22
(r) Operating Lease Obligations......................22
(s) Indebtedness.....................................23
(t) Environmental Matters............................23
(u) Schedules........................................23
(v) Insurance........................................23
(w) Use of Proceeds..................................23
(x) Solvency of the Borrower.........................23
- ii -
<PAGE>
(y) Solvency of the Guarantor........................23
SECTION 6.02. Representations, Warranties and Covenants of Lender....24
ARTICLE VII COVENANTS OF THE BORROWER AND THE GUARANTOR
SECTION 7.01. Affirmative Covenants..................................24
(a) Reporting Requirements...........................24
(b) Compliance with Laws, Etc........................27
(c) Preservation of Existence, Etc...................27
(d) Keeping of Records and Books of Account..........27
(e) Inspection Rights................................27
(f) Maintenance of Properties, Etc...................27
(g) Maintenance of Insurance.........................27
(h) Environmental Indemnity..........................28
(i) Notification of Event of Default.................28
(j) Further Assurances...............................28
(k) Additional Security..............................28
(l) Environmental Actions............................28
SECTION 7.02. Negative Covenants.....................................28
(a) Liens, Etc.......................................29
(b) Indebtedness.....................................29
(c) Guaranties, Etc..................................30
(d) Merger, Consolidation, Sale of Assets, Etc.......31
(e) Change in Nature of Business.....................31
(f) Investments, Etc.................................31
(g) Lease Obligations................................31
(h) Salaries and Withdrawals.........................31
(i) Dividends, Etc...................................31
(j) Federal Reserve Regulations......................32
(k) Transactions with Affiliates.....................32
(l) Fiscal Year, Accounting Policies.................32
(m) Improvements.....................................32
(n) Issuance of Stock................................32
SECTION 7.03. Covenants of the Guarantor.............................32
SECTION 7.04. Additional Line Loan Covenant..........................33
ARTICLE VIII EVENTS OF DEFAULT
SECTION 8.01. Events of Default......................................33
ARTICLE IX MISCELLANEOUS
SECTION 9.01. Notices, Etc...........................................35
SECTION 9.02. Amendments, Etc........................................36
SECTION 9.03. No Waiver; Remedies, Etc...............................36
SECTION 9.04. Fees, Costs, Expenses and Taxes........................36
SECTION 9.05. Right of Set-off.......................................37
SECTION 9.06. Severability...........................................37
SECTION 9.07. Successors and Assigns.................................37
- iii -
<PAGE>
SECTION 9.08. Counterparts...........................................38
SECTION 9.09. Headings...............................................38
SECTION 9.10. Governing Law..........................................38
SECTION 9.11. WAIVER OF JURY TRIAL, ETC..............................38
SECTION 9.12. Reinstatement; Certain Payments........................39
SECTION 9.13. Indemnification........................................39
ARTICLE X GUARANTY
SECTION 10.01. Guaranty..............................................40
SECTION 10.02. Obligations Unconditional.............................40
SECTION 10.03. Waivers...............................................41
SECTION 10.04. Subrogation...........................................41
SECTION 10.05. No Waiver; Remedies...................................41
SECTION 10.06. Taxes.................................................41
SECTION 10.07. Stay of Acceleration..................................42
SECTION 10.08. Continued Effectiveness of Guaranty...................42
SCHEDULE I Description of Property
SCHEDULE II Litigation
SCHEDULE III Licenses, Permits, Authorizations and Approvals
SCHEDULE IV Lease Obligations of the Borrower
SCHEDULE V Indebtedness of the Borrower
SCHEDULE VI Existing Liens
SCHEDULE VII Guarantees of the Borrower
SCHEDULE VIII Investments
SCHEDULE IX Stock Rights, Warrants and Options
SCHEDULE X Shares of Common Stock Issued
SCHEDULE XI Permitted Issuances of Warrants
EXHIBIT A Form of Term Note
EXHIBIT B Form of Line Note
EXHIBIT C Form of First Priority Deed of Trust
EXHIBIT D Form of Notice of Borrowing
EXHIBIT E Form of Notice of Line Borrowing
EXHIBIT F Form of Warrants
EXHIBIT G Form of Opinion of Freer & McGarry, Counsel to the
Borrower and the Guarantor
EXHIBIT H Form of Opinion of Jackson & Kelly, West Virginia
Counsel to the Borrower and the Guarantor
EXHIBIT I Corrective Action Plan
- iv -
<PAGE>
AMENDED AND RESTATED TERM LOAN AGREEMENT
AMENDED AND RESTATED TERM LOAN AGREEMENT, dated as of July 2,
1996, as amended and restated as of December 10, 1996, among MOUNTAINEER PARK,
INC., a West Virginia corporation (the "Borrower"), MTR Gaming Group, Inc.,
f/k/a WINNERS ENTERTAINMENT, INC., a Delaware corporation (the "Guarantor"), and
MADELEINE L.L.C., a New York limited liability company (the "Lender").
RECITALS
WHEREAS, the Borrower, the Guarantor and the Lender are
parties to a Term Loan Agreement, dated as of July 2, 1996 (the "Old
Agreement"), pursuant to which the Lender has made a term loan to the Borrower
in the original principal amount of $5,000,000.
WHEREAS, the Borrower and the Guarantor have requested that
the Lender (a) amend and restate the Old Agreement to provide, among other
things, an increase in the amount available under the Old Agreement to the
Borrower thereunder from $5,000,000 to $16,100,000 (the "Term Loan") to
refinance the o ligations of the Borrower under the Senior Loan Agreement (as
defined in the Old Agreement), and (b) extend additional credit to the Borrower
in the form of a three year line of credit for loans in the aggregate maximum
principal amount not to exceed $5,376,500 at any time outstanding (the "Line
Loans" and, collectively with the Term Loan, the "Loans");
WHEREAS, the Lender is willing, on the terms and conditions
herein, to amend and restate the Old Agreement;
WHEREAS, in order to induce the Borrower to borrow, and the
Guarantor to guarantee, the additional funds provided and to be provided
hereunder, the Lender is willing to lend the additional $11.1 million over and
above the loan made under the Old Agreement pursuant to the terms hereof and to
provide the Line Loans.
NOW, THEREFORE, in consideration of the premises and the
agreements herein and in order to induce the Lender to make and maintain the
Loans, the Lender, the Borrower and the Guarantor hereby agree as follows:
ARTICLE I
DEFINITIONS; CERTAIN TERMS
SECTION 1.01. Definitions. As used in this Agreement, the
following terms shall have the respective meanings indicated below, such
meanings to be applicable equally to both the singular and plural forms of such
terms:
<PAGE>
"Affiliate" means, as to any Person, (i) any o her Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person, or (ii) any trade
or business (whether or not incorporated) which is a member of a group of which
such Person is a member and which is under common control within the meaning of
Section 414 of the Internal Revenue Code and the rules and regulations
promulgated thereunder from time to time.
"Amended and Restated Security Agreement means the Amended and
Restated Security Agreement, dated as of July 2, 1996, as amended and Restated
on the date hereof, made by the Borrower in favor of the Lender.
"Borrower" has the meaning specified therefor in the preamble
hereto.
"Business Day" means any day not a Saturday, Sunday or legal
holiday on which the Lender is open for business in New York City and banks in
the State of West Virginia are not required or authorized to close.
"Capital Leases" means, with respect to any Person, leases or
agreements to lease by such Person and its Consolidated Subsidiaries that, in
accordance with GAAP, have been or should be capitalized on the books of such
Person.
"Capitalized Lease Obligations" means, with respect to any
Person, any obligation of such Person and its Consolidated Subsidiaries for the
payment of rent for any real or personal property under Capital Leases and, for
pu poses hereof, the amount of any such obligation shall be the capitalized
amount thereof, all computed and consolidated in accordance with generally
accepted accounting principles applied on a consistent basis.
"Collateral" means all of the property (real and personal) of
the Borrower purported to be subject to the lien or security interest purported
to be created by any mortgage, deed of trust, security agreement, pledge
agreement, assignment or other security document heret fore or hereafter
executed by the Borrower in favor of the Lender as security for all or any part
of the Obligations, including, without limitation, any asset purchased, in whole
or in part, with proceeds of a Line Loan, subject to the limitation set forth in
Section 7.01(k) hereof.
"Commitment" means the Term Commitment and the Line Commitment
"Common Stock" means the common stock of the Guarantor, par
value $0.00001 per share.
- 2 -
<PAGE>
"Consolidated EBITDA" means for each fiscal quarter of any
Person, all earnings of such Person and its Consolidated Subsidiaries for such
period as determined in accordance with GAAP, before (a) the sum, without
duplication, of (i) gross interest expense for such period minus gross interest
income for such period, in each case determined in accordance with GAAP,
(ii) income tax expense, (iii) depreciation expense, (iv) amortization expense
net of negative goodwill amortization, and (v) extraordinary or unusual non-cash
losses (provided such extraordinary or unusual losses do not at any time result
in a cash outlay by such Person), less (b) extraordinary gains of such Person
and each Consolidated Subsidiary, each determined on a consolidated basis for
such Person and its Consolidated Subsidiaries in accordance with GAAP.
"Consolidated Subsidiary" of a Person at any time shall mean
those Subsidiaries of such Person whose accounts are or should in accordance wit
GAAP be consolidated with those of such Person.
- 3 -
<PAGE>
"Deed of Trust" means the Deed of Trust, dated July 2, 1996,
made by the Borrower in favor of the Lender.
"Default" means any event that, with the giving of notice or
the passage of time or both, would result in an Event of Default.
"EBITDA Average" means, as of any date, the average
Consolidated EBITDA for each of the six calendar onths immediately preceding
such date; provided, however, that for the purpose of the calculation of EBITDA
Average, at the discretion of the Borrower, the months of December and January
may be excluded from such calculation and such months shall be deemed not to
have occurred.
"Effective Date" has the meaning specified therefor in Article
IV of the Old Agreement.
"Employee Plan" means an employee benefit plan (other than a
Multiem loyer Plan) covered by Title IV of ERISA and maintained for employees of
the Borrower or any of its Affiliates.
"Environmental Law" means the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. ss. 9601, et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. ss. 1801, et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901, et seq.), the
Federal Water Pollution Control Act (33 U.S.C ss. 1251 et seq.), the Clean Air
Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
ss. 2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. ss. 6451 et
seq.), and the Medical Waste Tracking Act of 1988, Pub. L. No. 100-582, 102
Stat. 2950 (1988), as such laws have been amended or supplemented from time to
time, and any similar present or future Federal, state or local statute,
ordinance, rule or regulation.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and, unless the context otherwise requires,
the rules and regulations promulgated thereunder from time to time.
"Event of Default" means any of the events set forth in
Section 8.01 hereof.
"Final Term Funding Date" has the meaning assigned to such
term in Section 5.01 hereof.
"Financial Statement " means the Financial Statements (as
defined in the Old Agreement) and the unaudited financial statements of the
Borrower and the Guarantor for the fiscal quarter ended June 30, 1996.
"First Priority Deed of Trust" means the Deed of Trust with
respect to the Property in substantially the form of Exhibit C, which First
Priority Deed of Trust shall, when duly executed and filed and the Senior Loan
Agreement is satisfied and released of record, create a first priority lien o
the property in favor of the Lender and securing all of the Obligations set
forth in clause (i) of the definition thereof.
"GAAP" means generally accepted accounting principles as in
effect from time-to-time in the United States, consistently applied.
"Governmental Authority" means any nation or government, any
federal, state, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commiss on,
- 4 -
<PAGE>
board, bureau, instrumentality, agency or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and having jurisdiction over the Parties to the Loan Documents.
"Guaranty" means the Guaranty made by the Guarantor in favor
of the Lender pursuant to Article X hereof, guaranteeing the Obligations under
the Loan Documents.
"Guarantor" has t e meaning specified therefor in the preamble
hereto.
"Hazardous Materials" means, without limit, any pollutant,
waste, flammable explosives, radioactive materials, hazardous materials,
hazardous wastes, hazardous or toxic substances, or other materials defined in
or regulated under any Environmental Law.
"Indebtedness" means (i) all indebtedness or other obligations
of the Borrower for borrowed money or for the deferred purchase price of prope
ty or services, (ii) Capitalized Lease Obligations of the Borrower, (iii) all
obligations of the Borrower under direct or indirect guaranties, contingent or
other obligations of the Borrower to purchase or otherwise acquire or assure a
creditor against loss in respect thereof, indebtedness or other obligations of
any other Person for borrowed money or for the deferred purchase price of
property or services or Capitalized Lease Obligations of any other Person, (iv)
all indebtedness or other obligations of the Borrower for borrowed money or for
the deferred purchase price of property or services secured by (or for which the
holder of such indebtedness has an existing right, contingent or otherwise, to
be secured by) any lien, security interest or other charge or encumbrance upon
or in property owned by the Borrower, (v) all obligations of the Borrower in
respect of letters of credit and bankers' acceptances with the exception of any
such letter of credit or bankers' acceptance issued in favor of, or required by,
a Governmental Authority, (vi) liabilities incurred under Title IV of ERISA with
respect to any plan covered by Title IV of ERISA and maintained for employees of
the Borrower or any of its Affiliates, and (vii) withdrawal liability incurred
under ERISA by the Borrower or any of its Affiliates to any Multiemployer Plan.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time.
"Lender" has the meaning spec fied therefor in the preamble
hereto.
"Lien" means any security interest, mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
otherwise), charge against or interest in property to secure payment of a debt
or performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"Line Commitment" means the commitment of the Lender to make
the Line Loans to the B rrower pursuant to Article III hereof in the aggregate
principal amount outstanding at any one time not to exceed $5,376,500.
"Line Fee" has the meaning assigned to such term in Section
4.01 hereof.
"Line Loans" means the loans made by the Lender to the
Borrower pursuant to Article III of this Agreement.
- 5 -
<PAGE>
"Line Note" means a promissory note of the Borrower,
substantially in the for of Exhibit B hereto, evidencing the Indebtedness
resulting from the making of the Line Loans and delivered to the Lender pursuant
to Article III hereof, as such promissory note may be modified or amended from
time to time, and any promissory note or notes issued in exchange or replacement
therefor.
"Line Obligations" means all Obligations in respect of the
Line Loans.
"Loan" or "Loans" means the Term Loan and the Line Loans.
"Loan Documents" means this Agreement, the Notes, the Deed of
Trust, the Security Agreement, the Amended and Restated Security Agreement, the
First Priority Deed of Trust, the Guaranty, the Stock Certificates, the
Warrants, the Registration Rights Agreement, Amendment No. 1 to Registration
Rights Agreement, the Stock Transfer Agreement and all other instruments,
documents and agreements executed and delivered pursuant hereto or thereto.
"Loan Fees" means ll of the fees and expenses payable, whether
in cash, in kind, in Common Stock or in Warrants, by the Borrower and the
Guarantor under Section 4.01 of this Agreement.
"Loan Parties" means the Borrower and the Guarantor.
"Maturity Date" means the third anniversary of the Final Term
Funding Date, or such earlier date on which the Loans shall become due and
payable, in whole or in part, in accordance with the terms of this Agreement,
whether by cceleration or otherwise.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA.
"Note" or "Notes" means the Original Term Note, the Term Note
and the Line Note.
"Notice of Borrowing" has the meaning specified in Section
2.02 hereof.
"Notice of Line Borrowing" has the meaning specified in
Section 3.02 hereof.
"Obligations" means (i) the obligation of any Loan Party to
pay, as and when due and payable (by scheduled maturity or otherwise), all
amounts from time to time owing by it in respect of any Loan Document, whether
for principal, interest, (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Borrower or the
Guarantor whether or not a claim for post-filing interest is allowed pursuant to
11 U.S.C. ss. 506, or otherwise in such cases), fees or otherwise and (ii) the
obligation of any Loan Party to perform or observe all of its other obligations
from time to time existing under any Loan Document.
"Operating Leases" means leases or agreements to lease of the
Borrower, other than Capital Leases.
"Operating Lease Obligations" means all obligations of the
Borrower for the payment of rent for any real or personal property under leases
or agreements to lease, other than Capitalized Le se Obligations, all computed
in accordance with GAAP.
- 6 -
<PAGE>
"Original Term Note" means the promissory note of the Borrower
evidencing the Indebtedness resulting from the making of the Tranche A portion
of the Term Loan and delivered to the Lender pursuant to Article IV of the Old
Agreement, as such promissory note may be modified or amended from time to time,
and any promissory note or notes issued in exchange or replacement therefor.
"Payment Office" means Madeleine L.L.C., 950 Third Avenue, New
York, New York 10022, Attn.: Mr. Kevin P. Genda.
"Permitted Investments" means (i) marketable direct
obligations issued or unconditionally guaranteed by the United States
Government, or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one year from the date
of acquisition thereof, (ii) commercial paper, maturing not more than 70 days
after the date of issue, issued by a corporation rated P-1 by Moody's Investors
Service, Inc. or A-1 by Standard & Poor's Corporation or issued by the Lender or
its Affiliates, (iii) time certificates of deposit, issued by commercial banking
institutions, each of which is a member of the Federal Reserve System and has a
combined capital and surplus of not less than $100,000,000, (iv) money market
accounts maintained with mutual funds having assets in excess of $2,500,000,000,
and (v) tax exempt securities rated A or better by Moody's Investors Service,
Inc. or A+ or better by Standard & Poor's Corporation; provided, however, that
deposits or certificates of deposits with commercial banking institutions which
are a member of the Federal Reserve System are Permitted Investments so long as
any such deposit does not exceed $250,000.
"Person" means an individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, join
venture or governmental authority.
"Plan of Remediation" means the Corrective Action Plan, dated
August 14, 1995, a copy of which is annexed hereto as Exhibit I.
"Post-Default Rate" means a rate per annum equal to 22%.
"Property" means the real property described in Schedule I
hereto.
"Refinance" has the meaning assigned to such term in Section
4.06 hereof.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated July 2, 1996, between the Lender and the Guarantor.
"Security Agreement" means the Security Agreement, dated July
2, 1996, made by the Borrower in favor of the Lender.
"Senior Loan Agreement" means the (i) Credit Line Deed of
Trust, dated June 27, l994; (ii) the Note in original principal amount of
$l0,200,000.00, dated June 28, 1994, and (iii) the Constru tion Loan Agreement,
dated June 27, l994; as amended and supplemented by the Agreement, dated August
l8, 1994; the Construction Loan Agreement, dated December 7, l994; the
Construction Loan Agreement Amendment, dated February l0, l995; the Letter
Amendment to Construction Loan Agreement, dated April l0, l995; the Construction
Loan Agreement Amendment V, dated July l995; the Letter Amendment to
Construction Loan Agreement, dated October 3l, l995; the Letter Amendment to
Construction Loan Agreement, dated November
- 7 -
<PAGE>
28, l995; the Letter Amendment to Construction Loan Agreement, dated December
21, l995; the Letter Amendment to Construction Loan Agreement, dated January 12,
l996, and the Amendment of Construction Loan Agreement dated September 19, 1996,
and effective on October 31, 1996, each among the Senior Secured Creditor, the
Borrower and the Guarantor.
"Senior Secured Creditor" means Bennett Management &
Development Corp., the bankruptcy estate hereof under chapter 11 Bankruptcy Case
No. 9661379, presently pending in the United States Bankruptcy Court for the
Northern District of New York and any and all successors and assigns of either
of them, any of which has the legal and/or equitable rights in the Property as
of the Final Term Funding Date.
"Surveyor" means ____________________________________________.
"Stock Certificate" means any original stock certificate
issued by th Guarantor representing shares of Common Stock.
"Stock Transfer Agreement" means the Stock Transfer Agreement,
dated as of July 2, 1996, between the Lender and the Guarantor.
"Subsidiary" means any corporation of which more than 50% of
the outstanding capital stock or similar rights of holders of equity having (in
the absence of contingencies) ordinary voting power to elect directors (or
Persons performing similar functions) of such corporati n is, at the time of
determination, owned directly, or indirectly through one or more intermediaries,
by any Person.
"Taxes" means any tax imposed by the State of West Virginia or
any subdivision thereof.
"Term Commitment" means the commitment of the Lender to make a
Loan to the Borrower pursuant to Article II hereof in the principal amount not
to exceed $16,100,000.00.
"Term Loan" means the loans made by the Le der to the Borrower
pursuant to Article II hereof.
"Term Note" means a promissory note of the Borrower,
substantially in the form of Exhibit A hereto, evidencing the Indebtedness
resulting from the making of the Term Loan and delivered to the Lender pursuant
to Article II hereof, as such promissory note may be modified or amended from
time to time, and any promissory note or notes issued in exchange or replacement
therefor.
"Term Obligations" as the meaning assigned to such term in
Section 9.13 hereof.
"Termination Date" means the earlier to occur of (a) the
Maturity Date and (b) the date on which all of the Obligations have been fully
performed.
"Title Insurance Policy" means the mortgagee's loan policy,
together with all endorsements made from time to time thereto, issued by or on
behalf of a title insurance company satisfactory to the Lender, insuring the
Lien created by the Fir t Priority Deed of Trust in an amount and on terms
satisfactory to the Lender, delivered to the Lender pursuant to Article V
hereof.
"Tranche A" has the meaning specified therefore in Section
2.02 hereof.
"Tranche B" has the meaning specified therefore in Section
2.02 hereof.
- 8 -
<PAGE>
"Title Insurance Policy" means the mortgagee's loan policy,
together with all endorsements made from time o time thereto, issued by or on
behalf of a title insurance company satisfactory to the Lender, insuring the
Lien created by the First Priority Deed of Trust in an amount and on terms
satisfactory to the Lender, delivered to the Lender pursuant to Article V
hereof.
"Transaction Costs" has the meaning specified therefore in
Section 9.04 hereof.
"Unfunded Liability" has the meaning specified therefore in
Subsection 6.01(j) hereof.
"Warrants" means validly issued warrants for the purchase of shares of Common
Stock, in substantially the form attached hereto as Exhibit F.
SECTION 1.02. Accounting and Other Terms. Unless otherwise
expressly stated herein, all accounting determinations hereunder shall be made,
all accounting terms used herein shall be interpreted, and all financial
statements required to be delivered hereunder shall be prepared in accordance
with GAA . All terms used in this Agreement which are defined in Article 9 of
the Uniform Commercial Code in effect in the State of New York on the date
hereof and which are not otherwise defined herein shall have the same meanings
herein as set forth therein.
ARTICLE II
AMOUNT AND TERMS OF THE TERM LOAN
SECTION 2.01. Term Commitment. The Lender agrees, on the terms
and conditions here nafter set forth, to make the Term Loan to the Borrower in a
principal amount not to exceed the Term Commitment. Any principal amount of the
Term Loan which is repaid or prepaid by the Borrower may not be reborrowed.
SECTION 2.02. Making the Term Loan. The Term Loan shall be
made by the Lender to the Borrower in two loan tranches. The first loan tranche
("Tranche A") in the original principal amount of $5,000,000 was made by the
Lender to the Borrowe pursuant to the Old Agreement. The second loan tranche
("Tranche B") shall be in the maximum principal amount of $11,100,000 and shall
be made on the Final Term Funding Date. Prior to the making of the Tranche B
portion of the Term Loan, the Borrower shall give the Lender prior written
notice in substantially the form of Exhibit D hereto (a "Notice of Borrowing")
no later than 11:00 A.M. (New York City time) on the day of the proposed
borrowing. Such Notice of Borrowing shall be irrevocable and shall specify the
principal amount of the proposed borrowing and the proposed borrowing date: and
(i) the Borrower shall be bound to make a borrowing in accordance therewith; and
(ii) the Lender shall be required to make the Tranche B portion of the Term Loan
requested in such Notice of Borrowing in accordance with the terms of this
Agreement. The Lender may act without liability upon the basis of written notice
believed by the Lender in good faith to be from the Borrower (or from any
officer thereof designated in writing to the Lender) and the Loan Parties shall
execute a "Settlement Statement" or "Use of Proceeds" which shall constitute
prima facie evidence as to the terms of the borrowing. On the Final Term Funding
Date and upon fulfillment of the applicable conditions set forth in Article V
hereof, the Lender will make available the requested Tranche B portion of the
Term Loan to the Borrower in an amount not to exceed $11,100,000 by delivering
the proceeds thereof, in immediately available funds (either in the form of a
certified bank check or
- 9 -
<PAGE>
wire transfer) less the fees and expenses due under Sections 4.01 and 9.04
hereof. The Borrower shall execute and deliver to the Lender, on the Final Term
Funding Date, a Term Note payable to the order of the Lender to evidence the
Term Loan in the original principal amount of the Term Commitment, and the
Lender shall return the Original Term Note in the amount of $5,000,000 to the
Borrower. The Term Loan amount may be increased to provide for the funding and
payment of the Lender's fees and costs incurred in connection herewith, together
with interest due thereon, which are unpaid as of the Termination Date and which
accrue thereafter. The books and records of the Lender shall be presumptive
evidence of the amount of Obligations under the Term Loan outstanding from time
to time, whether in excess of the principal amount of the Original Term Note,
the Term Note or otherwise, absent manifest error.
SECTION 2.03. Term Loan Interest.
(a) Loan. The Term Loan shall bear interest on the
principal amount thereof rom time to time outstanding from the Effective Date
until such principal amount becomes due at an interest rate per annum of twelve
percent (12%).
(b) Interest Payment. Interest on the Term Loan shall
be payable monthly, in arrears, on the last day of each month, commencing
December 31, 1996, and on the Termination Date (whether by demand, acceleration
or otherwise). Interest at the Post-Default Rate shall be payable on demand.
SECTION 2.04. Repayment. The Term Loan shall be
payable as to principal in full on the Maturity Date, together with all such
other amounts as may be necessary to repay in full all unpaid Term Obligations
to the Lender.
SECTION 2.05. Termination or Reduction of Commitment.
The Term Commitment shall terminate at 5:00 p.m. (New York City time) on the
Final Term Funding Date.
SECTION 2.06. Optional Prepayment of the Term Loan. Subject to
Sections 4.05 and 4.06 hereof, the Borrower may, on the same Business Day's
telephone notice no later than 11:00 A.M. (New York City time) (promptly
confirmed in writing) prepay without cost or penalty, the outstanding amount of
the Term Loan in whole or in part with accrued interest to the date of such
prepayment on the amount prepaid.
ARTICLE III
AMOUNT AND TERMS OF THE LINE LOANS
SECTION 3.01. Line Commitment. The Lender agrees, on the terms
and conditions hereinafter set forth, to make loans (the "Line Loans") to the
Borrower in an aggregate principal amount outstanding at any one time not to
exceed the Line Commitment. Any principal amount of the Line Loans which is
repaid by the Borrower may be reborrowed prior to the Termination Date provided
that no Event of Default or event that, with the giving of notice or the p ssing
of time or both, would constitute an Event of Default has occurred and is
continuing.
SECTION 3.02. Making the Line Loans. The Borrower shall give
the Lender prior written notice in substantially the form of Exhibit E hereto (a
"Notice of Line Borrowing") no later than 11:00 A.M. (New York City time) at
least two Business Days prior to each proposed Line Loan borrowing. Such Notice
of Line Borrowing shall be irrevocable and shall specify the principal amount of
the proposed borrowing, which
- 10 -
<PAGE>
shall be at least $500,000.00, and the proposed borrowing date: and (i) the
Borrower shall be bound to make a borrowing in accordance therewith and (ii) the
Lender shall be required to make the Line Loan requested in such Notice of Line
Borrowing in accordance with the terms of this Agreement. The Lender may act
without liability upon the basis of written notice believed by the Lender in
good faith to be from the Borrower (or from any officer thereof designated in
writing to the Lender), and the Loan Parties shall execute a "Settlement
Statement" or "Use of Proceeds" which shall constitute prima facie evidence as
to the terms of such borrowing. On the Final Term Funding Date and upon
fulfillment of the applicable conditions set forth in Article V hereof, the
Lender will make available the requested Line Loans to the Borrower in an amount
not to exceed the Line Commitment by delivering the proceeds thereof, in
immediately available funds (either in the form of a certified bank check or
wire transfer) less the Line Fees and expenses then due and payable, if any, due
under Sections 4.01(a) and 9.04 hereof. The Borrower shall execute and deliver
to the Lender, on the Final Term Funding Date, the Line Note payable to the
order of the Lender to evidence the Line Loans in the principal amount of the
Line Commitment. The outstanding amount of the Line Loans may be increased to
provide for the funding and payment of the Lender's fees and costs incurred in
connection with the Line Loans, together with interest due thereon, which are
unpaid as of the Termination Date and which accrue thereafter. The records of
the Lender shall be presumptive evidence of the amount of Obligations under the
Line Loans outstanding from time to time whether in excess of the initial
principal amount of the Line Note or otherwise, absent manifest error.
SECTION 3.03. Line Loan Interest.
(a) Loans. Each Line Loan shall bear interest on the
principal amount thereof from time to time outstanding from the Final Term
Funding Date until such principal amount becomes due at an interest rate per
annum of fifteen percent (15%).
(b) Interest Payment. Interest on the outstanding
principal amount of each Line Loan shall be payable monthly, in arrears, on
the last day of each month, commencing December 31, 1996, and on the Termination
Date (whether by demand, acceleration or otherwise). Interest at the Post-
Default Rate shall be payable on demand.
SECTION 3.04. Repayment. The Line Loans shall be
payable as to principal in full on the Maturity Date, together with all such
other amounts as may be necessary to repay in full all unpaid Line
Obligations to the Lender.
SECTION 3.05. Termination of Line Commitment. The Line
Commitment shall terminate in full at 5:00 P.M. (New York C ty time) on the
Termination Date.
ARTICLE IV
FEES, PAYMENTS, DEFAULT INTEREST AND OTHER COMPENSATION
SECTION 4.01. Fees and Other Consideration. The fees
and other consideration provided for herein are in addition to the fees and
other consideration due and payable on the Effective Date pursuant to the
Old Agreement.
(a) Loan Fees. On July 2, 1997, the Borrower shall
pay to the Lender, in immediately available funds, a non-refundable fee of
$888,000; provided, however, that if there has occurred a Refinance
- 11 -
<PAGE>
prior to July 2, 1997, the foregoing fee shall be waived by the Lender. On the
Final Term Funding Date, the Borrower shall pay to the Lender, in immediately
available funds, a non-refundable fee of $376,350.00 (the "Initial Line Fee");
provided, however, that the Borrower may elect to pay such fee in 13 monthly
installments, the first installment in the amount of $28,950.00 to be due and
payable on the Final Term Funding Date , and the remaining twelve installments,
each in the amount of $28,950.00, to be due and payable in immediately available
funds on the first day of each calendar month beginning on January 1, 1997, and
ending on December 1, 1997. The Borrower shall also pay to the Lender on each
January 1 prior to the Termination Date, if any, in immediately available funds,
a non-refundable fee (collectively with the Initial Line Fee, the "Line Fees")
of $376,350. The Borrower hereby instructs the Lender, commencing January 1,
1998, to withhold the Line Fees from the Line Commitment in satisfaction
thereof, and the amount so withheld shall be a Line Loan for all purposes
hereunder.
(b) Administration Fee. The Borrower shall pay to
the Lender, on each anniversary of the Final Term Funding Date, in immediately
available funds, a non-refundable fee equal to 8% of the outstanding principal
amount of the Term Loan as of the date of such anniversary; provided, however,
that on the first such anniversary, such fee shall equal 8% of the outstanding
principal balance of the Tranche A portion of the Term Loan only.
(c) Audit and Collateral Monitoring Fees. The
Borrower shall pay to the Lender on each anniversary of the Effective Date, the
costs and expenses incurred by the Lender in connection with the periodic
collateral appraisals and audit reviews performed by or on behalf of the Lender
in such year; provided, however, that so long as no Event of Default has
occurred and is continuing, the Borrower's obligation under this Subsection
3.01(c) shall be limited to $25,000 for each 365 (or 366, as applicable) day
period following the Effective Date.
(d) Common Stock.
(i) The Guarantor shall, on each November 15,
commencing November 15, 1997, until all of the amounts due to the Lender
(including, without limitation, all principal, interest, fees (whether due in
cash, in Common Stock, in Warrants or in kind), expe ses and indemnities) in
connection with the Term Loan (the "Term Loan Payments") have been satisfied in
full, deliver to the Lender Stock Certificates, in such denominations as the
Lender may request, validly issued to the Lender or its designee, representing
the number of shares of Common Stock equal to the quotient of (i) the product of
(A) the outstanding principal amount of the Term Loan on the day of such
delivery and (B) 5%, and (ii) the average daily closing price of the Common
Stock on each Business Day, as reported in a publication of generally recognized
standing in the securities industry, for the 30 Business Days immediately
preceding the third Business Day prior to such November 15; and
(ii) On the Final Term Funding Date, deliver to
the Lender Stock Certificates, in such denominations as the Lender may request,
validly issued to the Lender or its designee, representing 550,000 shares of
Common Stock; provided, however, that the Borrower may elect to issue and
deliver such shares in 13 installments, the first such installment to be
delivered on the Final Term Funding Date in the amount of 42,316 shares of
Common Stock, and the remaining 12 installments of 42,307 shares of Common
- 12 -
<PAGE>
Stock to be delivered on the first day of each calendar month beginning on
January 1, 1997, and ending on December 1, 1997;
provided, however, that such shares shall be issued to the Lender or its
designee only upon the payment by the Lender to the Guarantor of an amount equal
to the product of (i) the par value of the Common Stock and (ii) the number of
shares of Common Stock to be issued; provided, further, that the number of
shares of Common Stock of the Guarantor to be received by the Lender pursuant to
Section 4.01(d)(i)(II) after the Final Term Funding Date shall, subject to the
provisions of Section 7 of the Warrants which relate to limitations on the
Lender's right to anti-dilution protection, be adjusted to the extent necessary
to insure that the Lender will receive a number of shares of Common Stock equal
in percentage to the percentage of the Common Stock (on a fully-diluted basis)
that such shares represent of the Common Stock of the Guarantor issued and
outstanding (on a fully-diluted basis) on the Final Term Funding Date.
Notwithstanding the foregoing, if (i) an Event of Default has
occurred, (ii) the Obligations relating to the Term Loan have been repaid in
full, (iii) any single Person, group of Affiliated Persons, or Affiliate thereof
controls, or acquires control of, the voting rights of 35% or more of the Common
Stock, or (iv) the Guarantor merges or becomes consolidated with any other
Person in a transaction in which the Guarantor is not the surviving entity, or
sells all or s bstantially all of its assets, then the Guarantor shall deliver
to the Lender all of the shares of Common Stock due to the Lender pursuant to
paragraph 4.01(d)(ii) above upon demand by the Lender.
If the issuance of shares to the Lender would result in a put
obligation (the "Put") pursuant to Section 4.01 of the Stock Transfer Agreement,
then the maximum number of shares that may be issued without resulting in a Put
shall be issued to the Lender as hereinabove set forth, and the Borrower shall
issue to the Lender Warrants for the purchase of the remaining shares due to be
issued to the Lender hereunder with an Exercise Price (as defined in the
Warrant) equal to the par value of the Common Stock. Each Stock Certificate
issued hereunder shall bear the following legend:
"The Shares represented by this certificate have not been registered or
qualified under the Securities Act of 1933, as amended, or the "blue sky" laws
of any state, and may be offered or sold only if registered and qualified
pursuant to the relevant provisions of federal and state securities laws, or if
an exemption from such registration or qualification is applicable, upon an
opinion of counsel to the issuer that such transfer will not violate any federal
or state securities laws applicable thereto."
The parties hereto agree that, for income tax purposes, the
purchase price to be attributed to the shares of Common Stock issued to the
Lender hereunder on the date hereof is $___________________.
(e) Warrants. (i) The Guarantor shall, on each November 15,
commencing November 15, 1997, until all of the Term Loan Payments have been
satisfied in full, issue and deliver to the Lender or its designee validly
issued Warrants for the purpose of:
(I) 250,000 shares of Common Stock with an Expiration
Date (as defined in the Warrant) of five years from the date of issuance of such
Warrant, and an Exercise Price (as defined in the Warrant) equal to $1.06, and
(II) shares of Common Stock, with an Expiration Date of
five years from the date of issuance, for an Exercise Price (as defined in the
Warrant) equal to the average daily closing price of the Common Stock on each
Business Day, as reported in a publication of generally recognized standing in
the securities industry, for the 30 Business Days immediately preceding the
third Business Day prior to the Final Term Funding Date, rounded to the nearest
penny, and for that number of shares of Common Stock equal to the product of (A)
the product of (x) a fraction, the numerator of which is the Exercise Price and
the denominator of which is 1.06, and (y) 550,000, and (B) the quotient of
(x) the outstanding principal amount of the Term Loan on the day of such
delivery and (y) $16,100,000;
(ii) On the Final Term Funding Date, the Guarantor
shall issue and deliver to the Lender or its designee validly issued Warrants,
for the purchase of 1,632,140 shares of Common Stock, with an Expiration Date
(as defined in the Warrant) of five years from the date of issuance of such
Warrant, and an Exercise Price (as defined in the Warrant) equal to $1.06;
provided, however, that the Borrower may elect to issue and deliver such
Warrants in 13 equal installments (provided that the first installment may be
increased such that the remaining twelve installments shall be for a non-
fractional number of Warrants), the first such installment to be delivered on
the Final Term Funding Date and the remaining 12 installments to be delivered on
the first day of each calendar month beginning on January 1, 1997, and ending on
December 1, 1997.
Notwithstanding the foregoing, if (i) an Event of Default has
occurred, (ii) the Obligations relating to the Term Loan have been repaid in
full, (iii) any single Person, group of affiliated Persons or Affiliate thereof
controls, or acquires control of the voting rights of 35% or more of the Common
Stock, or (iv) the Guarantor merges, becomes consolidated with any other Person
in a transaction in which the Guarantor is not the surviving entity, or sells
all or substantially all of its assets, then the Guarantor shall deliver to the
Lender all of the Warrants due to the Lender pursuant to paragraph 4.01(e)(ii)
above upon demand by the Lender.
Notwithstanding the foregoing, to the extent that there shall
occur at any time, pri r to any such issuance of Warrants, any event of a type
that would require adjustment of the number of shares issuable upon the exercise
of the Warrants or the Exercise Price (as defined in the Warrant) of such shares
to the extent that such Warrants already had been issued, the number of shares
to be issued under such Warrant, and the Exercise Price thereof, shall prior to
issuance, be adjusted in the manner provided in Section 7 of the Warrant. Any
such adjusted number of shares issuable pursuant to a Warrant and any such
adjusted Exercise Price shall be reflected in the Warrant at the time of the
issuance thereof.
- 13 -
<PAGE>
The parties hereto agree that, for income tax purposes, the
purchase price to be attributed to the Warrants issued to the Lender hereunder
on the date hereof is $_____________.
SECTION 4.02. Payments and Computations. The Borrower will
make each payment under the Loan Documents to wh ch it is a party not later than
2:30 P.M. (New York City time) on the day when due, in lawful money of the
United States of America and in immediately available funds, to the Lender at
the Payment Office, or at such other place or to such account as the Lender may
designate by notice to the Borrower. All payments shall be made by the Borrower
without defense, set-off or counterclaim to the Lender. Subject to Section 8.01
below, all interest, fees, costs and expenses for which the Borrower is
obligated under any Loan Document shall, if not timely paid by the Borrower, be
added to the principal amount of the Loan and the Borrower hereby authorizes the
Lender to, and the Lender may, from time to time, increase the principal amount
of the Loan by any such amounts due under any Loan Document to which the
Borrower is a party. The Borrower confirms that any addition to principal which
the Lender so makes to the Loan as herein provided will be made as an
accommodation to the Borrower and solely at the Lender's discretion. Whenever
any payment to be made under any such Loan Document shall be stated to be due on
a day other than a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall in such case be
included in the computation of interest and fees. All computations of interest
under this Agreement and any other Loan Document and all fees shall be made by
the Lender on the basis of a year of 360 days for the actual number of days
occurring in the period for which such interest is payable; provided, however,
that with respect to any date on which the Borrower makes a repayment or
prepayment of principal, interest in respect of such principal repayment or
prepayment amount shall be calculated on the basis of a year of 360 days for the
actual number of days occurring in the period for which such interest is payable
but excluding the day on which such repayment or prepayment of principal is
made. In no event shall prior recourse to any Collateral be a prerequisite to
the Lender's right to demand payment of any Obligation. The Lender's records
kept in the ordinary course of its business shall be presumed to be correct and
shall constitute prima facie evidence of the amount owing or paid with respect
to any Obligation, absent manifest error.
SECTION 4.03. Taxes. (a) If the Borrower shall be required by
any applicable law, rule or regulation to deduct or withhold any Taxes from or
in respect of any amount payable hereunder, then (i) the amount so payable shall
be increased to the extent necessary so that after making all required
deductions and withholdings (including Taxes on amounts payable to the Lender
pursuant to this sentence) the Lender shall receive an amount equal to the sum
it would have received had no such deductions or withholdings been made, (ii)
the Borrower shall make such deductions or withholdings and (iii) the Borrower
shall pay to the relevant taxation authority the full amount required to be so
deducted or withheld. Whenever any Taxes are payable by the Borrower, as
promptly as possible thereafter the Borrower shall send the Lender an official
receipt or other documentation satisfactory to the Lender evidencing such
payment to such authority. If, due to the imposition of any Taxes, the Lender's
tax liability with respect to any amounts payable hereunder to any other taxing
authority is reduced, the amount of such reduction shall be paid by the Lender
to the Borrower upon Borrower's demand therefor; provided, however, that in no
event shall the Lender be required to pay to the Borrower an amount in
- 14 -
<PAGE>
excess of the amount withheld by the Borrower in respect of Taxes due from or in
respect of any amount payable hereunder.
(b) If the Lender shall be required to pay any Taxes
in respect of any amount payable by the Borrower hereunder, then the Borrower
shall, upon demand by the Lender, pay to the Lender a amount equal to the
difference between (i) the Taxes required to be paid by the Lender, and (ii) the
amount, if any, of the reduction of the Lender's tax liability to any other
taxing authority resulting from the payment of such Taxes; provided, however,
that in no event shall the Lender be required to pay to the Borrower an amount
in excess of the amount paid by the Borrower to the Lender pursuant to this
paragraph 4.03(b).
SECTION 4.04. Default Interest. Any Obligation hereunder,
including the principal of the Loans, fees and (to the extent permitted by law)
interest which is not paid when due (after any applicable grace period therefor
set forth in Section 8 hereof), whether upon demand, by acceleration or
otherwise, and all amounts payable after the occurrence and during the
continuance of an Event of Default, shall bear interest from the day when due
until such amount is paid in full at a rate per annum equal to the Post-Default
Rate. In the event that any amount of principal of, or interest on, any Loan is
not paid within 10 days of the due date thereof (whether by demand, acceleration
or otherwise) when due, the Borrower shall, upon demand, pay an additional fee
equal to 5% of the amount of such principal and/or interest not timely paid.
SECTION 4.05. Principal Repayments. All payments of principal
shall be applied first, to the outstanding principal amount of Line Loans, and
secon , to the outstanding principal amount of the Term Loan, unless the
Borrower specifies otherwise in a written notice received by the Lender prior
to, or concurrently with, such principal payment.
SECTION 4.06. Refinance of Term Loan. In the event that the
Borrower receives a bona fide offer from a third party to refinance the Term
Loan on terms more favorable than the ongoing terms contained herein applicable
to the Term Loan (a "Refinance"), then, on n less than 30-day's prior written
notice to the Lender from the Borrower that the Borrower has agreed to accept
such Refinance:
(a) the Borrower shall pay to the Lender all of the Term
Obligations;
(b) upon receipt of payment in full of all of the Term
Obligations, the Borrower and the Lender shall execute, and the Borrower shall
duly record, such documents, instruments and agreements, in form and substance
satisfactory to the Lender and i s counsel, such that the Lender shall have a
valid and perfected Lien on the Property securing the Line Loans in an amount
equal to the Line Commitment on the same terms and conditions as the First
Priority Deed of Trust, subject only to a Lien on the Property securing the
Refinance up to a maximum amount of $16,100,000, any then-existing lien senior
to the First Priority Deed of Trust and such other Liens as the Lender, in its
sole discretion, may agree to in writing.
The Borrowe hereby acknowledges and agrees that all reasonable
fees, costs, expenses and taxes incurred by or on behalf of the Lender in
connection with its obligations under this Section 4.06 are Transaction Costs.
- 15 -
<PAGE>
ARTICLE V
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 5.01. Conditions to Funding of the Tranche B Portion
of the Term Loan. The Lender sha l have no obligation to fund the Tranche B
portion of the Term Loan until the date (the "Final Term Funding Date") on which
each of the following conditions precedent shall have been satisfied:
(a) Payment of Fees, Etc. The Borrower shall have
paid on or before the Final Term Funding Date all fees, costs, expenses and
Taxes then payable by the Borrower pursuant to Sections 4.01, 4.03 and 9.04
hereof, and the Guarantor shall have satisfied all of its Obligations pursuant
to Section 4.01(d) and (e) hereof.
(b) Representations and Warranties; No Event of
Default. The representations and warranties contained in Section 6.01 of this
Agreement and in each other Loan Document and certificate or other writing
delivered to the Lender pursuant hereto on or prior to the Final Term Funding
Date, including, without limitation, each document, certificate or agreement
delivered pursuant to, or in connection with, the Old Agreement, shall be
correct on and as of the Final Term Funding Date as though made on and as of
such date; and no Event of Default, or event which with the giving of notice or
the lapse of time or both would constitute an Event of Default, shall have
occurred and be continuing on the Final Term Funding Date or would result from
the making of the Tranche B portion of the Term Loan.
(c) Legality. The making of the Term Loans shall not
contravene a y law, rule or regulation applicable to the Lender, the Borrower or
the Guarantor.
(d) Delivery of Documents. The Lender shall have
received on or before the Final Term Funding Date the following, each in form
and substance satisfactory to the Lender and, unless indicated otherwise, dated
the Final Term Funding Date :
(i) the Term Note representing the Term
Loan, duly executed by the Borrower;
(ii) the Amended and Restated Security Agreement,
duly executed by the Borrower;
(iii) a copy of the First Priority Deed of Trust,
duly executed by the Borrower and the Lender, and certified as filed by the
Clerk of the County Commission of ancock, West Virginia;
(iv) evidence of the recording of the First
Priority Deed of Trust in such other office or offices as may be necessary or,
in the opinion of the Lender, desirable to perfect each Lien purported to be
created thereby or to otherwise protect the rights of the Lender thereunder;
- 16 -
<PAGE>
(v) the Title Insurance Policy;
(vi) evidence satisfactory to the Lender and its
counsel that all obligations of the Borrower and the Guarantor under the Senior
Loan Documents have been satisfied in full including, without limitation, a
general release duly executed by the Senior Secured Creditor;
(vii) a certificate of the Surveyor certifying
that since the latest survey of the Property, there have been no material
changes thereto;
(viii) a certificate executed by an authorized
officer of the Borrower that to the best of its knowledge, the Property is not
located in an area designated by a Governmental Authority as a flood or similar
hazard area in form and substance satisfactory to the Lender, in its sole
and absolute discretion;
(ix) acknowledgment copies of appropriate
financing statements on Form UCC-1, duly executed by the Borrower and duly
filed in such office or offices as may be necessary or, in the opinion of the
Lender, desirable to perfect the security interests purported o be created
by the Amended and Restated Security Agreement;
(x) duly executed UCC termination statements
with respect to UCC filings by the Senior Secured Creditor in connection with
any of the Collateral;
(xi) Release of the Credit Line Deed of Trust,
dated June 27, l994, in favor of the Senior Secured Creditor;
(xii) a title report with respect to the Property
showing only those exceptions as are accept ble to the Lender, in its sole and
absolute discretion;
(xiii) certified copies of requests for copies of
information on Form UCC-11, listing all effective financing statements which
name as debtor the Borrower and which are filed in the offices referred to in
clause (x) above, together with copies of such financing statements, none of
which, except as otherwise agreed to in writing by the Lender, shall cover any
of the Collateral;
(xiv) a copy of the resolutions adopted by the
Board of Directors of each Loan Party, certified as of the Final Term Funding
Date by an authorized officer thereof, authorizing (A) the borrowings hereunder
and the transactions contemplated by the Loan Documents to which such entity is
or will be a party, and (B) the execution, delivery and performance by each Loan
Party of each Loan Document to which it is or will be a party and the execution
and delivery of the other documents to be delivered by the Loan Parties in
connection herewith;
(xv) a certificate of an authorized officer of
each Loan Party certifying the names and true signatures of the officers of
such Loan Party authorized to sign each Loan Document to which such entity is or
will be a party and the other
- 17 -
<PAGE>
documents to be executed and delivered by the Loan Parties in connection
herewith, together with evidence of the incumbency of such authorized officers;
(xvi) a certificate, dated as of a date not more
than ten (10) Business Days prior to the Final Term Funding Date, of the
appropriate official of the jurisdiction of incorporation and each
jurisdiction of foreign qualification, both inside and outside the United States
of each Loan Party, certifying as to the subsistence in good standing of, and
the payment of taxes by, each Loan Party in such jurisdictions and listing all
charter documents of each Loan Party on file with such official(s), together
with confirmation by telephone or telegram (where available) on the Final Term
Funding Date from such official(s) as to such matters;
(xvii) a copy of the charter of each Loan Party,
certified as of a date not more than 30 days prior to the Final Term
Funding Date by the appropriate official(s) of the jurisdiction of incorporation
of each Loan Party and as of the Final Term Funding Date by an authorized
officer of such Loan Party;
(xviii) a copy of the by-laws of each Loan Party,
certified as of the Final Term Funding Date by an authorized officer of such
Loan Party;
(xix) an opinion of Freer & McGarry, counsel to
the Borrower and the Guarantor, substantially in the form of Exhibit G hereto
and as to such other matters as the Lender may reasonably request;
(xx) an opinion of Jackson and Kelly, West
Virginia counsel to the Borrower and the Guarantor, substantially in the form of
Exhibit H hereto and as to such other matters as the Lender may reasonably
request;
(xxi) a copy of the Financial Statements, together
with a certificate of the chief executive officer or chief financial officer
of the Borrower, setting forth all existing guarantees and other contingent
liabilities of the Borrower;
(xxii) a certificate of insurance evidencing
insurance on all property of the Borrower as is required by Section 7.01(h)
thereof, naming the Lender as additional insured as its interests may appear for
all insurance maintained by the Borrower;
(xxiii) a schedule of all existing leases under
which the Borrower is a lessee for the use of real property, certified by the
chief financial officer of the Borrower;
(xxiv) such other agreements, instruments,
approvals, opinions and other documents as the Lender may reasonably request.
(e) Proceedings; Receipt of Documents. All
proceedings in connection with the transactions contemplated by this Agreement,
and all documents incidental thereto, shall be satisfactory to the Lender and
its counsel, and the Lender and such counsel shall have received
- 18 -
<PAGE>
all such information and such counterpart originals or certified or other copies
of such documents as the Lender or such counsel may reasonably request.
(f) Material Adverse Change. The Lender shall have
determined, in its sole and absolute discretion, that no material adverse change
shall have occurred in the business, operations, assets, financial condition
or prospects of the Borrower or the Guarantor after June 30, 1996.
(g) Due Diligence. The Lender shall have completed
its due diligence with respect to the Loan Parties and the results thereof
shall be acceptable to the Lender, in its sole and absolute discretion.
SECTION 5.02. Conditions to Funding of Line Loans.
The obligation of the Lender to make the initial Line Loan hereunder is subject
to the satisfaction in full of each of the following conditions precedent:
nt of Fees, Etc. The Borrower shall have paid on or before the Final Term
Funding Date all fees, costs, expenses and taxes then payable by the Borrower
pursuant to Sections 4.01 and 9.04 hereof, and the Guarantor shall have
satisfied all of its Obligations pursuant to Section 4.01(d) and (e) hereof, in
each case with respect to the Line Loans.
(b) Representations and Warranties; No Event of
Default. The representations and warranties contained in Section 6.01 of this
Agreement and in each other Loan Document and certificate or other writing
delivered to the Lender pursuant hereto, including, without limitation, each
document, certificate or agreement delivered pursuant to, or in connection
with, the Old Agreement, shall be correct on and as of the date of the making of
the requested Line Loan as though made on and as of such date, other than as
reflected in a written certificate delivered to the Lender at least three (3)
Business Days prior to the making of the initial Line Loan, which certificate
shall be reasonably acceptable in form and substance to the Lender; and no
Event of Default, or event which with the giving of notice or the lapse of time
or both would constitute an Event of Default, shall have occurred and be
continuing on such date either before or after giving effect to the requested
Line Loan.
(c) Legality. The making of the Li e Loans shall not
contravene any law, rule or regulation applicable to the Lender, the Borrower or
the Guarantor.
(d) Delivery of Documents. The Lender shall have
received the Line Note duly executed by the Borrower.
(e) Material Adverse Change. The Lender shall have
determined, in its sole and absolute discretion, that no material adverse change
shall have occurred in the business, operations, ass ts, financial condition
or prospects of the Borrower or the Guarantor after June 30, 1996.
(f) Other Conditions. All of the conditions set
forth in Section 5.01 hereof shall have been satisfied and the Lender shall have
made the Tranche B portion of the Term Loan.
- 19 -
<PAGE>
SECTION 5.03. Conditions of Funding each Line Loan. The Lender
shall have no obligation to make any Line Loan after the Final Term Funding Date
unless and until each of the following conditions have been satisfied:
(a) Representations and Warranties; No Event of
Default. The representations and warranties contained in Section 6.01 of this
Agreement and in each other Loan Document and certificate or other writing
delivered to the Lender pursuant hereto, including, without limitation, each
document, certificate or agreement delivered pursuant to, or in connection
with, the Old Agreement, shall be correct on and as of the date of the making of
the requested Line Loan as though made on and as of such date, other than as
reflected in a written certificate delivered to the Lender at least three (3)
Business Days prior to the making of the initial Line Loan, which certificate
shall be reasonably acceptable in form and substance to the Lender; and no
Event of Default, or event which with the giving of notice or the lapse of time
or both would constitute an Event of Default, shall have occurred and be
continuing on such date either before or after giving effect to the requested
Line Loan. The Borrower shall be deemed to have represented and warranted the
foregoing upon any request, by delivery of a Notice of Line Borrowing or
otherwise, for a Line Loan.
(b) Borrowing Notice. The Lender shall have received
a Notice of Line Borrowing in accordance with Section 3.02 with respect to such
Line Loan. Such Notice of Line Borrowing shall contain a detailed description
of the proposed use of funds with appropriate additional materials as are
requested by the Lender to review the proposed use of funds, including, without
limitation, any bids, contracts, plans, purchase agreements or the like in
connection with such use of proceeds, and the calculation of the then current
EBITDA Average.
(c) Use of Proceeds. The proceeds of the Line Loans
shall be used only for capital i provements, the acquisition of equipment
and/or other gaming businesses, or the acquisition of properties for use in the
gaming and lottery business consistent with the current businesses of the
Borrower.
(d) EBITDA Average. The EBITDA Average at the time
of such request for a Line Loan is at least $750,000.00.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties of the Borrower and the
Guarantor. The Borrower and the Guarantor, as appropriate, each represent and
warrant as follows:
(a) Organization, Good Standing, Etc. Each Loan Party
(i) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, (ii) has all requisite
power and authority to conduct its business as now onducted
- 20 -
<PAGE>
and as presently contemplated to make the borrowings hereunder and to consummate
the transactions contemplated hereby and by each of the Loan Documents to which
it is a party, and (iii) is duly qualified to do business and is in good
standing in each jurisdiction and territory, inside and outside of the United
States, in which the character of the properties owned or leased by it or in
which the transaction of its business makes such qualification necessary. The
Borrower is a wholly-owned subsidiary of the Guarantor.
(b) Authorization, Etc. The execution, delivery and
performance by each Loan Party of each Loan Document to which it is a party
(i) have been duly authorized by all necessary corporate action, (ii) do not
and will not contravene the charter or by-laws, law or any contractual
restriction binding on or otherwise affecting it or any of its properties,
(iii) do not and will not result in or require the c eation of any lien,
security interest or other charge or encumbrance (other than pursuant to any
such Loan Document) upon or with respect to any of its properties, and (iv)
do not and will not result in any suspension, revocation, impairment,
forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to its operations or any of its properties.
(c) Governmental Approvals. No authorization or
approval or other action by, and no notice to or filing with, any
Governmental Authority or other regulatory body is required in connection with
the due execution, delivery and performance by the Borrower or the Guarantors of
any Loan Document to which such Persons are or will be parties.
(d) Enforceability of Loan Documents. This Agreement
is, and each other Loan Document to which the Borrower or the Guarantor is
or will be a party, when delivered hereunder, will be a legal, valid and
binding obligation of such Person, enforceable against such Person in accordance
with its terms.
(e) Certificates. Each Stock Certificate issued and
delivered pursuant to subsection 3.01(d) or pursuant to the terms of any Warrant
shall, upon issuance and delivery pursuant to the terms hereof or the terms of
such Warrant, as may be the case, represent validly issued, fully paid and non-
assessable shares of Common Stock.
(f) Subsidiaries. There are no Subsidiaries of the
Borrower other than Mountaineer Magic, Inc.
(g) Litigation. Except as set forth on Schedule II
hereto and in the Financial Statements, there is no pending or threatened
action, suit or proceeding affecting the Borrower or the Guarantors before
any court or other Governmental Authority or any arbitrator. There is no
pending or threatened action, suit or proceeding affecting the Borrower or
any of the Guarantors before any court or other Governmental Authority or any
arbitrator which may materially adversely affect the operations or condition,
financial or otherwise, of such Person or the ability of such Person to perform
its obligations under any Loan Document to which such Person is or will be a
party.
(h) Financial Condition. The Financial Statements,
copies of which have been delivered to the Lender, fairly present the financial
condition of the Loan Parties as of the respective dates thereof and the results
of operations of the Loan Parties for the fiscal
- 21 -
<PAGE>
periods ended on such respective dates, all in accordance with GAAP. Since June
30, 1996, there has been no material adverse change in such condition or
operations. There has been no change in the number of shares of Common Stock
outstanding since May 16, 1996, as reported on the Form 10Q of the Guarantor for
the period ending March 31, 1996, other than as set forth on Schedule X hereto.
(i) Compliance with Law, Etc. Neither the Borrower nor the Guarantor is in
violation of its charter or by-laws, any law or any material term of any
agreement or instrument binding on or otherwise affecting it or any of its
properties.
(j) ERISA. Neither Loan Party maintains, or is obligated to maintain or
contribute to, any Employee Plan or Multiemployer P an. As of the Final Term
Funding Date, neither Loan Party has any employee benefit plan with respect to
which the present value of all vested, nonforfeitable benefits under such plan
exceeds the fair market value of the assets of such plan allocable to such
benefits (any such amount constituting an "Unfunded Liability").
(k) Taxes, Etc. After giving effect to any lawful extension, all Federal,
state and local tax returns and other reports required by pplicable law to be
filed by the Borrower or the Guarantors have been filed, and all taxes,
assessments and other governmental charges imposed upon the Borrower or the
Guarantors or any property of the Borrower or the Guarantors which have become
due and payable on or prior to the date hereof have been paid, except to the
extent contested in good faith by proper proceedings which stay the imposition
of any penalty, fine or lien resulting from the non-payment thereof and with
respect to which adequate reserves have been set aside for the payment thereof.
(l) Regulation U. Neither the Borrower nor the Guarantor is or will not be
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System), and no proceeds of the Loan will be
used to purchase or carry any margin stock or to extend credit to others for the
purpose of purch sing or carrying any margin stock.
(m) Adverse Agreements, Etc. Neither the Borrower nor the Guarantor is a
party to any agreement or instrument, or subject to any charter or other
corporate restriction or any judgment, order, regulation, ruling or other
requirement of a court or other Governmental Authority or regulatory body, which
materially adversely affects, or, to the best knowledge of the Borrower or the
Guarantor, in the future is reasonably li ely to materially adversely affect,
the condition or operations, financial or otherwise, of the Borrower or the
Guarantor or the ability of the Borrower or the Guarantor to perform its
obligations under any Loan Document to which the Borrower is or will be a party.
(n) Holding Company and Investment Company Acts. Neither the Borrower nor
the Guarantor is (i) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "ho ding company", as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended, or (ii) an
"investment company" or an "affiliated person" or "promoter" of, or "principal
underwriter" of or for, an "investment company", as such terms are defined in
the Investment Company Act of 1940, as amended.
- 22 -
<PAGE>
(o) Permits, Etc. The Borrower and the Guarantor have all permits,
licenses, authorizations and approval required for it to lawfully own and
operate its respective businesses. Schedule III hereto sets forth all licenses,
permits, authorizations and approvals required by any Governmental Authority for
the lawful conduct of the Borrower's business, and each of the foregoing has
been obtained by the Borrower and is in full force and effect as of the Final
Term Funding Date.
(p) Title to Properties. The Borrower has good and marketable title to all
of its p operties and assets, free and clear of all liens, security interests
and other charges and encumbrances and other types of preferential arrangements,
except such as are permitted by Section 7.02(a) hereof. All of Borrower's
properties are titled in Borrower's legal name. Borrower has not used, or filed
a financing statement (or other evidence of a lien, charge or Security Interest)
under, any other name in any United States jurisdiction or territory outside the
United States for at least the last five (5) years.
(q) Full Disclosure. No Loan Document or schedule or exhibit thereto and no
certificate, report, statement or other document or information furnished to the
Lender in connection herewith or with the consummation of the transactions
contemplated hereby, contains any misstatement of material fact or omits to
state a material fact or any fact necessary to make the statements contained
herein or therein not misleading. There is no contingent liabi ity or other
material fact of which the Borrower or the Guarantor is aware after reasonable
inquiry that may adversely affect the condition or operations, financial or
otherwise, or the business or prospects of the Borrower or the Guarantor which
has not been set forth in a footnote included in the Financial Statements or a
Schedule hereto or thereto.
(r) Operating Lease Obligations. The Borrower does not have any obligation
as lessee for the payment o rent for any real or personal property other than as
set forth in Schedule IV hereto.
(s) Indebtedness. The Borrower has no Indebtedness other than Indebtedness
set forth on Schedule V hereto.
(t) Environmental Matters. Except as set forth in the Plan of Remediation,
(i) the Borrower is in compliance with all applicable Environmental Laws, and
(ii) none of the operations of the Borrower is the sub ect of any Federal, state
or local investigation to determine whether any remedial action is needed to
address the presence, disposal, release or threatened release of any Hazardous
Material into the environment which may have a material adverse effect on the
business, operations, property, assets or financial or other condition of the
Borrower, and the Borrower does not have any contingent liability in connection
with any release of any Hazardous Material into the environment which may have a
material adverse effect on its business, operations, property, assets or
financial or other condition.
(u) Schedules. All of the information which is required to be scheduled to
this Agreement is correct and accurate in all material respects.
- 23 -
<PAGE>
(v) Insurance. Each of Borrower and the Guarantor keeps its insurable
properties adequately insured and maintains (i) insurance to such ext nt and
against such risks, including fire, as is customary with companies in the same
or similar businesses, (ii) workmen's compensation insurance in the amount
required by applicable law, (iii) personal liability insurance and public
liability insurance, in the amount customary with companies in the same or
similar business against claims for personal injury or death or properties
owned, occupied or controlled by it, and (iv) such other insurance as may be
required by law or as may be reasonably required in writing by the Lender.
(w) Use of Proceeds. The proceeds of the Loans shall be used (i) in the
case of the Tranche B portion of the Term Loan, to refinance the Obligations (as
defined in the Senior Loan Agreement) and fund the costs and expenses thereof,
and in working capital and (ii) in the case of the Line Loans, in compliance
with Section 5.03 (c) hereof.
(x) Solvency of the Borrower. As of t e date first written above, and after
giving effect to the Loans and to liens created by the Borrower in connection
therewith, (i) the sum of the assets, at a fair valuation, of the Borrower will
exceed its debts ("debt" means any liability on a claim, and "claim" means (A)
right to payment, whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured or (B) right to an equitable
remedy for breach of performance if such breach gives rise to payment, whether
or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured or unsecured);
(ii) the Borrower has not incurred and does not intend to incur, and does not
believe that it will incur, debts beyond its ability to pay such debts as such
debts mature; and (iii) the Borrower has, and will have, sufficient capital with
which to conduct its business.
(y) Solvency of the Guarantor. As of the date first written above, and
after giving effect to the Loans and to liens created by the Borrower in
connection therewith, (i) the sum of the consolidated assets, at a fair
valuation, of the Guarantor will exceed its consolidated debts ("debt" means any
liability on a claim, and "claim" means (A) right to payment, whether or not
such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured,
or unsecured or (B) right to an equitable remedy for breach of performance if
such breach gives rise to payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured); (ii) the Guarantor has not incurred and does
not intend to incur, and does not believe that it will incur, debts beyond its
ability to pay such debts as such debts mature; and (iii) the Guarantor will
have sufficient capital with which to conduct its business.
SECTION 6.02. Representations, Warranties and Covenants of Lender. Lender
hereby represents and warrants to and covenants with Borrower and Winners that:
All shares of Winners Common Stock acquired by Lender in accordance with
this Agreement are being acquired by lender for its own account for investment
and without
- 24 -
<PAGE>
a view to distribut any of the shares of Winners Common Stock in any transaction
which would be in violation of the Securities Act of l933, as amended.
ARTICLE VII
COVENANTS OF THE BORROWER AND THE GUARANTOR
SECTION 7.01. Affirmative Covenants. So long as any principal
of or interest on any Loan shall remain unpaid or the Lender shall have any
commitment to make a Loan hereunder, the Borrower and where appropriate, the
Guarantor will, unless the Lender shall otherwise consent in writing:
(a) Reporting Requirements. Furnish to the Lender:
(i) as soon as available and in any event within 30 days after the end of
each month, an interim (A) consolidated and consolidating balance sheets of the
Borrower as at the end of such month and for the period commencing at the end of
the immediately preceding fiscal year and ending with the end of such month, (B)
consolidated and consolidating statement of income of the Borrower as at the end
of such month and for the period commencing at the end of the immediately
preceding fiscal year and ending with the end of such month, and (C)
consolidated and consolidating statement of cash flow of the Borrower for such
month and for the period commencing at the end of the immediately preceding
fiscal year and ending with the end of such month, setting forth in comparative
form the corresponding figures for the corresponding date or period of the
immediately preceding fiscal year and setting forth the budget for such period
all in reasonable detail and prepared in accordance with generally accepted
accounting principles consistently applied, each duly certified by the chief
financial officer of the Borrower as (1) fairly presenting the financial
condition of the Borrower at the end of such month, and the results of the
operations of the Borrower for such month (subject to normal year-end audit
adjustments), and (2) having been prepared in accordance with generally accepted
accounting principles consistently applied;
(ii) as soon as available and in any event within 45 days after the end of
each fiscal quarter of the Borrower, an inter m (A) consolidated and
consolidating balance sheet of the Borrower as at the end of such quarter and
for the period commencing at the end of the immediately preceding fiscal year
and ending with the end of such quarter, (B) consolidated and consolidating
statement of income of the Borrower as at the end of such quarter and for the
period commencing at the end of the immediately preceding fiscal year and ending
with the end of such quarter, and (C) consolidated and consolidating statement
of cash flow of the Borrower for such quarter and for the period commencing at
the end of the immediately preceding fiscal year and ending with the end of such
quarter setting forth in comparative form the corresponding figures for the
corresponding date or period of the immediately preceding fiscal year and
setting forth the budget for such period, all in reasonable detail and prepared
in accordance with generally accepted accounting principles consistently
applied, each duly
- 25 -
<PAGE>
certified by the chief financial officer of the Borrower as (1) fairly
presenting the financial condition of the Borrower at the end of such quarter,
and the results of the operations of the Borrower for such quarter (subject to
normal year-end audit adjustments), and (2) having been prepared in accordance
with generally accepted accounting principles consistently applied;
(iii) as soon as available and in any event within 90 days after the end of
each fiscal year of the Borrower, a (A) co solidated and consolidating balance
sheet of the Borrower as at the end of such fiscal year, (B) consolidated and
consolidating statement of income of the Borrower as at the end of such fiscal
year, and (C) consolidated and consolidating statement of cash flow of the
Borrower for such fiscal year setting forth in comparative form the
corresponding figures for the immediately preceding fiscal year and setting
forth the budget for such fiscal year, all in reasonable detail and prepared in
accordance with generally accepted accounting principles consistently applied
and, in the case of balance sheets and statement of income, accompanied by a
report and an unqualified opinion, prepared in accordance with generally
accepted auditing standards, of an independent certified public accountant of
recognized standing selected by the Borrower and satisfactory to the Lender,
together with any management letter prepared by such accountant and a written
statement of such accountant (1) to the effect that in making the examination
necessary for its certification of such financial statements, it has not
obtained any knowledge of the existence of an Event of Default, or an event
which, with the giving of notice or the lapse of time or both, would constitute
an Event of Default, or (2) if such accountant shall have obtained any knowledge
of the existence of an Event of Default, or an event which, with the giving of
notice or the lapse of time or both, would constitute an Event of Default,
describing the nature thereof;
(iv) within 30 days after the end of any fiscal quarter of the Guarantor or
such time that the information required to be delivered pursuant to this
subparagraph 6.01(a)(iv) is delivered to the Securities and Exchange Commission
without violation of any rule, regulation or order thereof, balance sheets of
the Guarantor and its subsidiaries as of the end of such fiscal quarter and
statements of income and retained earnings of the Guarantor and its subsidiaries
for the period commenci g at the beginning of the fiscal year in which such
fiscal quarter falls through the end of such fiscal quarter, certified as
accurate and correct by the chief financial officer of the Guarantor;
(v) within 120 days after the end of each fiscal year of the Guarantor or
such time that the information required to be delivered pursuant to this
subparagraph 6.01(a)(v) is delivered to the Securities and Exchange Commission
without violation of any rule, regulation or order the eof, a copy of the annual
report for such fiscal year for the Guarantor and its subsidiaries containing
financial statements for such year certified in a manner acceptable to Lender by
independent public accountants of recognized standing;
(vi) promptly after the sending or filing thereof, copies of all reports
that the Guarantor sends to any of its security holders, reports and copies of
all
- 26 -
<PAGE>
reports and registration statements that the Gua antor or any subsidiary files
with the Securities and Exchange Commission or any national securities exchange;
(vii) promptly upon delivery thereof, all reports and filings made by the
Borrower and/or the Guarantor to the West Virginia Racing Commission or the West
Virginia Lottery Commission;
(viii) simultaneously with the delivery of the financial statements
required by clauses (i), (ii), (iii), (iv) and (v) of this Section 7.01(a), (A)
certificate of the chief financial officer of the appropriate Loan Party,
stating that such officer has reviewed the provisions of this Agreement and the
other Loan Documents to which such Loan Party is a party and has made or caused
to be made under his supervision a review of the condition and operations of
such Loan Party during the period covered by such financial statements with a
view to determining whether the Borrower was in compliance with all of the
provisions of such Loan Documents, and that such review has not disclosed, and
such officer has no knowledge of, the existence during such period of an Event
of Default, or an event which, with the giving of notice or the lapse of time or
both, would constitute an Event of Default;
(ix) as soon as available, and in any event no later than 90 days after the
end of each year, annual financial projections (including forecasted income
statements, cash flow statements, schedules of cash receipts and disbursements
and borrow ngs hereunder) of the Borrower and the Guarantor for the next
succeeding three-year period, all in reasonable detail, together with all such
supporting information as the Lender shall reasonably request;
(x) promptly after submission to any Governmental Authority not otherwise
referred to in this subsection 7.01(a), all documents and information furnished
to such Governmental Authority, unless such documents and information are
furnished in the ordinary course of business nd will not result in any adverse
action to be taken by such Governmental Authority;
(xi) promptly after obtaining knowledge thereof but in any event not later
than five (5) days after the occurrence of an Event of Default, or an event
which, with the giving of notice or the lapse of time or both, would constitute
an Event of Default, or a material adverse change in the condition or
operations, financial or otherwise, of the Borrower, the written statement of
the chief exe utive officer or the chief financial officer of the Borrower,
setting forth the details of such Event of Default, event or material adverse
change and the action which the Borrower proposes to take with respect thereto;
(xii) as soon as possible and in any event within 10 days after the
Borrower, the Guarantor or any of their Affiliates knows or has reason to know
of the existence of any Unfunded Liability, a notice setting forth the amount of
such Unfunded Liability, cert fied by the chief financial officer of the
applicable Loan Party.
- 27 -
<PAGE>
(xiii) promptly after the commencement thereof but in any event not later
than five (5) Business Days after service of process with respect thereto on, or
the obtaining of knowledge thereof by, the Borrower or the Guarantor, notice of
each action, suit or proceeding before any court or other Governmental Authority
or other regulatory body or any arbitrator which may materially adversely affect
the condition or operations, financial or otherwise, of the Borrower or the
Guarantor; and
(xiv) promptly upon request, such other information concerning the
condition or operations, financial or otherwise, of the Borrower or the
Guarantor as the Lender from time to time may reasonably request.
(b) Compliance with Laws, Etc. Comply in all material respects with all
applicable laws, rules, regulations and orders, such compliance to include,
without limitation, (i) paying before the same become delinquent all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or upon any of their properties, and (ii) paying all lawful
claims which if npaid might become a lien or charge upon any of their
properties, except to the extent contested in good faith by proper proceedings
which stay the imposition of any penalty, fine or lien resulting from the
non-payment thereof and with respect to which adequate reserves have been set
aside for the payment thereof.
(c) Preservation of Existence, Etc. Maintain and preserve its existence,
rights and privileges, and become or remain duly qualified and in g od standing
in each jurisdiction in which the character of the properties owned or leased by
it or in which the transaction of its business makes such qualification
necessary. Maintain all licenses and accreditations necessary to conduct the
business of the Borrower and the Guarantor.
(d) Keeping of Records and Books of Account. Keep adequate records and
books of account, with complete entries made in accordance with GAAP.
(e) Inspection Rights. Permit the Lender or any agent or representative
thereof at any reasonable time and from time to time to examine and make copies
of and abstracts from its records and books of account, to visit and inspect its
properties, to conduct audits or examinations, and to discuss its affairs,
finances and accounts with any of the directors, officers, employees,
independent accountants or other representatives thereof. The Borrower agrees to
pay the cost of each such audit or examination as provided in subsection
4.01(c).
(f) Maintenance of Properties, Etc. Maintain and preserve all of its
properties which are necessary or useful in the proper conduct of its business
in good working order and condition, ordinary wear and tear excepted, and comply
at all times with the provisions of all leases to which the Borrower or the
Guarantor is a party as lessee or under which the Borrower or the Guarantor
occupies property, o as to prevent any loss or forfeiture thereof or thereunder.
(g) Maintenance of Insurance. Maintain insurance with responsible and
reputable insurance companies or associations (including, without limitation,
comprehensive general liability, personal liability and hazard insurance) with
respect to its properties and
- 28 -
<PAGE>
business, in such amounts and covering such risks, as is required by any
Governmental Authority or other egulatory body having jurisdiction with respect
thereto or as is carried generally in accordance with sound business practice by
companies in similar businesses similarly situated.
(h) Environmental Indemnity. Comply with the requirements of all applicable
Environmental Laws, provide to the Lender all documentation in connection with
such compliance that the Lender may reasonably request, and defend, indemnify,
and hold harmless the Lender, its employe s, agents, officers, and directors,
from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs, or expenses (including, without limitation,
attorney and consultant fees, investigation and laboratory fees, court costs,
and litigation expenses) arising out of (i) the presence, disposal, release, or
threatened release of any Hazardous Materials on any property at any time owned
or occupied by the Borrower (or its predecessors in interest or title); (ii) any
personal injury (including wrongful death) or property damage (real or personal)
arising out of or related to such Hazardous Materials; (iii) any investigation,
lawsuit brought or threatened, settlement reached, or government order relating
to such Hazardous Materials; and/or (iv) any violation of any Environmental Law.
(i) Notification of Event of Default Immediately notify Lender in writing
of any default of nonpayment or any other default or event of default or no ice
thereof under any agreements or instruments representing material Indebtedness
of Borrower or the Guarantor or any Lien on their respective assets.
(j) Further Assurances. Each Loan Party shall do, execute, acknowledge and
deliver, at the sole cost and expense of such Loan Party, all such further acts,
deeds, conveyances, mortgages, assignments, estoppel certificates, financing
statements, notices of assignment, transfers and assurances as the Lend r may
reasonably require from time to time in order to better assure, convey, grant,
assign, transfer and confirm unto the Lender the rights now or hereafter
intended to be granted to the Lender under this Agreement, any Loan Document or
any other instrument under which such Loan Party may be or may hereafter become
bound to convey, mortgage or assign to the Lender to effect the intention or
facilitate the performance of the terms of the Agreement.
(k) Additional Securi y. The Borrower shall, within 10 days of the
acquisition of any asset by the Borrower with the proceeds of a Line Loan
(whether such acquisition is funded in whole or in part by such proceeds),
execute and deliver all documents necessary or desirable, in the opinion of
counsel to the Lender, to perfect a first priority security interest in such
asset in favor of the Lender; provided, however, that with respect to any asset
that is partially funded by a purchase money mortgage or purchase money security
interest in accordance with subsection 7.02(a)(vii) hereof, the Lender's
security interest may be subject to such purchase money mortgage or security
interest; and provided, further, however, that the Lender shall not have
additional security in the event such purchase money mortgage or security
agreement precludes junior financing. Each of the Borrower and the Guarantor
hereby acknowledge and agree that (i) any asset other than an equity interest in
a Person acquired by it after the date hereof shall be automatically subject to
a Lien in favor of the Lender pursuant to the Amended and Restated Security
Agreement and be subject to the terms thereof, and (ii) any
- 29 -
<PAGE>
asset that is an equity interest in another Person shall be subject to the terms
and conditions of a pledge agreement in form and substance reasonably
satisfactory to the Lender.
(l) Environmental Actions The Borrower sh ll take all remedial and other
actions as set forth in the Plan of Remediation in a timely manner.
SECTION 7.02. Negative Covenants. So long as any principal of
or interest on any Loan, or any Obligation, shall remain unpaid or the Lender
shall have any commitment to make any Loan, the Borrower will not and, where
appropriate, the Guarantor will not, without the prior written consent of the
Lender:
(a) Liens, Etc. Create or suffer to exist any Lien upon or with respect to
any of its properties, rights or other assets, whether now owned or hereafter
acquired, or assign or otherwise transfer any right to receive income, other
than:
(i) Liens cr ated pursuant to the Loan Documents;
(ii) Liens existing on the date hereof, as set forth in Schedule VI hereto,
and the renewal and replacement of such liens, provided that any such renewal or
replacement lien shall be limited to the property or assets covered by the lien
renewed or replaced and the indebtedness secured by any such renewal or
replacement lien shall be in an amount not greater than the amount of
indebtedness secured by the lien renewed or replaced; (iii) Liens for taxes,
assessments or governmental charges or levies to the extent that the payment
thereof shall not be required by Section 7.01(b)(i) hereof;
(iv) Liens created by operation of law, such as materialmen's liens,
mechanics' liens and other similar liens, arising in the ordinary course of
business and securing claims the payment of which shall not be required by
Section 7.01(b)(ii) hereof;
(v) depos ts, pledges or Liens (other than liens arising under ERISA)
securing (A) obligations incurred in respect of workers' compensation,
unemployment insurance or other forms of governmental insurance or benefits, (B)
the performance of bids, tenders, leases, contracts (other than for the payment
of money) and statutory obligations, or (C) obligations on surety or appeal
bonds, but only to the extent such deposits, pledges or liens are incurred or
otherwise arise in the ordinary course of business and secure obligations which
are not past due;
(vi) restrictions on the use of real property and minor irregularities in
the title thereto which do not (A) secure obligations for the payment of money
or (B) materially impair the value of such property or its use by any Loan Party
in the normal conduct of such Loan Party's business;
- 30 -
<PAGE>
(vii) (A) purchase money liens on or purchase money security interests in
equipment acquire or held by the Borrower in the ordinary course of its business
to secure the purchase price of such property or Indebtedness incurred solely
for the purpose of financing the acquisition of such property, or (B) liens or
security interests existing on such property at the time of its acquisition,
provided, that (1) no such lien or security interests shall extend to cover any
other property of the Borrower, and (2) the principal amount of the Indebtedness
secured by any such lien or security interest shall not exceed 100% of the
lesser of the fair market value or the cost of the property so held or acquired;
and
(viii) any other Lien in favor of the Lender.
(b) Indebtedness. Create, incur or suffer to exist ny Indebtedness, other
than:
(i) Indebtedness to the Lender;
(ii) Indebtedness created hereunder or under the Notes;
(iii) Indebtedness existing on the date hereof, as set forth in Schedule V
heret , and any extension of maturity, refinancing or other modification of the
terms thereof, provided, however, that such extension, refinancing or
modification (A) is pursuant to terms that are not less favorable to the
Borrower than the terms of the Indebtedness being extended, refinanced or
modified, and (B) after giving effect to the extension, refinancing or
modification of such Indebtedness, the amount of such Indebtedness outstanding
is not greater than the amount of such Indebtedness outstanding immediately
prior to such extension, refinancing or modification;
(iv) Indebtedness represented by accounts payable incurred in the ordinary
course of business;
(v) Indebtedness secured by liens or security interests permitted by clause
(vii) of subsection (a) of this Section 7.02;
(vi) Subordinated Indebtedness of the Borrower on terms approved, in
writing, by the Lender; and
(vii) Indebtedness under Operating Leases permitted by Section 7.02(g)
hereof.
(c) Guaranties, Etc. Assume, guarantee, endorse or otherwise become
directly or contingently liable (including, without limitation, liable b way of
agreement, contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to or otherwise invest in the debtor or otherwise to assure the
creditor against loss), in connection with any Indebtedness of any other Person,
other than:
- 31 -
<PAGE>
(i) guaranties created hereunder or under any Loan Document;
(ii) guaranties by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business;
(iii) guaranties existing on the date hereof, as set forth in Schedule VII
hereto, including any renewal or other modification thereof, provided, however,
that such renewal or modification (A) is pursuant to t rms that are not less
favorable to the Borrower than the terms of the guaranty being renewed or
modified, and (B) after giving effect to the renewal or modification of such
guaranty, the amount of the outstanding indebtedness guaranteed by such guaranty
is not greater than the amount of the outstanding indebtedness guaranteed by
such guaranty immediately prior to such renewal or modification; and
(iv) guaranties of any other Indebtedness to the Lender or Indebtedness
permi ted by subsection (b) of this Section 7.02.
(d) Merger, Consolidation, Sale of Assets, Etc.
(i) merge or consolidate with any Person; or
(ii) sell, assign, lease, engage in sale leaseback transactions or
otherwise transfer or dispose of, whether in one transaction or in a series of
related transactions, any substantial portion of its properties, rights or other
assets (whether now owned or hereafter acquired) to any Person. (e) Change in
Nature of Business. Make any material change in the nature of its business as
conducted on at the date hereof.
(f) Investments, Etc. Make any loan, advance or contribution to an Person
or purchase or otherwise acquire any capital stock, properties, assets or
obligations of, or any interest in, any Person, other than (i) Permitted
Investments, (ii) investments existing on the date hereof, as set forth in
Schedule VIII hereto, (iii) advances to employees or vendors made in the
ordinary course of its business as presently conducted, not to exceed at any one
time outstanding an aggregate of $500,000 for all such loans and advances, and
(iv) in connection with the exercise, or the assignment, of the Guarantor's
right to purchase certain Common Stock pursuant to Section 6 of Amendment to
Construction Loan Agreement entered the 19th day of September 1996 by and
between the Borrower, the Guarantor and Richard C. Breeden in his capacity as
trustee of the estates of Bennett Management and Development Corp. and Bennett
Funding Group.
(g) Lease Obligations. Create, incur or suffer to exist any obligation as
lessee (i) for the payment of re t for any real or personal property in
connection with any sale and leaseback transaction, or (ii) for the payment of
rent for any real or personal property under Operating Leases which would cause
the aggregate amount of all obligations in respect of Operating Leases payable
by the Borrower in any fiscal year of the Borrower to exceed 105%
- 32 -
<PAGE>
of the Operating Leases outstanding as of the end of the prior fiscal year;
provided, however, that the Borrower may incur such obligations with respect to
the leasing of video lottery terminals in an amount not to exceed $3,000,000.00
per year.
(h) Salaries and Withdrawals. Pay or become obligated to pay any fees,
wages, distributions, salary, bonus, commission, contributions to deferred
benefit plans or any other compensation ("Compensation") to, or for the benefit
of, the Guarantor or any officers of the Borrower or the Guarantor in any
calendar year in excess of 120% of uch Persons Compensation in the immediately
preceding calendar year.
(i) Dividends, Etc. Declare or pay any dividend, purchase or otherwise
acquire for value any of its capital stock now or hereafter outstanding, return
any capital to its stockholders as such, or make any other payment or
distribution of assets to its stockholders as such or to purchase or otherwise
acquire for value any stock of the Borrower; provided, however, that noth ng
herein shall prevent the Borrower from making distributions to the Guarantor in
the aggregate in any fiscal year equal to the lesser of (i) the amount necessary
to pay the expenses of the Guarantor, and (ii) $500,000.00 plus expenses paid to
any third parties, in each case minus the funds available to the Guarantor from
other sources other than through the issuance of securities.
(j) Federal Reserve Regulations. Permit the Loan or the proceeds of th Loan
under this Agreement to be used for the purpose which violates or is
inconsistent with the provisions of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
(k) Transactions with Affiliates. The Borrower shall not enter into or be a
party to any transaction with any of its Affiliates, except in the ordinary
course of business for fair consideration and on terms no less favorable to the
Borrower as are available from naffiliated third parties.
(l) Fiscal Year, Accounting Policies. Permit any material change in the
fiscal year or accounting policies and procedure of the Borrower without the
prior written consent of the Lender.
(m) Improvements. Make or commit to make any improvements on the Property
with a total cost in excess of $250,000.00 without the prior written consent of
the Lender, after Lender's review f all plans, permits and other items necessary
to ensure that any such improvement will comply with all applicable building and
safety requirements as the Lender, in its sole and absolute discretion, may
determine; provided, however, that the foregoing limitations shall not apply to
the proceeds of the Tranche A portion of the Term Loan and proceeds of Line
Loans made for improvements to the Property pursuant to Article III hereof.
(n) Issuance of Stock of (i) any additional shares of any class of capital
stock, (ii) any securities convertible voluntarily by the holder thereof or
automatically upon the occurrence or non-occurrence of any event or condition
into, or exchangeable for, any such shares of capital stock or (iii) any
warrants, options, contracts or
- 33 -
<PAGE>
other commitments entitlelize any Person to purchase or otherwise acquire any
such shares of capital stock.
SECTION 7.03. Additional Covenants of the Guarantor. So long as any of the
Obligations remains outstanding, the Guarantor:
(a) shall not take any action to increase the par value of the Common
Stock;
(b) shall not issue any Common Stock, any preferred stock or any security
providing for the purchase of or convertibility into, or exchangeable for,
Common Stock or preferred stock, other than;
d 4% of the number of outstanding shares of
Common Stock in any fiscal year;
(iii) in the ordinary course of business of the Guarantor not to exceed 2%
of the number of outstanding shares of Common Stock in any fiscal year;
(iv) in connection with any merger, acquisition or sale of a major portion
of the assets of the Guarantor approved in writing by the Lender, such approval
not to be unreasonably withheld;
(v) as provided under Section 4.01 hereof; and
(vi) as set forth in Schedule XI hereto;
(c) shall not create or suffer to exist any Lien upon or with respect to
any of the common stock of the Borrower other than a Lien in favor of he Lender;
and
(d) shall, after the filing with the West Virginia Lottery Commission by
the Lender of its application for approval under the license of the Borrower,
use its best efforts to obtain the approval of each applicable Governmental
Authority to the pledge of all of the shares of the common stock of the Borrower
pursuant to a pledge agreement and, upon such approval, or the written opinion
of counsel to the Guarantor that such pledge would not result in a revocati n of
any approval, license or permit required by the Borrower for the conduct of its
gaming businesses, shall execute and deliver a pledge agreement to the Lender in
form and substance reasonably satisfactory to the Lender, together with such
other documents as are customarily delivered and /or executed and delivered in
connection therewith.
- 34 -
<PAGE>
SECTION 7.04. Additional Line Loan Covenant. So long as any of the Line
Obligations remains outstanding, the Borrower shall maintain an EBITDA Average
of at least $500,000.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. If any of the following Events of Default
shall occur and be continuing:
(a) the Borrower shall fail to pay any principal on any Loan when due
(whether by scheduled maturity, required prepayment, acceleration, dema d or
otherwise);
(b) the Borrower shall fail to pay any interest on any Loan or any fee or
other amount (whether by scheduled payment, acceleration, demand or otherwise)
within three (3) Business Days of the date when due; provided, however, that
failure to make payments when due with respect to Obligations in this Subsection
7.01(b) more than three (3) times in any twelve (12) month period shall
constitute an Event of Default hereunder;
(c) any representation or warranty made by any Loan Party or any officer of
any Loan Party under or in connection with any Loan Document shall have been
incorrect in any material respect when made;
(d) any Loan Party shall fail to perform or observe any of the covenants
contained in Sections 7.01, 7.02, or 7.03 hereof, or Article X hereof;
(e) any Loan Party shall fail to perform or observe any other term,
covenant or agreement c ntained in any Loan Document and to be performed or
observed by such Loan Party;
(f) there shall occur any breach or default under any other agreement
involving the borrowing of money under which such Loan Party or any of its
subsidiaries may be obligated as borrower or guarantor;
(g) any Loan Party (i) shall institute any proceeding or voluntary case
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
liquidation, wi ding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for such Person or for any substantial part of its property,
(ii) shall be generally not paying its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, (iii) shall make a
general assignment for the benefit of creditors, or (iv) shall take any action
to authorize or effect any of the actions set forth above in this subsection
(g);
(h) any proceeding shall be instituted against any Loan Party seeking to
adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief of
debtors, or seeking the entry of an order for relief or the appointment f a
receiver, trustee, custodian or other similar official for
- 35 -
<PAGE>
such Person or for any substantial part of its property, and either such
proceeding shall remain undismissed or unstayed for a period of 60 days or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its property) shall occur;
(i) any provision of any Loan Document shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested by any Loan Party, or a proceeding shall be commenced by any Loan
Party, or by any Governmental Authority or other regulatory body having
jurisdiction over any Loan Party, seeking to establish the invalidity or
unenforceability thereof, or any Loan Party shall deny that such Loan Party has
any liability or obligat on purported to be created under any Loan Document;
(j) the Security Agreement, the Amended and Restated Security Agreement,
the Deed of Trust, the First Priority Deed of Trust or any other security
document, after delivery thereof pursuant hereto, shall for any reason fail or
cease to create a valid and perfected and, to the extent provided for by the
terms hereof or thereof, first or second priority lien on or security interest
in any Collateral purported to be covered hereby;
(k) one or more judgments or orders (other than a judgment or award
described in subsections (g) and (h) of this Section 8.01) for the payment of
money exceeding any applicable insurance coverage shall be rendered against any
Loan Party, and either (i) enforcement proceedings shall have been commenced by
any creditor upon any such judgment or order, or (ii) there shall be any period
of 30 consecutive days during which a stay of enforcement of any such judgment
or o der, by reason of a pending appeal or otherwise, shall not be in effect;
(l) any Loan Party or any Affiliate of a Loan Party shall suffer to exist
any Unfunded Liability in excess of $100,000; or
(m) the Borrower shall fail to perform or observe the covenant contained in
Section 7.04 hereof;
then, and in any such event, the Lender may, by notice to the Borrower, (i)
declare its Commitment to make any Loan hereunder to be term nated, whereupon
such Commitment shall forthwith terminate, (ii) declare the Loans, all interest
thereon and all other amounts payable under this Agreement to be forthwith due
and payable, whereupon the Loans, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that upon the occurrence of an Event of Default
described in subsections (g) and (h) of this Section 8.01, the Commitment to
make any Loan hereunder shall immediately terminate and the Loans, all such
interest thereon and all other amounts shall become payable and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are expressly waived by the Borrower; provided further, that upon
the occurrence of an Event of Default other than the events described in
Subsections (a), (b), (g) and (h), the Borrower shall have three (3) Business
Days in which to cure such Event of Default and
- 36 -
<PAGE>
(iii) exercise any and all of its other rights under applicable law, hereunder
and under the other Loan Documents; provided, further, that the Event of Default
described in subsection (m) of this Section 8.01 shall apply to the Line Loans
only, and shall not be deemed a default under subsection (f) of this Section
8.01 with respect to the Term Loan.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and shall be mailed, telecopied, with a copy
sent promptly thereafter by U.S. mail, return receipt requested or delivered, if
to the Borrower or the Guarantor, at the following address:
Mountaineer Park, Inc.
Route 2 South
Chester, West Virginia 26034
Attention: Mr. Edson Arneault, President
Telephone No.: (304) 387-2400
Telecopy No.: (304) 387-1598
with copies to:
Freer & McGarry, a Professional Corporation
1000 Thomas Jefferson Street, NW, Suite 600
Washington, DC 20007
Attention: Robert Ruben, Esq.
Telephone No.: (202) 965-6565
Telecopy No.: (202) 965-4839
and if to the Lender, to it at the following address:
Madeleine L.L.C.
950 Third Avenue
New York, New York 10022
Attention: Mr. Kevin P. Genda
Telephone No.: (212) 758-5110
Telecopy No.: (212) 421-2947
with copies to:
- 37 -
<PAGE>
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Mark A. Neporent, Esq.
Telephone No.: (212) 756-2238
Telecopy No.: (212) 593-5955
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section 9.01. All such notices and other communications shall be
effective (i) if mailed, when received or three days after mailing, whichever
first occurs, (ii) if telecopied, when transmitted, provided same is on a
Business Day and, if not, on the next Business Day, or (iii) if delivered, upon
delivery, provided same is on a Business Day and, if not, on the next Business
Day, except that notices to the Lender pursuant to Article II hereof shall not
be effective until received by the Lender.
SECTION 9.02. Amendments, Etc. No amendment of any provision
of this Agreement, any Note or any other Loan Document shall be effective unless
it is in writing and signed by the Borrower, each of the Guarantor and the
Lender, and no waiver of any provision of this Agreement, any Note or any other
Loan Document, nor consent to any departure by the Borrower or the Guarantor
therefrom, shall be effective unless it is in writing and signed by the Lender,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION 9.03. No Waiver; Remedies, tc. No failure on the part
of the Lender to exercise, and no delay in exercising, any right hereunder or
under any other Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of the Lender provided herein and in the other Loan Documents are
cumulative and are in addition to, and not exclusive of, any right or remedy
provided by law. The rights of the Lender under any Loan Document against any
party thereto are not conditional or contingent on any attempt by the Lender to
exercise any of its rights under any other Loan Document against such party or
against any other Person.
SECTION 9.04. Fees, Costs, Expenses and Taxes. The Borrower
will pay on demand (i) all fees, costs and expenses in connection with the
preparation, execution, delivery, filing, recording, amendment, modification and
waiver of the Loan Documents and the other documents to be delivered pursuant to
the Loan Documents, including, without limitation, the reasonable fees,
out-of-pocket expenses and other client charges of Schulte Roth & Zabel LLP,
counsel to the Lender, and Bowles Rice McDavid Graff & Love, West Virginia
counsel to the Lender and the reasonable fees, out-of-pocket expenses and other
client charges of all accountants, auditors and consultants retained by the
Lender in connection with the transactions contemplated by this Agreement, and
(ii) all costs and expenses, if any (including reasonable counsel fees,
out-of-pocket expenses and other client charges), in connection with the
enforcement of the Loan Documents and the other documents to be delivered
pursuant to the Loan Documents. In addition, the Borrower will pay any and all
stamp and other taxes and fees payable or
- 38 -
<PAGE>
determined to be payable in connection with the execution, delivery, filing and
recording of the Loan Documents and the other documents to be delivered pursuant
to the Loan Documents, and will save the Lender harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees. All of the foregoing fees, costs, expenses
and taxes are herein referred to as "Transaction Costs".
SECTION 9.05. Right of Set-off. Upon the occurrence and during
the continuance of any Event of Default, the Lender may, and is hereby
authorized to, at any time and from time to time, without notice to the Borrower
(any such notice being expressly waived by the Borrower) and to the fullest
extent permitted by law, set off and apply any and all indebtedness at any time
owing by the Lender to or for the credit or the account of the Borrower against
any and all Obligations now or hereafter existing, irrespective of whether or
not the Lender shall have made any demand hereunder or thereunder and although
such Obligations may be contingent or unmatured. The Lender agrees to notify the
Borrower promptly after any such set-off and application made by the Lender,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Lender under this Section 9.05
are in addition to the other rights and remedies (including, without limitation,
other rights of set-off) which the Lender may have.
SECTION 9.06. Severability. Any provision of this Agreement,
or of any other Loan Document to which the Borrower or any of the Guarantors is
a party, which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or thereof
or affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 9.07. ccessors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Borrower, the Guarantor and the
Lender and their respective successors and assigns, except that neither the
Borrower nor any Guarantor may assign its rights hereunder or any interest
herein without the prior written consent of the Lender. The Lender may assign to
one or more banks or other entities all or any part of, or may grant
participations to one or more banks or other entities in or to all or any part
of the Commitment, the Loans or the Notes and, to the extent of any such
assignment or participation (unless otherwise stated therein), the assignee of
such assignment shall have the same rights and benefits hereunder and under such
Note(s) as it would have if it were the Lender hereunder. In connection with any
assignment by the Lender pursuant hereto, the Borrower shall, promptly upon
request by the Lender, execute and deliver a new Note or Notes, in replacement
of the then effective Note or Notes, in an aggregate principal amount equal to
the outstanding principal amount of the applicable Loan or Loans at such time,
payable to the order of the Lender and/or an assignee(s). The Lender may, in
connection with any such assignment or participation or as may be required by
law or any Governmental Authority or other regulatory body, disclose any public
and non-public information relating to the Borrower and each of the Guarantors
furnished by or on behalf of the Borrower or any of the Guarantors or any of
their Affiliates to the Lender.
SECTION 9.08. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be
- 39 -
<PAGE>
deemed to be an original, but all of which taken together shall constitute one
and the same agreement.
SECTION 9.09. Headings. Section headings herein are in luded for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
SECTION 9.10. Governing Law. This Agreement, each Note, and
the other Loan Documents shall be governed by, and construed in accordance with,
the law of the State of New York applicable to contracts made and to be
performed in such State without regard to conflicts of law principles. Any legal
action or proceeding with respect to this Agreem nt or any other Loan Document
may be brought in the courts of the State of New York or of the United States
for the Southern District of New York, and, by execution and delivery of this
Agreement, the Borrower and the Guarantor hereby irrevocably accept for
themselves in respect of their property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Borrower and the Guarantor further
irrevocably consent to the service of process out of any of the aforementioned
courts and in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the Borrower at its address
for notices contained in Section 9.01, such service to become effective thirty
(30) days after such mailing. The Borrower and the Guarantor hereby irrevocably
appoint Mr. Robert A. Blatt, c/o CRC Group, 1890 Palmer Avenue, Suite 303,
Larchmont, New York 10538, or such other Person as shall be acceptable to the
Lender, as their agent for service of process in respect of any such action or
proceeding. Nothing herein shall affect the right of the Lender to service of
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Borrower and the Guarantor in any other
jurisdiction.
SECTION 9.11. WAIVER OF JURY TRIAL, ETC. EACH OF THE BORROWER,
THE GUARANTOR AND THE LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIG T UNDER THIS AGREEMENT,
ANY NOTE, OR OTHER LOAN DOCUMENT, OR UNDER ANY AMENDMENT, WAIVER, CONSENT,
INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE
DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR
COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH OF THE
BORROWER AND THE GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. THE BORROWER AND THE GUARANTOR CERTIFY THAT NO OFFICER,
REPRESENTATIVE, AGENT OR ATTORNEY OF THE LENDER HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT THE LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR
COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. THE BORROWER AND THE
GUARANTOR HEREBY ACKNOWLEDGE THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE LENDER ENTERING INTO THIS AGREEMENT.
- 41 -
<PAGE>
SECTION 9.12. Reinstatement; Certain Payments. If a claim is
ever made upon the Lender for repayment or recovery of any amount or amounts
received by the Lender in payment or on account of any of the Obligations under
this Agreements, the Lender shall give prompt notice of such claim to the
Borrower, and if the Lender repays all or part of said amount by reason of (i)
any j dgment, decree or order of any court or administrative body having
jurisdiction over the Lender or any of its property, or (ii) any settlement or
compromise of any such claim effected by the Lender with any such claimant, then
and in such event the Borrower and the Guarantor (A) agree that any such
judgment, decree, order, settlement or compromise shall be binding upon the
Borrower and the Guarantor notwithstanding the cancellation of any Note or other
instrument evidencing the Obligations under this Agreement or the other Loan
Documents or the termination of this Agreement or the other Loan Documents, and
(B) shall be and remain liable to the Lender hereunder for the amount so repaid
or recovered to the same extent as if such amount had never originally been
received by the Lender.
SECTION 9.13. Indemnification. In addition to all of their
other Obligations under this Agreement, the Borrower and the Guarantor jointly
and severally agree to defend, prote t, indemnify and hold harmless the Lender
and any assignee of the Lenders rights hereunder, and all of their respective
officers, directors, employees, attorneys, consultants and agents (including,
without limitation, those retained in connection with the satisfaction or
attempted satisfaction of any of the conditions set forth in this Agreement)
(collectively called the "Indemnitees") from and against any and all losses,
damages, liabilities, obligations, penalties, fees, costs and expenses
(including, without limitation, attorneys' fees, costs and expenses) incurred by
such Indemnitees, whether prior to or from and after the Effective Date, whether
direct, indirect or consequential, as a result of or arising from or relating to
any suit, investigation, action or proceeding by any Person, whether threatened
or initiated, asserting a claim for any legal or equitable remedy against any
Person under any statute or regulation, including, without limitation, any
Federal or state securities or labor laws, or under any Federal, state or local
environmental, health or safety laws, regulations or, common law principles,
arising from or in connection with the past, present or future operations of the
Borrower or its predecessors in interest, arising from or in connection with any
of the following: (i) the negotiation, preparation, execution or performance of
this Agreement or of any document executed in connection with the transactions
contemplated by this Agreement, (ii) the Lender's furnishing of funds to the
Borrower under this Agreement, including, without limitation, the management of
the Loans, or (iii) any matter relating to the financing transactions
contemplated by this Agreement or by any document executed in connection with
the transactions contemplated by this Agreement (collectively, the "Indemnified
Matters"); provided, however, that the Borrower and the Guarantor shall have no
obligation to any Indemnitee hereunder for any Indemnified Matter caused by or
resulting from the gross negligence or willful misconduct of such Indemnitee, as
determined by a final judgment of a court of competent jurisdiction. Such
indemnification for all of the foregoing losses, damages, fees, costs and
expenses of the Lender shall be part of the Obligations in respect of the Term
Loan (the "Term Obligations"), secured by the Collateral and added to the
principal amount of the Term Loan; provided, further, however, that if the Term
Loan has been paid in full, then all of the foregoing losses, damages, fees,
costs and expenses of the Lender shall be part of the Line Obligations, secured
by the Collateral and added to the principal amount of the Line Loans. To the
extent that the
- 42 -
<PAGE>
undertaking to indemnify, pay and hold harmless set forth in this Section 9.13
may be unenforceable because it is violative of any law or public policy, the
Borrower and the Guarantor shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees. The
provisions of this Section 9.13 shall survive termination of this Agreement.
ARTICLE X
GUARANTY
SECTION 10.01. Guaranty. the Guarantor, and each other
Guarantor that may become party hereto, hereby (i) irrevocably, absolutely and
unconditionally guarantees the prompt payment, as and when due and payab e
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), of (A) all the Obligations, including, without limitation, all
amounts now or hereafter owing in respect of the Loan Documents, whether for
principal, interest, fees, expenses or otherwise, and (B) all indebtedness,
obligations and other liabilities, direct or indirect, absolute or contingent,
now existing or hereafter arising of the Borrower to the Lender and (ii) agrees,
to pay any and all expenses (including reasonable counsel fees and expenses)
incurred by the Lender in enforcing its rights under this Agreement, the
Guarantee and each other Loan Document.
SECTION 10.02. Obligations Unconditional.
(i) the uarantor and each other Guarantor that may become party hereto,
hereby guarantees that the Obligations will be paid strictly in accordance with
the terms of the Loan Documents, regardless of any law, regulation or order now
or hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Lender with respect thereto. the Guarantor and each other
Guarantor agrees that its guarantee constitutes a guaranty of payment when due
and not of collection, and waives any right to require that any resort be had by
the Lender to any security held for payment of the Obligations or to any balance
of any deposit account or credit on the books of the Lender in favor of the
Borrower or for any other reason. The liability of the Guarantor and each other
Guarantor hereunder shall be absolute and unconditional irrespective of: (i) any
lack of validity or enforceability of any Loan Document or any agreement or
instrument relating thereto; (ii) any extension or change in the time, manner or
place of payment of, or in any other term in respect of, all or any of the
Obligations (including, without limitation, any extension for longer than the
original period), or any other amendment or waiver of or consent to any
departure from any provision of any Loan Document; (iii) any exchange or release
of, or non-perfection of any lien on or security interest in, any Collateral, or
any release or amendment or waiver of or consent to any departure from any other
guaranty, for all or any of the Obligations; or (iv) any other circumstance
which might otherwise constitute a defense available to, or a discharge of, the
Borrower or any other Guarantor in respect of the Obligations or the Guarantor
and each other Guarantor in respect hereof.
- 43 -
<PAGE>
(ii) This Guaranty (i) is a continuing guaranty and shall remain in full
force and effect until such date on which all of the Obligations and all other
expenses to be paid by the Guarantor or any other Guarantor pursuant he eto
shall have been satisfied in full after the Commitment shall have been
terminated, (ii) shall continue to be effective or shall be reinstated, as the
case may be, if at any time any payment of any of the Obligations is rescinded
or must otherwise be returned by the Lender upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, all as though such payment had not
been made, and (iii) shall be binding upon the Guarantor, any other Guarantor or
their respective heirs, executors, successors and assigns.
SECTION 10.03. Waivers. The Guarantor hereby waives, to the
extent permitted by applicable law, (i) promptness and diligence, (ii) notice of
acceptance and notice of the incurrence of any Obligation, (iii) no ice of any
action taken by the Lender or the Borrower or any other agreement or instrument
relating thereto, (iv) all other notices, demands and protests, and all other
formalities of every kind in connection with the enforcement of the Obligations
or of the obligations of the Guarantor and each other Guarantor hereunder, the
omission of or delay in which, but for the provisions of this Section 10.03,
might constitute grounds for relieving the Guarantor or any other Guarantor of
its obligations hereunder, and (v) any requirement that the Lender protect,
secure, perfect or insure any security interest or lien or any property subject
thereto or exhaust any right or take any action against any Person or any
Collateral. All such waivers by the Guarantor shall be effective only to the
extent permitted by applicable law.
SECTION 10.04. Subrogation. The Guarantor hereby waives and
agrees that it will not exercise any rights which it may acquire by way of subro
ation hereunder, by any payment made by it hereunder or otherwise. If the amount
shall be paid to the Guarantor or such other Guarantor on account of such
subrogation rights at any time when all of such Obligations and all other
Obligations shall not have been paid in full, such amount shall be held in trust
for the benefit of the Lender, shall be segregated from the other funds of the
Guarantor or such other Guarantor and shall forthwith be paid over to the Lender
to be applied in whole or in part by the Lender against the Obligations, whether
matured or unmatured, in accordance with the terms of this Agreement.
SECTION 10.05. No Waiver; Remedies. No failure on the part of
the Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided re cumulative and not exclusive
of any remedy provided by law.
- 44 -
<PAGE>
SECTION 10.06. Taxes.
(a) Each payment by the Guarantor under this Loan Agreement shall be made
without withholding for or on account of any present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of the Lender, taxes imposed on its income, and
franchise taxes imposed on it by the jurisdiction (or any political subdivision
thereof) under the laws of which the Lender is organized (all such nonexcluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Other Taxes"); provided, however, that if such Other
Taxes are required by law to be withheld from any such payment, the Guarantor
shall make such withholding for the account of the Lender, make timely payment
thereof to the appropriate governmental authority, and forthwith pay for the
account of the Lender such additional amount as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 10.06.) the Lender receives an amount equal to
the sum it would have received had no such deductions been made. All such Other
Taxes shall be paid by the Guarantor prior to the date on which penalties attach
thereto or interest accrues thereon; provided, however, that, if any such
penalties or interest become due, the Guarantor shall make prompt payment
thereof to the appropriate governmental authority.
(b) the Guarantor will indemnify the Lender for the full amount of Other
Taxes (including any Other Taxes on amounts payable under this Section 10.06.)
paid by the Lender and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Other
Taxes were correctly or legally asserted. This indemnification shall be made
within 30 days from the date the Lender makes written demand therefor.
(c) Within 30 days after the date of any payment of Other Taxes, the
Guarantor will furnish to the Lender the original or a certified copy of a
receipt evidencing payment thereof. If no Other Taxes are payable in respect of
any payment hereunder or under any Note, the Guarantor will furnish to the
Lender a certificate from each appropriate taxing a thority, or an opinion of
counsel acceptable to the Lender, in either case stating that such payment is
exempt from or not subject to Other Taxes.
SECTION 10.07. Stay of Acceleration. If acceleration of the
time for payment of any amount payable by any of the Borrower in respect of the
Obligations is stayed upon the insolvency, bankruptcy or reorganization of any
of the Borrower, all such amounts otherwise subject to acceleration under the
terms of thi Agreement shall nonetheless be payable by the Guarantor forthwith
on demand by the Lender.
SECTION 10.08. Continued Effectiveness of Guaranty. The within
Guarantee is in addition to the Guaranty contained in the Old Agreement (the
"Old Guaranty"), and, notwithstanding that the within Guaranty is a Guaranty of
all of the Obligations hereunder (including, without limitation, the Obligations
as defined in the Old Agreement), the Guarantor hereby confirms that the Old
Guaranty is, and shall continue to be, in full force and effect and hereby
ratifies and confirms the Old Guaranty in all respects.
- 45 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
MOUNTAINEER PARK, INC.
By: /s/ Edson R. Arneault
Name:
Title:
MTR GAMING GROUP, INC.
By: /s/ Edson R. Arneault
Name:
Title:
MADELEINE L.L.C.
By:
- ---------------------------------------
Name:
Title:
- 46 -
<PAGE>
SCHEDULE I
Description of Property
- 47 -
<PAGE>
SCHEDULE II
Litigation
- 47 -
<PAGE>
SCHEDULE III
Licenses, Permits, Authorizations and Approvals
- 48 -
<PAGE>
SCHEDULE IV
Lease Obligations of the Borrower
- 49 -
<PAGE>
SCHEDULE V
Indebtedness of the Borrower
- 50 -
<PAGE>
SCHEDULE VI
Existing Liens
- 51 -
<PAGE>
SCHEDULE VII
Guarantees of the Borrower
- 52 -
<PAGE>
SCHEDULE VIII
Investments
- 53 -
<PAGE>
SCHEDULE IX
Stock Rights, Warrants and Options
- 54 -
<PAGE>
SCHEDULE X
Shares of Common Stock Issued
- 55 -
<PAGE>
EXHIBIT A
Form of Note
- 56 -
<PAGE>
EXHIBIT B
Form of Deed of Trust
- 57 -
<PAGE>
EXHIBIT C
Form of Registration Rights Agreement
- 58 -
<PAGE>
EXHIBIT D
Form of Security Agreement
- 59 -
<PAGE>
EXHIBIT E
Form of Warrants
- 60 -
<PAGE>
EXHIBIT F
Form of Borrowing Notice
- 61 -
<PAGE>
EXHIBIT G
Form of Opinion of Freer & McGarry,
Counsel to the Borrower and the Guarantor
- 62 -
<PAGE>
EXHIBIT H
Form of Opinion of Jackson & Kelley,
West Virginia Counsel to the Borrower and the Guarantor
- 63 -
<PAGE>
EXHIBIT I
Form of Stock Transfer Agreement
- 64 -
<PAGE>
EXHIBIT J
Corrective Action Plan
- 65 -
<PAGE>
EXHIBIT 2
AMENDED AND RESTATED GENERAL SECURITY AGREEMENT
AMENDED AND RESTATED GENERAL SECURITY AGREEMENT dated June 2,
1996, as amended and restated as of December 10, 1996, made by Mountaineer Park,
Inc., a West Virginia corporation (the "Grantor"), in favor of Madeleine L.L.C.,
as lender (the "Lender") for the Lenders (as hereinafter defined).
W I T N E S S E T H :
WHEREAS, the Grantor, WINNERS ENTERTAINMENT, INC., and the
Lender are parties to a Term Loan Agreement, dated as of July 2, 1996, as
amended and restated as of December 10, 1996 (such Agreement, as further amended
or otherwise modified from time to time, being hereinafter referred to as the
"Loan Agreement");
WHEREAS, pursuant to the Loan Agreement, the Lender has agreed
to make (i) a term loan (the "Term Loan") to the Borrower in an aggregate p
incipal amount not to exceed the Term Commitment (as defined in the Loan
Agreement), and (ii) a line of credit available for loans to the Borrower (the
"Line Loans" and, collectively with the Term Loan, the "Loans") in an aggregate
principal amount not to exceed the Line Commitment (as defined in the Loan
Agreement);
WHEREAS, it is a condition precedent to the making of any
Loans by the Lender pursuant to the Loan Agreement that the Grantor shall have
executed and delivered to the Lender a security agreement providing for the
grant to the Lender of a security interest in all personal property and fixtures
of the Grantor;
NOW, THEREFORE, in consideration of the premises and the
agreements herein and in order to induce the Lender to make and maintain the
Loans pursuant to the Loan Agreement, the Grantor hereby agrees with the Lender
as follows:
SECTION 1. Definitions. Reference is hereby made to the Loan
Agreement for a state ent of the terms thereof. All terms used in this Agreement
which are defined in the Loan Agreement or in Article 9 of the Uniform
Commercial Code (the "Code") currently in effect in the State of New York and
which are not otherwise defined herein shall have the same meanings herein as
set forth therein.
SECTION 2. Grant of Security Interest. As collateral security
for all of the Obligations (as defined in Section 3 hereof), the Grantor hereby
pledges and assigns to the Le der, and grants to the Lender a continuing
security interest in, all personal property and fixtures of the Grantor,
wherever located and whether now or hereafter existing and whether now owned or
hereafter acquired, of every kind and description, tangible or intangible (the
"Collateral"), including, without limitation, the following:
(a) all equipment of any kind including, without limitation,
the equipment described in Schedule I hereto, all furniture, fixtures, machinery
and all motor vehicles, tractors and other like property, whether or not the
title thereto is governed by a certificate of title or ownership (hereinafter
collectively referred to as the "Motor Vehicles"), wherever located and whether
now or hereafter existing and whether now owned or hereafter acquired, together
with all substitutes, replacements,
<PAGE>
accessions and additions thereto, and all tools, parts, accessories and
attachments used in connection therewith (hereinafter collectively referred to
as the "Equipment");
(b) all of the Grantor's right, title and interest in and to
all inventory of any kind, wherever located and whether now or hereafter
existing and whether now owned or hereafter acquired, and all accessions thereto
and products thereof (any and all such inventory, accessions and products being
hereinafter referred to as the "Inventory");
(c) all of the Grantor's right, title and intere t in and to
(i) all accounts, contract rights, chattel paper, instruments, documents,
general intangibles and other rights or obligations of any kind, whether now or
hereafter existing and whether now owned or hereafter acquired, arising out of
or in connection with the sale or lease of goods or the rendering of services or
otherwise and (ii) all rights now or hereafter existing in and to all security
agreements, leases and other contracts, now or hereafter existing and securing
or otherwise relating to any such accounts, contract rights, chattel paper,
instruments, general intangibles or obligations (including without limitation,
the contracts described in Schedule II hereto) (any and all such accounts,
contract rights, chattel paper, instruments, general intangibles and obligations
being hereinafter referred to as the "Receivables", and any and all such
security agreements, leases and other contracts being hereinafter referred to as
the "Related Contracts"); and
(d) all pr ceeds of any and all of the foregoing Collateral
and, to the extent not otherwise included, all payments under insurance (whether
or not the Lender is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral; in each case, howsoever the Grantor's interest
therein may arise or appear (whether by ownership, security interest, claim or
otherwise).
SECTION 3. Security for Ob igations. The security interest
created hereby in the Collateral constitutes continuing collateral security for
all of the following obligations, whether now existing or hereafter incurred
(the "Obligations"):
(a) the prompt payment by the Grantor, as and when due and
payable, of all amounts from time to time owing by it in respect of the Loan
Agreement, the Notes and the other Loan Documents; and
(b) the due performance and observance by the Grantor of all
of its other obligations from time to time existing in respect of the Loan
Documents.
SECTION 4. Representations and Warranties. The Grantor represents and
warrants as follows:
(a) The Grantor (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
as set forth on the first page hereof, and (ii) has all requisite power and
authority to execute, delive and perform this Agreement.
(b) The execution, delivery and performance by the Grantor of
this Agreement (i) have been duly authorized by all necessary corporate action,
(ii) do not and will not contravene its charter or by-laws, law or any
contractual restriction binding on or affecting the Grantor or any of its
- 2 -
<PAGE>
properties, and (iii) do not and will not result in or require the creation of
any lien, security interest or other charge or enc mbrance upon or with respect
to any of its properties, except as contemplated by the Loan Documents.
(c) This Agreement is a legal, valid and binding obligation of
the Grantor, enforceable against the Grantor in accordance with its terms.
(d) All Equipment and Inventory now existing is, and all
Equipment and Inventory hereafter existing will be, located at the address(es)
specified therefor in Schedule III hereto. The Grantor's chief plac of business
and chief executive office, the place where the Grantor keeps its records
concerning Receivables and all originals of all chattel paper which constitute
Receivables are located at the address specified therefor in Schedule III. None
of the Receivables is evidenced by a promissory note or other instrument. Set
forth as Schedule IV hereto is a complete and correct list of each trade name
used by the Grantor.
(e) The Grantor has delivered to the Lender complete and
correct copies of each Related Contract described in Schedule II hereto,
including all schedules and exhibits thereto. Each such Related Contract sets
forth the entire agreement and understanding of the parties thereto relating to
the subject matter thereof, and there are no other agreements, arrangements or
understandings, written or oral, relating to the matters covered thereby or the
rights of the Grantor or any of its Affiliates in respect thereof. Each Related
Contract now existing is, and each other Related Contract will be the legal,
valid and binding obligation of the parties thereto, enforceable against such
parties in accordance with its terms. No default thereunder by any such party
has occurred, nor does any defense, offset, deduction or counterclaim exist
thereunder in favor of any such party.
(f) The Grantor is and will be at all times the owner of the
Collateral free and clear of any lien, security interest or other charge or
encumbrance except for (i) he security interest created by this Agreement and
(ii) the security interests and other encumbrances described in Schedule V
hereto. No effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording or filing
office except (i) such as may have been filed in favor of the Lender relating to
this Agreement and (ii) such as may have been filed to perfect or protect any
security interest or encumbrance described in Schedule V hereto.
(g) The exercise by the Lender of its rights and remedies
hereunder will not contravene any law or contractual restriction binding on or
affecting the Grantor or any of its properties and will not result in or require
the creation of any lien, security interest or other charge or encumbrance upon
or with respect to any of its properties.
(h) No authorization or approval or other action by, and no
notice to or filing with, any Governmental A thority or other regulatory body is
required for (i) the due execution, delivery and performance by the Grantor of
this Agreement, (ii) the grant by the Grantor, or the perfection, of the
security interest purported to be created hereby in the Collateral or (iii) the
exercise by the Lender of any of its rights and remedies hereunder, except for
the filing under the Code of the financing statement(s) required to be filed
pursuant to the Loan Agreement, all of which financing statements have been duly
filed and are in full force and effect.
- 3 -
<PAGE>
(i) This Agreement creates a valid security interest in favor
of the Lender in the Collateral as security for the Obligations. The Lender's
having possession of all instruments and cash constituting Collateral from time
to time and the filing of the financing statements required to be filed pursuant
to the Loan Agreement results in the perfection of such security interest. Such
security interest is, or in t e case of Collateral in which the Grantor obtains
rights after the date hereof, will be, a perfected, first priority security
interest, subject only to the security interests and other encumbrances
described in Schedule V hereto. Such filings and all other action necessary or
desirable to perfect and protect such security interest have been duly taken,
except for the Lender's having possession of instruments and cash constituting
Collateral after the date hereof.
SECTION 5. C venants as to the Collateral. So long as any of
the Obligations (as such term is defined in clause (i) of Section 1.01 of the
Loan Agreement) shall remain outstanding, unless the Lender shall otherwise
consent in writing:
(a) Further Assurances. The Grantor will at its expense, at
any time and from time to time, promptly execute and deliver all further
instruments and documents and take all further action that may be necessary or
desirable or that the Lender may request in order (i) to perfect and protect the
security interest purported to be created hereby, (ii) to enable the Lender to
exercise and enforce its rights and remedies hereunder in respect of the
Collateral or (iii) to otherwise effect the purposes of this Agreement,
including, without limitation: (A) marking conspicuously each chattel paper
included in the Receivables and each Related Contract and, at the request of the
Lender, each of its records pertaining to the Collateral with a legend, in form
and substance satisfactory to the Lender, indicating that such chattel paper,
Related Contract or Collateral is subject to the security interest created
hereby, (B) if any Receivable shall be evidenced by a promissory note or other
instrument or chattel paper, delivering and pledging to the Lender hereunder
such note, instrument or chattel paper duly indorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance satisfactory to
the Lender, (C) executing and filing such financing or continuation statements,
or amendments thereto, as may be necessary or desirable or that the Lender may
request in order to perfect and preserve the security interest purported to be
created hereby, (D) furnishing to the Lender from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Lender may reasonably request,
all in reasonable detail, and (E) upon the acquisition after the date hereof by
the Grantor of any Equipment covered by a certificate of title or ownership,
cause the Lender to be listed as the lienholder (or, in the event such Equipment
is subject to a purchase money security interest (a "Permitted Lien"), as a
junior lienholder) on such certificate of title and within 60 days of the
acquisition thereof and deliver evidence of the same to the Lender..
(b) Location of Equipment and Inventory. The Grantor will keep
the Equipment and Inventory (other than Inventory and used Equipment sold in the
ordinary course of business) at the location[s] specified therefor in Section
4(d) hereof.
(c) Condition of Equipment. The Grantor will cause the
Equipment to be maintained and preserved in the same condition, repair and
working order as when acquired, ordinary wear and tear excepted, and in
accordance with any manufacturer's manual, and will forthwith, or in the case of
any loss or damage to any Equipment as quickly as racticable after the
occurrence thereof, make
- 4 -
<PAGE>
or cause to be made all repairs, replacements, and other improvements in
connection therewith which are necessary or desirable or that the Lender may
request to such end. The Grantor will promptly furnish to the Lender a statement
respecting any loss or damage in excess of $10,000 to any Equipment.
(d) Taxes. The Grantor will pay promptly when due all property
and other taxes, assessments and governmental charges or levies imposed upon,
and all claims (including claims for labor, materials and supplies) against, the
Equipment and Inventory, except to the extent the validity thereof is being
contested in good faith by proper proceedings which stay the imposition of any
penalty, fine or lien resulting from the non-payment thereof and with respect to
which adequate reserves have been set aside for the payment thereof.
(e) Insurance.
(i) The Grantor will, at its own expense, maintain insurance with respect to
the Equipment and Inventory in such amounts, against such risks, in such form
and with such insurers, as shall be satisfactory to the Lender from time to
time. Each policy for liability insurance shall provide for all losses to be
paid on behalf of the Lender and the Grantor as their respective interests may
appear, and each policy for property damage insurance shall provide for all
losses to be adjusted with, and pai directly to, the Lender; provided, however,
that with respect to Equipment subject to a Permitted Lien, the Lender's rights
may be subject to the rights of the holder of such Permitted Lien. Except as
required by any agreement which creates a Permitted Lien, each such policy shall
in addition (A) name the Grantor and the Lender as insured parties thereunder
(without any representation or warranty by or obligation upon the Lender) as
their interests may appear, (B) contain the agreement by the insurer that any
loss thereunder shall be payable to the Lender notwithstanding any action,
inaction or breach of representation or warranty by the Grantor, (C) provide
that there shall be no recourse against the Lender for payment of premiums or
other amounts with respect thereto and (D) provide that at least 30 days' prior
written notice of cancellation or of lapse shall be given to the Lender by the
insurer. The Grantor will, if so requested by the Lender, deliver to the Lender
original or duplicate policies of such insurance and, as often as the Lender may
reasonably request, a report of a reputable insurance broker with respect to
such insurance. The Grantor will also, at the request of the Lender, duly
execute and deliver instruments of assignment of such insurance policies and
cause the respective insurers to acknowledge notice of such assignment.
(ii) Reimbursement under any liability insurance maintained by the Grantor
pursuant to this Section 5(e) may be paid dir ctly to the Person who shall have
incurred liability covered by such insurance. In the case of any loss involving
damage to Equipment or Inventory as to which paragraph (iii) of this Section
5(e) is not applicable, the Grantor will make or cause to be made the necessary
repairs to or replacements of such Equipment or Inventory, and any proceeds of
insurance maintained by the Grantor pursuant to this Section 5(e) shall be paid
to the Grantor as reimbursement for the costs of such repairs or replacements.
(iii) Upon the occurrence and during the continuance of an Event of Default
or the actual or constructive total loss (in excess of $10,000 per occurrence)
of any Equipment or Inventory, all insurance payments in respect of such
Equipment or Inventory shall be paid to the Lender and applied as specified in
Section 7(b) hereof.
- 5 -
<PAGE>
(f) Provisions Concerning the Receivables and the Related Contracts.
(i) The Grantor will (A) give the Lender prompt notice of any change in the
Grantor's name, identity or corporate structure, (B) keep its chief place of
business and chief executive office and all originals of all chattel paper which
constitute Receivables at the location[s] specified therefor in Section 4(d)
hereof, and (C) keep adequate records concerning the Receivables and such
chattel paper and permit representatives of the Lender at any time during normal
business hours to insp ct and make abstracts from such records and chattel
paper.
(ii) The Grantor will duly perform and observe all of its obligations under
each Related Contract and, except as otherwise provided in this Subsection (f),
continue to collect, at its own expense, all amounts due or to become due under
the Receivables. In connection with such collections, the Grantor may (and, at
the Lender's direction, will) take such action as the Grantor or the Lender may
deem necessary or advi able to enforce collection or performance of the
Receivables; provided, however, that the Lender shall have the right at any
time, upon the occurrence and during the continuance of an Event of Default or
an event which, with the giving of notice or the lapse of time or both, would
constitute an Event of Default, and upon written notice to the Grantor of its
intention to do so, to notify the account debtors or obligors under any
Receivables of the assignment of such Receivables to the Lender and to direct
such account debtors or obligors to make payment of all amounts due or to become
due to the Grantor thereunder directly to the Lender and, upon such notification
and at the expense of the Grantor and to the extent permitted by law, to enforce
collection of any such Receivables and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as the
Grantor might have done. After receipt by the Grantor of the notice from the
Lender referred to in the proviso to the immediately preceding sentence, (A) all
amounts and proceeds (including instruments) received by the Grantor in respect
of the Receivables shall be received in trust for the benefit of the Lender
hereunder, shall be segregated from other funds of the Grantor and shall be
forthwith paid over to the Lender in the same form as so received (with any
necessary indorsement) to be held as cash collateral and either (1) released to
the Grantor so long as no Event of Default shall have occurred and be continuing
or (2) if any Event of Default shall have occurred and be continuing, applied as
specified in Section 7(b) hereof, and (B) the Grantor will not adjust, settle or
compromise the amount or payment of any Receivable or release wholly or partly
any account debtor or obligor thereof or allow any credit or discount thereon.
(iii) Upon the occurrence and during the continuance of any breach or
default under any Related Contract referred to in Schedule II hereto or otherwi
e specified by the Lender from time to time by any party thereto other than the
Grantor, (A) the Grantor will, promptly after obtaining knowledge thereof, give
the Lender written notice of the nature and duration thereof, specifying what
action, if any, it has taken and proposes to take with respect thereto, (B) the
Grantor will not, without the prior written consent of the Lender, declare or
waive any such breach or default or affirmatively consent to the cure thereof or
exercise any of its remedies in respect thereof, and (C) the Grantor will, upon
written instructions from the Lender and at the Grantor's expense, take such
action as the Lender may deem necessary or advisable in respect thereof.
(iv) The Grantor will, at its expense, promptly deliver to the Lender a
copy of each notice or other communication received by it by which any other
party to any Related
- 6 -
<PAGE>
Contract referred to in Schedule II hereto or otherwise specified by the Lender
rom time to time purports to exercise any of its rights or affect any of its
obligations thereunder, together with a copy of any reply by the Grantor
thereto.
(v) The Grantor will not, without the prior written consent of the Lender,
cancel, terminate, amend, modify, or waive any provision of, any Related
Contract referred to in Schedule II hereto or otherwise specified by the Lender
from time to time.
(g) Motor Vehicles.
(i) Within 60 days of the date hereof, the Grantor shall deliver to the
Lender photocopies of the certificates of title or ownership for the Motor
Vehicles owned by it with the Lender listed as lienholder.
(ii) Upon the acquisition after the date hereof by the Grantor of any Motor
Vehicle, the Grantor shall deliver to the Lender photocopies of the certificates
of title or ownership for such Motor Vehicle, together with the manufacturer's
statement of rigin, with the Lender listed as lienholder.
(iii) The Grantor hereby appoints the Lender as its attorney-in-fact,
effective the date hereof and terminating upon the termination of this
Agreement, for the purpose of (i) executing on behalf of the Grantor title or
ownership applications for filing with appropriate Governmental Authorities to
enable Motor Vehicles now owned or hereafter acquired by the Grantor to be
retitled and the Lender listed as lienholder thereof, (ii) iling such
applications with such state agencies and (iii) executing such other documents
and instruments on behalf of, and taking such other action in the name of, the
Grantor as the Lender may deem necessary or advisable to accomplish the purposes
hereof (including, without limitation, for the purpose of creating in favor of
the Lender a perfected lien on the Motor Vehicles and exercising the rights and
remedies of the Lender hereunder). This appointment as attorney-in-fact is
irrevocable and coupled with an interest.
(iv) Any photocopies of certificates of title or ownership delivered
pursuant to the terms hereof shall be accompanied by odometer statements for
each Motor Vehicle covered thereby.
(v) So long as no Event of Default or event which, with the giving of
notice or the lapse of time or both, would constitute an Event of Default shall
have occurred and be continuing, upon the request of the Grantor, the Lender
shall execute and d liver to the Grantor such instruments as the Grantor shall
reasonably request to remove the notation of the Lender as lienholder on any
certificate of title for any Motor Vehicle; provided that any such instruments
shall be delivered, and the release effective, only upon receipt by the Lender
of a certificate from the Grantor, stating that the Motor Vehicle the lien on
which is to be released is to be sold or has suffered a casualty loss (with
title thereto passing to the casualty insurance company therefor in settlement
of the claim for such loss) and any proceeds of such sale or casualty loss being
paid to the Lender hereunder to be applied to the Obligations then outstanding
in the manner contemplated by Section 7(b) hereof.
- 7 -
<PAGE>
(h) Inspection and Reporting. The Grantor shall permit
representatives of the Lender, upon reasonable notice and at any time during
normal business hours, to inspect and make abstracts from its books and records
ertaining to the Collateral, and permit representatives of the Lender to be
present at the Grantor's place of business to receive copies of all
communications and remittances relating to the Collateral, and to forward copies
of any notices or communications received or made by the Grantor with respect to
the Collateral, all in such manner as the Lender may require.
(i) Transfers and Other Liens. The Grantor will not (i) sell,
assign (by operation of law or otherwis ), exchange or otherwise dispose of any
of the Collateral (except for sales or other dispositions of Inventory and used
Equipment in the ordinary course of business) or (ii) create or suffer to exist
any lien, security interest or other charge or encumbrance upon or with respect
to any of the Collateral except for (A) the security interest created hereby and
(B) the security interests and other encumbrances described in Schedule V
hereto.
SECTION 6. Additional Provisions Conce ning the Collateral.
(a) The Grantor hereby authorizes the Lender to file, without
the signature of the Grantor where permitted by law, one or more financing or
continuation statements, and amendments thereto, relating to the Collateral.
(b) The Grantor hereby irrevocably appoints the Lender the
Grantor's attorney-in-fact and proxy, with full authority in the place and stead
of the Grantor and in the name of the Grantor or otherwise, from time to time in
the Lender's discretion, to take any action and to execute any instrument which
the Lender may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation: (i) to obtain and adjust insurance
required to be paid to the Lender pursuant to Section 5(e) hereof, (ii) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any Collateral,
(iii) to receive, indorse, and collect any drafts or other instruments,
documents and chattel paper in connection with clause (i) or (ii) above and (iv)
to file any claims or take any action or institute any proceedings which the
Lender may deem necessary or desirable for the collection of any Collateral or
otherwise to enforce the rights of the Lender with respect to any Collateral.
(c) If the G antor fails to perform any agreement contained
herein after the expiry of any applicable grace period, the Lender may itself
perform, or cause performance of, such agreement or obligation, and the expenses
of the Lender incurred in connection therewith shall be payable by the Grantor
pursuant to Section 8 hereof.
(d) The powers conferred on the Lender hereunder are solely to
protect its interest in the Collateral and shall no impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Lender shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
(e) Anything herein to the contrary notwithstanding, (i) the
Grantor shall remain liable under the Related Contracts to the extent set forth
therein to perform all of its obligations thereunder to the same extent as if
this Agreement had not been executed, (ii) the exercise by the Lender of any
- 8 -
<PAGE>
of its rights hereunder shall not release the Grantor from any of its
obligations under the Related Contracts and (iii) the Lender shall not have any
obligation or liability by reason of this Agreement under the Related Contracts
nor shall the Lender be obligated to perform any of the obligations or duties of
the Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 7. Remedies Upon Default. If an Event of Default shall have
occurred and be continuing:
(a) The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or o herwise available
to it, all of the rights and remedies of a secured party on default under the
Code (whether or not the Code applies to the affected Collateral), and also may
(i) require the Grantor to, and the Grantor hereby agrees that it will at its
expense and upon request of the Lender forthwith, assemble all or part of the
Collateral as directed by the Lender and make it available to the Lender at a
place to be designated by the Lender which is reasonably convenient to both
parties and (ii) without notice except as specified below, sell the Collateral
or any part thereof in one or more parcels at public or private sale, at any of
the Lender's offices or elsewhere, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as the Lender may deem
commercially reasonable. The Grantor agrees that, to the extent notice of sale
shall be required by law, at least 10 days' notice to the Grantor of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Lender shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
The Lender may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. The
Grantor hereby waives any claims against the Lender arising by reason of the
fact that the price at which the Collateral may have been sold at a private sale
was less than the price which might have been obtained at a public sale or was
less than the aggregate amount of the Obligations, even if the Lender accepts
the first offer received and does not offer the Collateral to more than one
offeree.
(b) Any cash held by the Lender as Collateral and all cash
proceeds received by the Lender in respect of any sale of, collection from, r
other realization upon, all or any part of the Collateral shall be applied as
follows:
(i) First, to the payment of the reasonable costs and expenses, including
reasonable attorneys' fees and legal expenses, incurred by the Lender in
connection with (A) the administration of this Agreement, (B) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (C) the exercise or enforcement of any of the
rights of the Lender hereunder or (D) the failure of the Grantor to perform or
observe any of the provisions hereof;
(ii) Second, at the option of the Lender, to the payment or other
satisfaction of any liens and other encumbrances upon any of the Collateral;
- 9 -
<PAGE>
(iii) Third, ratably to the payment of the Obligations, first in respect of
any fees not covered by clause (i) above, second, in respect of accrued but
unpaid in erest on the Loans, and third, in respect of unpaid principal of the
Loans;
(iv) Fourth, to the payment of any other amounts required by applicable law
(including, without limitation, Section 9-504(1)(c) of the Code or any successor
or similar, applicable statutory provision); and
(v) Fifth, the surplus proceeds, if any, to the Grantor or to whomsoever
shall be lawfully entitled to receive the same or as a court of competent
jurisdiction s all direct.
(c) In the event that the proceeds of any such sale,
collection or realization are insufficient to pay all amounts to which the
Lender is legally entitled, the Grantor shall be liable for the deficiency,
together with interest thereon at the highest rate specified in any Note for
interest on overdue principal thereof or such other rate as shall be fixed by
applicable law, together with the costs of collection and the reasonable fees of
any attorneys employed by the Lender to collect such deficiency.
SECTION 8. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Lender from and
against any and all claims, losses and liabilities growing out of or resulting
from this Agreement (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities resulting solely a d directly
from the Lender's gross negligence or willful misconduct.
(b) The Grantor will upon demand pay to the Lender the amount
of any and all costs and expenses, including the reasonable fees and
disbursements of the Lender's counsel and of any experts and Lenders, which the
Lender may incur in connection with (i) the administration of this Agreement,
(ii) the custody, preservation, use or operation of, or the sale of, co lection
from, or other realization upon, any Collateral, (iii) the exercise or
enforcement of any of the rights of the Lender hereunder, or (iv) the failure by
the Grantor to perform or observe any of the provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed, telegraphed or
delivered, if to the Grantor, to it at its address specified in he Loan
Agreement; if to the Lender, to it at its address specified in the Loan
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Persons complying as
to delivery with the terms of this Section 9. All such notices and other
communications shall be effective (i) if mailed, when deposited in the mails,
(ii) if telegraphed, when delivered to the telegraph company, or (iii) if
delivered, upon delivery.
SECTION 10. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantor and the Lender, and
no waiver of any provision of this Agreement, and no consent to any departure by
the Grantor therefrom, shall be effective unless it is
- 10 -
<PAGE>
in writing and signed by the Lender, a d then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
(b) No failure on the part of the Lender to exercise, and no
delay in exercising, any right hereunder or under any other Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The rights and remedies of the Lender provided herein and in the
other Loan Documents are cumulative and are in addition to, and not exclusive
of, any rights or remedies provided by law. The rights of the Lender under any
Loan Document against any party thereto are not conditional or contingent on any
attempt by the Lender to exercise any of its rights under any other Loan
Document against such party or against any other Person.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or invalidity without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest
in the Collate al and shall (i) remain in full force and effect until the
indefeasible payment in full or release of the Obligations (as such term is
defined in clause (i) of Section 1.01 of the Loan Agreement), (ii) be binding on
the Grantor and its successors and assigns and shall inure, together with all
rights and remedies of the Lender hereunder, to the benefit of the Lender and
its respective successors, transferees and assigns. Without limiting the
generality of the foregoing, the Lender may assign or otherwise transfer any
Note or portion thereof held by it, and the Lender may assign or otherwise
transfer its rights under any other Loan Document to any other Person, and such
other Person shall thereupon become vested with all of the benefits in respect
thereof granted to the Lender, herein or otherwise. None of the rights or
obligations of the Grantor hereunder may be assigned or otherwise transferred
without the prior written consent of the Lender.
(e) Upon the satisfaction in full of the Obligations, (i) this
Agreement and the security interest created hereby shall terminate and all
rights to the Collateral shall revert to the Grantor, and (ii) the Lender will,
upon the Grantor's request and at the Grantor's expense, (A) return to the
Grantor such of the Collateral as shall not have been sold or otherwise disposed
of or applied pursuant to the terms hereof and (B) execute and deliver to the
Grantor such documents as the Grantor shall reasonably request to evidence such
termination.
(f) This Agreement shall be governed by and construed in
accordance with the law of the State of New York, except as required by
mandatory provisions of law and except to the extent that the validity or
perfection or the perfection and the effect of the perfection or non-perfection
of the security interest created hereby, or remedies hereunder, in respect of
any particular Col ateral are governed by the law of a jurisdiction other than
the State of New York.
(g) Any legal action or proceeding with respect to this
Agreement or any document related thereto may be brought in the courts of the
State of New York or the United States of America for the Southern District of
New York, and, by execution and delivery of this Agreement, the Grantor hereby
accepts for itself and in respect of its property, generally and
unconditionally, the
- 11 -
<PAGE>
jurisdiction of the aforesaid courts. The Grantor hereby irrevocably waives any
objection, including, without limitation, any objection to the laying of venue
or based on the grounds of forum non conveniens, which it may now or hereafter
have to the bringing of any such action or proceeding in such respective
jurisdictions and consents to the granting of such legal or equitable relief as
is deemed appropriate by the court.
(h) The Grantor rrevocably consents to the service of process
of any of the aforesaid courts in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, to such
Grantor at its address provided herein, such service to become effective 30 days
after such mailing.
(i) Nothing contained herein shall affect the right of the
Lender to serve process in any other manner permitted by law or commence legal
proceedings or otherwise proceed agai st the Grantor or any of the Grantor's
property in any other jurisdiction.
(j) EACH OF THE GRANTOR AND (BY ITS ACCEPTANCE OF THIS
AGREEMENT) THE LENDER WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.
- 12 -
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be executed and
delivered by its officer thereunto duly authorized, as of the date first above
written.
MOUNTAINEER PARK, INC.
By: /s/ Edson R. Arneault
Title: _______________________________
- 13 -
<PAGE>
SCHEDULE I
TO
SECURITY AGREEMENT
Equipment
- 14 -
<PAGE>
SCHEDULE II
TO
SECURITY AGREEMENT
Certain Related Contracts
- 15 -
<PAGE>
SCHEDULE III
TO
SECURITY AGREEMENT
1. Location(s) of Equipment and Inventory:
2. Grantor's chief place of business, chief executive office and place
where the Grantor keeps its records concerning Receivables.
- 16 -
<PAGE>
SCHEDULE IV
TO
SECURITY AGREEMENT
Trade Names, Etc.
- 17 -
<PAGE>
SCHEDULE V
TO
SECURITY AGREEMENT
Permitted Encumbrances
- 18 -
<PAGE>
EXHIBIT 3
CREDIT LINE DEED OF TRUST,
LEASEHOLD DEED OF TRUST, SECURITY AGREEMENT,
ASSIGNMENT, FIXTURE FILING AND FINANCING STATEMENT
THIS CREDIT LINE DEED OF TRUST, LEASEHOLD DEED OF TRUST, SECURITY
AGREEMENT, ASSIGNMENT, FIXTURE FILING AND FINANCING STATEMENT (hereinafter
referred to as "Trust Deed" or "Deed of Trust") made and entered into as of
December , 1996 by and among MOUNTAINEER PARK, INC., a West Virginia
corporation, party of the first part ("Grantor"), and Deborah A. Sink, a
resident of Kanawha County, West Virginia, and Carl D. Andrews, a resident of
Kanawha County, West Virginia, as Trustees, parties of the second part
(collectively, the "Trustees) and MADELEINE L.L.C., ("Madeleine"), a New York
limited liability company, shall be referred to herein as the "Lender".
W I T N E S S E T H:
WHEREAS, the Borrower, Winners Entertainment, Inc. (the
"Guarantor") and the Lender are parties to a Term Loan Agreement, dated as of
July 2, 1996 (the "Old Agreement"), pursuant to which the Lender made a term
loan to the Borrower in the original principal amount of $5,000,000.
WHEREAS, the Borrower and the Guarantor have requested that the
Lender (a) amend and restate the Old Agreement to provide, among other things,
an increase in the amount available under the Old Agreement to the Borrower
thereunder from $5,000,000 to $16,100,000 (the "Term Loan") to refinance the
obligations of the Borrower under the Senior Loan Agreement (as defined in the
Old Agreement), and (b) extend additional credit to the Borrower in the form of
a three year line of credit for loans in the aggregate maximum principal amount
not to exceed $5,376,500 at any time outstanding (the "Line Loans" and,
collectively with the Term Loan, the "Loans").
WHEREAS, the obligation of Lender to extend credit under the
Restated Loan Agreement is subject to the condition, among others, that Grantor
grant the Property (as hereinafter defined) to Trustees in trust for the benefit
of Lender; and
WHEREAS, to induce Lender to extend credit to Grantor, and as
security for the Loans, Grantor desires to execute and deliver this Deed of
Trust to Trustees for the benefit of Lender pursuant to the Restated Loan
Agreement; and
WHEREAS, this is a Credit Line Deed of Trust for the purposes of
West Virginia Code ss. 38-1-14, and secures a maximum principal amount not to
exceed $21,500,000.00, and this Deed of Trust is also security for the payment
of interest on such principal sums and for taxes, insurance premiums, and other
expenses, including interest thereon, undertaken by Trustee or Lender pursuant
to West Virginia Code ss. 38-1-14; and
WHEREAS, this credit line deed of trust provides for and secures
future advances which are intended to be obligatory advances for the purposes of
West Virginia Code ss. 38-1-14.
<PAGE>
WHEREAS, this Deed of Trust also secures the repayment of all
advances that Lender may extend to Grantor under the Loans and other agreements
provided in the Note and Restated Loan Agreement described therein, this Deed of
Trust, or any other present or future written agreement. Upon written request of
Grantor, and in the absence of default or breach of any covenant or agreement
contained in the Note, this Deed of Trust or the Restated Loan Agreement and the
Loan Documents as defined in the Restated Loan Agreement, the Lender hereby
agrees to make future advances of principal up to an amount which, when added to
the then outstanding principal balance owing on the Loans, shall not exceed
$21,500,000.00.
NOW, THEREFORE, in order to further secure the payment of a
maximum principal amount not to exceed $21,500,000.00 and all sums due or to
become due under the Restated Loan Agreement, the Loans, and the Loan Documents
(as defined in the Restated Loan Agreement), or any extensions or modifications
thereof, as well as to secure the performance of all Grantor's covenants and
agreements contained in this Trust Deed or any amendments thereof, and in
consideration of the premises and the further sum of Ten Dollars ($10.00) to
Grantor in hand well and truly paid by Lender at and before the delivery hereof,
the receipt whereof is hereby acknowledged, Grantor has granted, bargained and
sold, mortgaged, conveyed, aliened, enfeoffed, released, confirmed, assigned,
transferred and set over, and by these presents does grant, bargain and sell,
mortgage, convey, alien, enfeoff, release, confirm, assign, transfer and set
over unto Trustees, their successors and assigns, in trust, with power of sale,
Grantor's interest (including without limitation all surface and mineral
interests, if any, including coal) in those certain tracts of land more
particularly described in Exhibit "A" attached hereto and made a part hereof
(the "Land").
TOGETHER with Grantor's interest in all the coal, if any, in all
seams underlying the Land in which Grantor has rights.
TOGETHER with all Grantor's interest in sand, stone, water and
gravel found on the Land and Grantor's right to dump refuse from such coal on
the surface of the Land.
TOGETHER with the tenements, hereditaments, appurtenances and all
the estates and rights of Grantor in and to the Land.
TOGETHER with all the right, title and interest of Grantor in and
to all streets, roads and public places, opened or proposed, adjoining the Land,
and all easements and rights-of-way, public or private, now or hereafter used in
connection with the Land, including without limitation, all roads and ways on
the surface of or underground on the Land for the mining, transportation,
ventilation and drainage of coal and for the transportation of workmen and
supplies and all other necessary or useful purposes in connection with the
exploration, mining, processing, production and removal of coal.
TOGETHER with Grantor's interest in all the oil and gas, if any,
underlying the Land.
TOGETHER with all right, title and interest of Grantor, now owned
or hereafter acquired, in and to any land lying in the bed of any street, road
or avenue, opened or proposed, in front of or adjoining the Land to the extent
of the interest of Grantor therein, now or hereafter acquired.
- 2 -
<PAGE>
TOGETHER with all right, title and interest of Grantor, now owned
or hereafter acquired, in and to any and all sidewalks and alleys, and all
strips and gores of land, adjacent to or used in connection with the Land.
TOGETHER with all buildings, tipples, inclines, ma chine shops,
structures, improvements, rail spurs, dams and reservoirs in connection with the
mining of coal (the "Improvements") of every kind and description now or
hereafter erected or-placed on the Land.
TOGETHER with all of Grantor's present and future right, title and
interest in (i) all fixtures including without limitation, all standing or cut
timber, and all minerals, including without limitation, coal, minerals before
extraction, minerals as extracted and accounts resulting from the sale thereof
("Fixtures") heretofore or hereafter placed on the Lands or Leased Lands and
(ii) all machinery and equipment, including without limitation, all coal
preparation plants, docks, transloading, coal storage, cleaning and transporting
facilities or other improvements located on any of the Lands, now or hereafter
used by Grantor and all equipment and machinery comprising, or related to the
operation of such facilities or improvements ("Equipment"), wherever located,
and all attachments, accessories, and parts used or intended to be used with any
of such Equipment or Fixtures whether now or hereinafter installed therein or
thereon or affixed thereto as well as all substitutes and replacements thereof
in whole or in part, and (iii) all products and all cash and noncash proceeds
(including insurance policies and proceeds) and all guaranties, claims, rights,
remedies and privileges relating to any or all of the items listed in (i) and
(ii) above.
TOGETHER with all the mining rights and easements owned by Grantor
and appurtenant to the Land.
TOGETHER with all right, title and interest of Grantor as lessee
under any and all leases relating to any Fixtures, together with any options to
purchase the Fixtures which are subject to such leases and together with the
benefit of any payments now or hereafter made thereon.
TOGETHER with the reversions, remainders, easements, rents, issues and
profits arising or issuing from the Land and from the Improvements thereon,
including, but not limited to, the rents, royalties, issues and profits arising
or issuing from all leases and subleases now or hereafter entered into covering
all or any part of the Land and for the Improvements, including, without
limitation, all accounts receivable, maintenance, tax and insurance
contributions, percentage rents, minimum rents, any damages or awards following
suit or arbitration damages following default, capital reserve funds, any sums
to which Grantor may become entitled in any court proceedings involving the
bankruptcy, insolvency or reorganization of any tenants or operators of the
Land; any guaranties of any rents, royalties, income and profits due or to
become due under any lease, and any proceeds payable under any policy of
insurance covering loss of rents under any lease for any cause, all of which
leases, subleases, rents, issues and profits are hereby assigned (collectively,
the "Rents") and, if.requested by Lender, shall be caused to be further assigned
to Lender by Grantor. The foregoing assignment shall include without limitation,
cash or securities deposited under leases to secure performance by tenants or
operators of their obligations thereunder, whether such cash or securities are
to be held until the expiration of the terms of such leases or applied to one or
more installments of rent coming due prior to the expiration of such terms. The
foregoing assignment is intended by Grantor and Lender to create and shall be
construed to create an absolute, unconditional and presently effective
assignment
- 3 -
<PAGE>
to Lender of all of Grantor's right, title and interest in the Rents and shall
not be deemed to create merely a security interest therein for the payment of
any indebtedness or the performance of any obligations of Grantor evidenced by
the Restated Loan Agreement, the Loans, and the Loan Documents. Grantor will
execute and deliver to Lender on demand such assignments and instruments as
Lender may require to implement, confirm, maintain and continue the assignment
hereunder.
TOGETHER with any and all awards, damages, payments and other
compensation and any and all claims therefor and rights thereto which may result
from taking or injury by virtue of the exercise of the power of eminent domain
of or to, or any damage, injury or destruction in any manner caused to, the
Land, the Improvements, or any part thereof, or from any change of grade or
vacation of any street abutting thereon, all of which awards, damages, payments,
compensation, claims and rights are hereby assigned, transferred and set over to
Trustees on behalf of Lender to the fullest extent that Grantor may under the
law so do.
TOGETHER with all of Grantor's right, title and interest in and to
all rights and claims arising under and by virtue of the covenants of warranty
contained in those deeds conveying the Land to Grantor.
ALL of which property and rights therein hereinabove described or
mentioned and all of which collateral is now existing or hereafter arising, now
owned or hereafter acquired, due or to become due, including proceeds, products,
and insurance proceeds to secure payment of all indebtedness of Grantor to
Lender now existing or hereafter arising, being hereinafter collectively called,
the "Property". It is the intention of the parties hereto that this Deed of
Trust shall embrace and Grantor does hereby grant to Trustees on behalf of
Lender a mortgage, deed of trust and security interest in all of the properties,
rights, interests, claims, demands and privileges of every kind and character as
are owned by the Grantor or in which the Grantor has rights in and appurtenant
to all lands in the county in which this instrument is recorded, whether fee,
mineral, surface, leasehold, easement, right-of-way or otherwise, and
wheresoever situate, and whether or not specifically described herein, together
with all rents, royalties and other income arising from the various coal leases
and other instruments and agreements affecting the same.
BUT THIS CONVEYANCE IS IN TRUST, HOWEVER, to secure the payment of
the Debt (as hereinafter defined) and performance of the other obligations of
Grantor referred to herein.
And without limiting any of the other provisions of this Deed of
Trust, Grantor, as debtor, expressly grants unto Lender, a security interest in
all those portions of the Property which may be subject to the Uniform
Commercial Code (the "Code") provisions applicable to secured transactions under
the laws of any state and this Deed of Trust shall constitute a Security
Agreement under the Code.
TO HAVE AND TO HOLD the same unto Trustees, their successors and
assigns, forever.
PROVIDED, HOWEVER, that if Grantor shall pay to Lender the Debt
(as hereinafter defined), and shall keep and perform each of its other
covenants, conditions and agreements set forth herein and in the Restated Loan
Agreement, the Loans, and the Loan Documents, upon the termination of all
obligations, duties and commitments of Grantor under the Restated Loan
- 4 -
<PAGE>
Agreement, the Loans, and the Loan Documents, this Deed of Trust and the estate
hereby granted and conveyed shall become null and void.
This conveyance is intended as a Trust Deed and is given for the
purpose of securing payment of the Debt and performance of the other obligations
of Grantor referred to above.
This Trust Deed is executed and delivered subject to the following
covenants, conditions and agreements.
1. Definition. Words and terms defined in the Restated Loan Agreement
shall, unless the context hereof clearly requires otherwise, have the same
meanings herein as therein provided.
2. Debt Secured. "Debt" means, collectively, (i) all indebtedness whether
of principal, interest, fees, expenses or otherwise of Grantor to Lender
incurred in connection with the Restated Loan Agreement, the Loans, and the Loan
Documents, as the same may from time to time be amended, together with any and
all extensions, renewals, refinancings or refundings thereof in whole or in part
and (ii) all costs and expenses, including without limitation, to the extent
permitted by law, reasonable attorneys, fees and legal expenses, incurred by
Trustees or Lender or Lender in the collection of any of the indebtedness
referred to in clause (i) above, and (iii) any advances made by Lender or Lender
for the maintenance, preservation, protection or enforcement of, or realization
upon, any property or assets now or hereafter made subject to a mortgage,
pledge, lien or security interest granted pursuant to this Deed of Trust or
pursuant to any agreement, instrument or note relating to any of the Debt,
including without limitation advances for taxes, insurance, repairs and the
like; interest on the principal sums hereby secured, and taxes, insurance
premiums and other obligations, including interest thereon undertaken by Lender
or Lender herein or in any other agreement securing or otherwise pertaining to
all indebtedness evidenced or guaranteed by the Restated Loan Agreement, the
Loans, and the Loan Documents.
The beneficial owner of the Debt is MADELEINE L.L.C., the Lender, and the
residence and principal place of business of said beneficial owner and the
Lender is as follows:
Madeleine, L.L.C.
950 Third Avenue
New York, New York 10022
Attention: Kevin Genda
3. (a) Possession. Until an Event of Default, Beneficiary shall permit the
Grantor to possess and enjoy the Property and to receive the Rents, issues and
profits thereof.
(b) Condition of Grant. The condition of this Deed of Trust is such that if
the Grantor shall fulfill all of its promises under the Old Agreement, Restated
Loan Agreement and Notes, as such terms are defined therein, and shall observe,
perform and discharge the obligations contained in this deed of trust, then
Beneficiary shall release and reconvey unto and at the cost of the Grantor the
Property.
4. Impositions and Other Charges.
- 5 -
<PAGE>
(a) Duty to Pay. Until payment in full of the clause (i) Obligations as
such item is defined at Section 1.01 of the Restated Loan Agreement, Grantor
will, except as otherwise provided in Article VIII of the Restated Loan
Agreement, (i) at least five (5) days prior to the date on which any interest or
penalties shall commence to accrue thereon, pay, discharge and, upon the request
of Lender furnish to Lender copies of (unless originals are requested by Lender)
proper receipts for all taxes, general and special, water and sewer rent
charges, excise levies, transit taxes, levies and assessments of every kind and
all charges for utilities and utility services, and which may have been or may
hereafter be charged, assessed, levied, confirmed, imposed upon, or grow or
become due and payable out of, or in respect to, or against, the Property, or
any part thereof, or any appurtenances thereto (collectively, the Impositions),
by any lawful authority or public utility, or which may become a lien thereon,
unless the same shall have been fully paid to Lender as provided in subparagraph
3(b) hereof, (ii) pay and discharge all mechanics, liens which may be filed
against said premises, (iii) pay and discharge any documentary, stamp or other
tax, including interest and penalties thereon, if any, now or hereafter becoming
payable hereon, (iv) provide, renew and keep alive by paying the necessary
premiums and charges thereon such policies of hazard and liability insurance
upon the property and upon the buildings and improvements now or hereafter
erected upon the Property as are required by the Lender.
(b) Escrow by Lender. Upon the written request of Trustees or Lender,
Grantor will pay or cause to be paid to Lender contemporaneously with each
monthly payment of interest, principal or principal and interest a sum equal to
one-twelfth (1/12th) of the real estate taxes and premiums for insurance
required by subparagraph 3(a) hereof so as to enable Lender to pay the same at
least thirty (30) days before they become due. Amounts so paid shall be deemed
not to be trust funds but may at the option of Lender be commingled with general
funds of Lender. No interest shall be paid oft such amounts. If, pursuant to any
provision of this Trust Deed, the whole amount of the principal debt remaining
or any installment of interest, principal or principal and interest becomes due
and payable prior to its originally scheduled maturity, Lender shall have the
right, at its election, to a apply any amounts paid to Lender under this
subparagraph 3(b), with accrued interest, thereon, against all or any part of
the indebtedness secured by this Trust Deed, any interest thereon or in payment
of the premiums or payments for which the amounts were paid. If the real estate
taxes and insurance premiums required to be escrowed pursuant to this paragraph
shall exceed the estimate therefor and the amounts paid into escrow under this
subparagraph 3(b), Grantor shall on demand forthwith make good the deficiency.
Grantor will furnish to Lender tax and insurance bills in sufficient time to
enable Lender to pay such taxes and premiums before interest and penalties
accrue thereon.
(c) Proof of Payment. Unless the same shall have been fully paid to Lender
as provided in subparagraph 3(b) hereof, Grantor, upon the written request of
Lender, will furnish or will cause to be furnished to Lender within thirty (30)
days after the date when any Impositions would become delinquent, official
receipts of the appropriate taxing authority or other authority to which the
charge is payable, or other evidences reasonably satisfactory to Lender
evidencing the payment thereof.
(d) Evidence of Payment. The certificate, or bill of the appropriate
official designated by law to make or issue the same or to receive payment of
any Imposition, of nonpayment
- 6 -
<PAGE>
of such Imposition shall be prima facie evidence that such Imposition is due and
unpaid at the time of the making or issuance of such certificate, advice or
bill.
5. Risk of Loss; Insurance. Risk of loss or, damage to or
destruction of the Property is and shall remain upon Grantor. If Grantor fails
to effect and keep in force insurance covering the Property as required by the
Lender, or fails to pay the premiums thereon when due, Trustees or Lender upon
receipt of notice of default may do so for the account of Grantor. Upon the
existence of an Event of Default beyond any applicable cure and grace periods,
Grantor hereby assigns and sets over to Lender all monies which may become
payable on account of all insurance covering the Property including without
limitation any return of unearned premiums which may be due upon cancellation of
any such insurance, and directs the insurers to pay directly to Lender any
amount so due which shall be applied to the principal balance of the Note,
provided the Note is current and no Event of Default exists subject only to the
rights of the holder(s) of the note secured by the Bennett- Management Trust
Deed. Trustees on behalf of Lender are hereby irrevocably appointed the
attorneys-in-fact of Grantor to endorse any draft or check which may be payable
to Grantor in order to collect the proceeds of such insurance or any return of
unearned premiums which Lender is entitled to collect under this paragraph 4.
Lender shall apply such proceeds of all casualty insurance in accordance with
the provisions of paragraph 16 of this Deed of Trust. Lender may deduct from
such proceeds any expense incurred by Lender in collecting the same (including
reasonable counsel fees).
6. Property Maintenance, Alterations, Improvements. Grantor shall
maintain the Property and all buildings and improvements subject to this Deed of
Trust in good working order and condition, ordinary wear and tear excepted, and
shall not commit or suffer waste. In no event shall Grantor undertake any
alteration or addition to the Property which reduces the economic value of the
Property. Lender shall have the right to enter upon the Property at any
reasonable hour and upon 24-hour notice for the purpose of inspecting the order,
condition and repair of the buildings and Improvements erected thereon.
7. Location of Personal Property. The personal property covered by
this Trust Deed is located in Hancock County, West Virginia more particularly
described on Exhibit A to this Deed of Trust or in another county in which a
priority security interest in such personal property has been granted to Lender.
Except as otherwise permitted under the Restated Loan Agreement, Grantor will
not move (except to any county in which Lender has a prior perfected security
interest in such items of personal property), remove, transfer, sell, convey or
otherwise assign any of the items of personal property included in the Property
until the Debt secured hereby is paid in full.
8. Compliance with Laws. Grantor will promptly comply, in all material
respects, with all present and future laws, ordinances, rules and regulations of
any governmental authority having an effect on Grantor or the Property.
9. Further Assurances. Grantor will, from time to time, make, do, execute
and acknowledge, as may be reasonably necessary such further acts, deeds,
conveyances, mortgages, security agreements, financing statements, continuation
statements and other assurances in law as may be required for the purpose of
effectuating the intent hereof.
- 7 -
<PAGE>
10. Failure to Pay Impositions and other Charges; Protection of
Property. Except as otherwise provided in the Restated Loan Agreement, in the
event Grantor neglects or refuses to pay or cause to be paid the charges
mentioned in paragraph 3 of this Deed of Trust, or fails to maintain the
buildings and Improvements as aforesaid, Lender after notice to.Grantor may do
so, add to the Debt the cost thereof, and collect the same as part of said Debt.
Lender shall, after the expiration of notice and grace period provided in the
Restated Loan Agreement, have the power and authority to institute and maintain
any suits and proceedings as Lender may deem advisable (a) to prevent any
impairment of the Property by any acts which may be unlawful or any violation of
this Deed of Trust, and (b) to preserve or protect its interest in the Property.
11. Prohibition of Liens; Debt. Grantor will pay, or bond, from
time to time when the same shall become due, all claims and demands of
mechanics, materialmen, laborers, and others which, if unpaid, might result in,
or permit the creation of, a lien on the Property or any part thereof, or on the
revenues, rents, issues, income and profits arising therefrom. Grantor will do
everything necessary so that the lien and priority hereof shall be fully
preserved, at the cost of Grantor, without expense to Lender, except as
otherwise provided in the Restated Loan Agreement.
Grantor will not, without the written consent of Lender, create
or suffer to be created any security interest under the Code, together with any
amendments or supplements thereto, or other encumbrances in favor of any party
other than Lender, or create or suffer any reservation of title by any such
other party, with respect to any fixtures, nor shall any such fixtures or
property be the subject matter of any lease or other transaction whereby the
ownership or any beneficial interest in any of such property is held by any
person or entity other than Grantor (or Lender as provided herein)except as
permitted in the Restated Loan Agreement. Except as permitted in the Restated
Loan Agreement, all such property shall be purchased for cash or in such manner
that no lien shall be created thereon except the lien of this Mortgage, unless
Mortgagee shall agree in writing to the contrary before a contract to purchase
any such property is executed.
12. Prohibition of Assumption, Transfer. Grantor hereby warrants
and covenants that it is the lawful owner of the Property that Grantor has good
right and lawful authority to convey and encumber the same, that the Property is
free and clear from all liens and encumbrances except for liens in favor of the
Lender and liens permitted under the Restated Loan Agreement, and that it will
warrant and defend such title to the Property against the claims of all persons
whomsoever. Except as disclosed in the Restated Loan Agreement or otherwise
permitted under the Restated Loan Agreement, Grantor shall not create, ' incur,
assume or suffer to exist any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing), any conditional sale or other title retention agreement, any lease
intended as security, (and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction) on the Property
or any other part of the collateral mentioned above. Except as disclosed in the
Restated Loan Agreement or otherwise permitted under the Restated Loan
Agreement, Grantor shall not, without the prior written consent of Lender, sell,
lease, transfer or otherwise dispose of any of the Property or all or a
substantial portion of its assets, or liquidate or consolidate with or merge
with or into any entity.
13. Priority of Lien. This Deed of Trust shall be a first lien deed of
trust and shall be superior in right to other deeds of trust encumbering part or
all of the Property except for liens
- 8 -
<PAGE>
or encumbrances disclosed in the Restated Loan Agreement and accepted by the
Lender. Except as otherwise provided herein or in the Restated Loan Agreement,
Grantor will not create or permit to accrue upon all or any part of the Property
any debt, lien or charge except the lien of this Deed of Trust and shall
promptly pay and discharge, any lien or charge whatsoever which by any present
or future law may be or become superior to, or on a parity with this Deed of
Trust, either in lien or in distribution out of the proceeds of any judicial
sale of the Property, 'or any part thereof, and any lien or charge not permitted
by Paragraph 11.
14. Default.
(a) Default and Remedies. In the event sums are due and owing by Grantor
under the terms of the Restated Loan Agreement, the Note and by reason of an
Event of Default (as defined in the Restated Loan Agreement), Trustees or Lender
may forthwith proceed to enforce payment of the amounts due and owing under the
Note or the performance of any term hereof, whether by foreclosure, by suit in
law or equity or otherwise, and without further delay undertake any one or more
of the following:
(1) Foreclosure. At any times sums are due and
owing under the Restated Loan Agreement, the Note as
aforesaid, beyond any applicable grace periods, Trustees,
upon the written request of Lender, may foreclose upon and
sell the Property to satisfy the Debt. After the giving of
notice as provided pursuant to W. Va. Code ss. 38-1-4,
Trustees shall sell all the Property herein conveyed, or
so much thereof as the Trustees shall deem necessary, at
public auction, at the front door of the courthouse in the
county (or any county if more than one) where the Property
is located, or such other places as permitted by law, for
cash in hand on the day of sale. Further, Trustees may
take such other action as the law may allow, at law or in
equity, for the enforcement and realization of the Deed of
Trust security or any other security which is herein or
elsewhere provided for, and proceed thereon to final
judgment and execution thereon for the entire unpaid
balance of the principal indebtedness, with interest, at
the rates and pursuant to the methods of calculation
specified in the Note, the Restated Loan Agreement, and
this Deed of Trust to the date of default and thereafter
at the rate provided in the Note and the Restated Loan
Agreement together with all other sums secured by this
Deed of Trust, all costs of suit, interest at the rate
specified in the Note, and the Restated Loan Agreement on
any judgment obtained by Lender from and after the date of
any foreclosure sale of the Property (which may be sold in
one parcel or in such parcels, manner or order as Trustees
shall elect) until actual payment is made pursuant to the
foreclosure sale of the full amount due Lender, and an
attorneys, reasonable commission for collection without
further stay, any law, usage or custom to the contrary
notwithstanding. Upon any such foreclosure sale, Lender
may bid for and purchase the Property in a commercially
responsible manner and, upon compliance with the terms of
sale, may hold, retain and possess and dispose of such
property in its own absolute right without further
accountability. In addition to the rights, remedies and
powers hereinabove set forth, Lender and Trustees-shall
have as to any and all fixtures and personal
- 9 -
<PAGE>
property covered by this Deed of Trust, all rights,
remedies and powers of a Lender under the Code.
(2) Receivership. Have a receiver appointed to
enter into possession of the Property, collect the
earnings, revenues, rents, issues, profits and income
therefrom and apply the same as the court may direct. It
is understood and agreed by and between the parties hereto
that nothing herein contained shall be construed as a
substitute for, or in derogation of, the right to
foreclose this Deed of Trust or as imposing any duty or
obligation upon Lender or upon Trustees, or any of them,
to take charge of the Property or to collect said rents,
issues or profit or to have a receiver appointed for such
purposes.
(3) Sale of personal property. Lender shall have
such rights and remedies in respect of so much of the
Property as may, under applicable law, including the Code,
be personal property, or any part thereof, as are provided
by the Code and such other rights and remedies in respect
thereof which it may have at law or in equity or under
this Deed of Trust, including without limitation the right
to take possession of the Property wherever located and to
sell all or any portion thereof at public or private sale,
without prior notice to Grantor, except as otherwise
required by law (and if notice is required by law, after
ten (10) days, prior written notice, which Grantor agrees
is a reasonable period of notice), at such place or places
and at such time or times and in such manner and upon such
terms, whether for cash or on credit, as Lender in its
sole discretion may determine. Lender shall apply the
proceeds of any such sale to the payment of the Debt. Upon
the occurrence of any Event of Default, Grantor, upon
demand by Lender, shall promptly assemble any equipment
and fixtures included in the Property and make them
available to Lender at a place to be designated by Lender
which shall be reasonably convenient to Lender and
Grantor.
(4) Sale of the Property. Lender may sell any of the
Property, not specifically designated as personal property
and subject to subparagraph(iii)above, in accordance with
any applicable law.
(5) Additional rights and remedies; not
exclusive. In addition to all the foregoing, Trustees and
Lender shall have such other rights as the law allows in
the pursuit of the foregoing specified remedies and shall
have such other remedies as the law allows for the
realization of security interests herein granted. The
rights and remedies herein provided to Trustees and Lender
shall be cumulative and not alternative, and are not
exclusive of any other remedies that may be available to
the Trustees and Lender, whether at law, in equity, or
otherwise.
(b) Provisions Regarding Sale. (i) Grantor agrees that any sale made
hereunder may be adjourned from time to time without notice other than oral
proclamation of such adjournment at the time and place of sale, or at the time
and place of any adjourned sale, and (ii) Grantor agrees that any sale of real
property or interest in real property hereunder shall be made in
- 10 -
<PAGE>
accordance with the laws of the state of West Virginia relating to sales under
deeds of trust, with the exceptions herein stated and with the further exception
that the Grantor covenants and agrees.
(c) Rights in Pursuit of Remedies. In the event sums are due and owing
under the Note or the Loan Documents as aforesaid, Lender in pursuance of the
foregoing remedies, or in addition thereto, (i) shall be entitled to resort to
its several securities for the payment of the sums secured hereby in such order
and manner as Lender may think fit without impairing Lender's lien in, or rights
to, any of such securities and without affecting the liability of any person,
firm or corporation for the sums secured hereby, except to the extent that the
Debt shall have been reduced by the actual monetary consideration, if any,
received by Lender from the proceeds of such security; (ii) may, in Lender's
sole discretion, release for such consideration, or none, as the Lender may
require, any portion of the Property without, as to the remainder of the
security, in otherwise impairing or affecting the lien of this Deed of Trust, or
the priority thereof, or improving the position of any subordinate lienholder
with respect thereto, except to the extent that the Debt shall have been reduced
by the actual monetary consideration, if any, received by Lender for such
release; and/or (iii) may accept the assignment or pledge of any other property
in place thereof as Lender may require without being accountable for so doing to
any other lienor.
(d) Continued Lien of Deed of Trust. No entry of any judgment by Lender and
no levy of an execution under any judgment upon the Property or upon any other
property of Grantor shall affect in any manner or to any extent, the lien of
this Deed of Trust upon the Property or any part thereof, or any liens, rights,
powers or remedies of Lender hereunder, but such liens, rights, powers and
remedies of Lender shall continue unimpaired as before.
(e) Subordination of Tenants' Rights Under Leases. In the event that
Trustees shall have the right to foreclose this Deed of Trust, Grantor
authorizes Trustees at their option to foreclose this Deed of Trust, subject to
the rights of any tenants of the Property if Trustees or Lender elect that this
Deed of Trust shall be subordinate to rights of tenants, and the failure to make
any such tenants parties defendant to any such foreclosure proceeding and to
foreclose their rights will not be asserted by Grantor as a defense to any
proceeding instituted by Trustees or Lender to collect the Debt or any
deficiency remaining unpaid after the foreclosure sale of the Property.
(f) Discontinuance of Proceedings; Position of Parties Restored . If
Trustees or Lender shall have proceeded to enforce any right or remedy under
this Deed of Trust by foreclosure, or otherwise, any such proceedings shall have
been discontinued or abandoned for any reason, then in every such case Grantor
and Trustees or Lender, shall be restored to their former positions and rights
hereunder, and all rights, powers and remedies of Lender shall continue as if no
such proceeding had occurred or had been taken.
15. Application of Proceeds of Foreclosure. Trustees or Lender shall apply
the proceeds of any foreclosure sale of or other disposition or realization
upon, or rents or profits from, the Property:
(a) First, to the payment or reimbursement of all
reasonable advances, expenses and disbursements of Trustees and
Lender (including, without limitation, the reasonable fees and
costs of their counsel and agents and not less than $500 as
- 11 -
<PAGE>
commission to Trustees for acting as Trustees hereunder) incurred
in connection with the administration and enforcement of, or the
preservation of any rights under, this Deed of Trust or in the
collection of the obligations of Grantor under the Note and the
Loan Documents;
(b) Second, in satisfaction of the Debt, whether for
principal, interest or expenses in such order as Trustees or
Lender shall designate; and
(c) Third, the balance, if any, to be distributed as
required by law.
If the proceeds from any such sale of or other disposition or
realization upon the Property are insufficient to pay the Debt, the Grantor
shall remain liable for such deficiency.
16. Trustees.
(a) Removal. It is hereby expressly covenanted and agreed that Lender may,
at any time and from time to time hereafter, upon notice to Trustees and
Grantor, but without any other notice, appoint and substitute another Trustee,
corporation or person, in place of either or both of the Trustees herein named
to execute the trust herein created. Upon such appointment, either with or
without a conveyance to said substituted Trustee or Trustees by the Trustees
herein named, or by any other substituted Trustee in case the said right of
appointment is exercised more than once, the new and substituted Trustee in each
instance shall be vested with all the rights, titles, interests, powers, duties
and trusts in the premises which are vested in and conferred upon the Trustee
herein named; and such new and substituted Trustee shall be considered the
successor and assign of the Trustee in his place and stead. Each appointment and
substitution shall be evidenced by an instrument in writing, which instrument,
executed and acknowledged by Lender and recorded in the office of the Clerk of
the County Commission of the County wherein said property is situate, shall be
conclusive proof of the proper substitution and appointment of such successor
Trustee or Trustees, and notice of such proper substitution and appointment to
all parties in interest. The Trustees, or either of them or the survivor
thereof, may act in the execution of this trust and in the event either of the
Trustees shall act alone, the authority and power of the Trustees so acting
shall be as full and complete as if the powers and authority granted to the
Trustees herein jointly had been granted to such Trustee alone. Either or both
of the Trustees are hereby authorized to act by agent or attorney in the
execution of this trust.
(b) Fees. In the event foreclosure proceedings instituted under the terms
and provisions of this Trust Deed are not completed through no fault of the
Trustees, Trustees shall be entitled to receive and forthwith be paid the
necessary costs and expenses incurred by them, together with a fee of not less
than Five Hundred Dollars ($500.00).
(c) Action. The Trustees herein may act by agent or attorney appointed by
them in the execution of this Deed of Trust and the Trustees shall not be
required to be present in person.
17. Casualty Loss.
- 12 -
<PAGE>
(a) Notice to Lender. In case of casualty resulting in damage or
destruction to the Property, Grantor shall promptly give written notice thereof
to Trustees and Lender.
(b) Restoration of Property. Unless Lender elects to apply insurance
proceeds to reduce the Debt, then, regardless of the amount of any such damage
or destruction, Grantor shall at its sole cost and expense, and whether or not
the insurance proceeds, if any, shall be sufficient for the purpose, restore,
repair, replace, rebuild or alter the same as nearly as possible to its value,
condition and character immediately prior to such damage or destruction or with
such changes or alterations as may be made at Grantor's election in conformity
with and subject to the conditions of paragraph 8 hereof. Such restoration,
repairs, replacements, rebuilding or alteration shall be commenced promptly and
prosecuted with reasonable diligence. If (i) estimates received, and/or made, by
Lender disclose that the cost or restoration would be in excess of the amount of
the insurance proceeds available therefor, or (ii) during the period of
restoration by Grantor the amount of the insurance proceeds shall not be
sufficient to complete such restoration, then in either of such events, Grantor
shall deposit with Lender the amount required to complete such restoration or
such other security as shall be satisfactory to Lender.
(c) Application of Proceeds. All proceeds of and payments under insurance
policies with respect to any casualty event shall be paid to Lender and applied
by Lender first to payment of the actual costs, fees and expenses, if any,
incurred by Lender in connection with adjustment of the loss and settlement with
the insurance company. The remainder of such insurance proceeds shall be applied
by Lender, at the sole discretion of Lender, either (i) in reduction of the
outstanding Debt, as Lender may elect, or (ii) to the payment of the cost of the
aforesaid restoration, repairs, replacement, rebuilding or alterations,
including the cost of temporary repairs and the cost of protection of property
pending the completion of permanent restoration, repairs, replacement,
rebuilding or alterations (all of which temporary and permanent repairs,
restoration, replacement, rebuilding, alterations and protection of property are
hereinafter collectively referred to as the "restoration").
(d) Advancement of Proceeds. If under the provisions of this paragraph 16,
insurance proceeds are to be applied to the cost of restoration, Lender shall
hold such insurance proceeds, together with any amounts deposited with Lender
pursuant to subparagraph 16(b) hereof, and advance the same for application to
the cost of the restoration from time to time as the restoration progresses.
Such funds will be advanced upon the written request of Grantor and upon
Grantor's compliance with such reasonable requirements therefor as Lender shall
impose. Upon completion of all of the restoration in a good and workmanlike
manner and substantially in accordance with any plans and specifications
therefor which Lender may have required, and upon receipt by Lender of evidence
satisfactory to Lender that the restoration has been completed and that the
Property is not and will not become subject to any mechanic's or materialmen's
liens on account of the restoration or any part thereof, any balance of the
insurance proceeds or sums deposited with Lender pursuant to subparagraph 16(b)
hereof and not applied to the cost of restoration shall be applied to reduce the
Debt, and any balance remaining after repayment of the Debt shall be paid over
to Grantor.
(e) Effect of Default. Notwithstanding any provision of this paragraph 16
to the contrary, if at any time during any restoration of the Property, an Event
of Default in the payment
- 13 -
<PAGE>
on the Note shall exist, Lender shall have no obligation to continue to apply
insurance money to restoration and may apply such insurance money to reduction
of the Debt.
(f) No Postponement, Abatement of Scheduled Installments. In no event shall
the application to the obligation of Grantor, whether or not then due or
payable, of any insurance proceeds postpone, abate or reduce any of the periodic
installments of principal and interest thereafter to become due under the Debt
until the Debt is completely satisfied and paid in full. If Lender shall acquire
title to the Property either by virtue of a deed in lieu of foreclosure or a
judicial sale thereof pursuant to proceedings under the Note or this Deed of
Trust, then all of Grantor's estate, right, title and interest in and to all
such policies, including unearned premiums thereon and the proceeds thereof,
shall vest in Lender.
18. Condemnation.
(a) Notice, Right to Participate. Grantor shall give Trustees and Lender
immediate notice of any actual or threatened commencement of condemnation
proceedings or the exercise of the right of eminent domain. In the event that
the Property, or any part thereof, shall be taken in condemnation proceedings or
by exercise of any right of eminent domain (hereinafter called collectively,
"condemnation proceedings"), Lender may on behalf of Grantor participate in any
such condemnation proceedings and may on behalf of and with the concurrence of
Grantor adjust, contest, accept, reject or compromise any proposed award and
collect and, without the concurrence of Grantor, may receive the proceeds
thereof and endorse drafts, and Lender is hereby irrevocably appointed
attorney-in-fact of Grantor for such purposes, such power being coupled with an
interest. The decision of Lender with the concurrence of Grantor with regard to
the adjustment, contest, acceptance, rejection or compromise of any proposed
award issued in connection with any condemnation proceedings shall be binding
upon Grantor. The award that may be made in any such proceeding or the proceeds
thereof shall be deposited with Lender and distributed in the manner set forth
in this paragraph 18. The parties agree to execute any and all further documents
that may be required in order to facilitate collection of any award or awards
and the making of any such deposits with Lender.
(b) Condemnation of All or Material Part of Property. If at any time during
the term of this Deed of Trust title to the whole or a material part of the
Property shall be taken in condemnation proceedings or by agreement between
Grantor and Lender and those authorized to exercise such right, Lender shall
apply such award or proceeds which it receives pursuant to subparagraph 17(a)
hereof to payment of the Debt and any balance then remaining shall be paid to
Grantor. In the event that the amount of the award or proceeds received by
Lender shall not be sufficient to pay the Debt, Grantor shall, within ten (10)
days after the application of the award or proceeds as aforesaid pay or cause to
be paid such deficiency to Lender. For the purposes of this subparagraph 17(b)
"a material part" shall be deemed to have been taken if the portion of the
Property taken shall preclude, in Lender's sole judgment the effective use of
the Property as an economically viable unit for the permitted purposes for which
Grantor utilizes such Property.
(c) Condemnation of Less than Material Part of Property. If at any time
during the term of this Deed of Trust title to a portion of the Property that
does not constitute "a material part" of the Property shall be taken as
aforesaid, all of the award or proceeds collected by
- 14 -
<PAGE>
Lender pursuant to subparagraph 17(a) hereof, shall, at the option of the
Lender, (i) be applied to reduce the Debt or (ii) be held by Lender, and applied
and paid over toward the costs of demolition, repair and restoration,
substantially in the same manner and subject to the same conditions as those
provided in paragraph 16 hereof with respect to insurance and other monies. Any
balance remaining in the hands of Lender after payment of such costs of
demolition, repair and restoration shall be retained by Lender and applied in
reduction of the Debt. In the event that the costs of such demolition, repairs
and restoration shall exceed the new amount collected by Lender, Grantor shall
pay the deficiency.
(d) Temporary Use or Taking. If at any time during the term of this Deed of
Trust the temporary use of the whole or any part of the Property shall be taken
in condemnation proceedings, all of the award or proceeds collected by Lender
pursuant to subparagraph 17(a) hereof shall be held by Lender and applied by
Lender toward the payment of the monthly interest payment or of the monthly
payments of principal and interest due on the Debt until such time as the Debt
is completely satisfied and paid, except that, if such taking by condemnation
proceedings results in changes and alterations to the Property or any part
thereof which would necessitate an expenditure to restore the Property or any
part thereof to its former condition, then such portion of the award or proceeds
as in Lender's reasonable estimation shall be necessary to cover the cost of
restoration shall at the option of Lender be retained by Lender, without
application as aforesaid, and be applied and paid over toward the restoration of
the Property, or any part thereof, to its former condition in substantially the
same manner and subject to the same conditions as those provided in paragraph 16
hereof with respect to insurance and other monies. In the event that the costs
of such restoration shall exceed the net amount collected by Lender, Grantor
shall pay or cause to be paid the deficiency.
(e) Taking of Rights of Light, Air, Access and the Like. Any award for
compensation made in condemnation proceedings for consequential damages or for
the taking of rights in, under and above the streets adjoining such Property, or
the rights and benefits of light, air or access to said streets, or for the
taking of space, or rights therein, below the surface of, or above, the
Property, shall be paid over to and received by Lender. Such awards or
compensation shall at the option of Lender be either applied to the reduction of
the Debt, or paid over toward the cost of such demolition, repair and
restoration of the Property as shall be necessitated by such taking,
substantially in the same manner and subject to the same conditions as those
provided in paragraph 17 hereof with respect to insurance and other monies, and
any balance remaining in the hands of Lender shall be retained by Lender, and
applied in reduction of the Debt in the same manner as provided in subparagraph
17(c) with respect to the balance of the award or awards therein referred to.
(f) Reimbursement of Costs, Fees and the Like. In the case of any taking
covered by the provisions of this paragraph 17, Grantor shall be entitled as a
first priority to reimbursement out of any award or awards for all reasonable
costs, fees, and expenses incurred in the determination and collection of any
such awards.
(g) Payments Pending Receipt of Award. Notwithstanding any taking by
condemnation proceedings, Grantor shall continue to pay interest on the Debt at
the rates provided in the Note until any such award or payment shall have been
actually received by Lender and applied to the principal sum as provided in this
paragraph 18, if it is to be so applied under this paragraph
- 15 -
<PAGE>
18. Any reduction in the principal sum resulting from Lender's application
of such award or payment as hereinafter set forth shall be deemed to take effect
only on the date of such application. If prior to Lender's receipt of such award
or payment the Property shall have been sc',.d to Lender or its nominee on
foreclosure of this Deed of Trust, Lender shall have the right to receive and
retain the entire award or payment.
(h) No Postponement. Abatement or Scheduled Installments. In no event shall
the application to the Debt of any payment to Lender pursuant to this paragraph
18 postpone, abate or reduce any of the periodic installments of principal or
interest thereafter to become due under the Note and the Loan Documents until
such amounts are paid in full.
19. Indemnity for Costs. Grantor will indemnify against, and on
demand repay Trustees or Lender for any loss, damage, expense, or reasonable
attorneys, fees which may be incurred by reason of any action or proceeding
affecting the Property or the title thereto or Trustee's or Lender's interest
under this Deed of Trust to which Trustees or Lender is made a party (by
intervention or otherwise).
20. Change in Trust Deed Tax Laws. In the event of the passage
after the date of this Deed of Trust of any law of the State of West Virginia
deducting from the value of the Property for the purpose of taxation any lien
thereon, or changing in any way the laws now in force for the taxation of
mortgages, or debts secured thereby, for state or local purposes, or the manner
of the operation of any such taxes so as to affect the interest of Trustees or
Lender, then and in such event, Grantor shall bear and pay the full amount of
such taxes.
21. Agreements Continuing, Absolute. The agreements and
obligations of Grantor hereunder are continuing agreements and obligations, and
are absolute and unconditional irrespective of the genuineness, validity or
enforceability of the Note or any other instrument or instruments now or
hereafter evidencing the Debt or any other agreement or agreements now or
hereafter entered into by Lender and Grantor pursuant to which the Debt or any
part thereof is issued or of any other circumstance which might otherwise
constitute a legal or equitable discharge of such agreements and obligations;
without limitation upon the foregoing, the agreements and obligations of Grantor
shall not in any such way be affected by (i) any renewal, refinancing or
refunding of the Debt in whole or in part, (ii) any extension of the time of
payment of the amounts due and owing under the Note or any other instrument or
instruments now or hereafter evidencing the Debt or any part thereof, (iii) any
amendment to or modification of the terms of the Note or other instrument or
instruments now or hereafter evidencing the Debt or any part thereof or any
other agreement or agreements now or hereafter entered into by Lender and
Grantor pursuant to which the Debt or any part thereof is issued or secured,
(iv) any substitution, exchange or release of, or failure to preserve, perfect
or protect, or other dealing in respect of, the Property or any other property
or any security for the payment of the Debt or any part thereof, (v) any
bankruptcy, insolvency, arrangement, composition, assignment for the benefit of
creditors or similar proceeding commenced by or against Grantor or (vi) any
other matter or thing whatsoever whereby the agreements and obligations of
Grantor hereunder would or might otherwise be released or discharged.
- 16 -
<PAGE>
22. Partial Invalidity. The invalidity per se or in any application of any
one or more paragraphs of this Deed of Trust or any part of any thereof shall
not affect the remaining portions of this Deed of Trust, all of which are
inserted conditionally on their being held valid in law.
23. Notices. All notices, requests, demands, directions and other
communications (collectively "notices") under the provisions of this Deed of
Trust must be in writing unless otherwise expressly permitted under this
Agreement and must be sent by first-class express mail, private overnight or
next Business Day courier, in all cases with charges prepaid, and any such
properly given notice will be effective when received. All notices will be sent
to the applicable party at the addresses stated below or in accordance with the
last unrevoked written direction from such party to the other parties. Any
notice to be provided by a subordinate lienholder, as contemplated by West
Virginia Code 38-1-4, shall be forwarded to Lender at the address stated below.
A copy of any notice of Trustee's sale under this Deed of Trust shall be served
on Grantor by certified mail, return receipt requested, directed to the address
stated below.
If to Grantor: Mountaineer Park, Inc.
8 Route 2 South
Chester, West Virginia 26034
Attn: Mr. Edson Arneault
and copy to: Freer, McGarry, Bodansky & Rubin, P.C.
1000 Thomas Jefferson St., N.W.
Suite 600
Washington, DC 20007
Attention: Robert Ruben, Esquire
- 17 -
<PAGE>
If to Secured
Party: Madeleine, L.L.C.
950 Third Avenue
New York, New York 10022
Attention: Kevin Genda
and copy to: Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
Attention: Mark A. Neporent, Esquire
If to Trustees:
Deborah A. Sink, Esq.
Carl D. Andrews, Esq.
P.O. Box 1386
Charleston, Vest Virginia 25301
IN WITNESS WHEREOF the parties have caused this instrument to be
executed by their respective officers thereunder duly authorized as of the date
first written above.
ATTEST MOUNTAINEER PARK, INC
By: /s/ Robert L. Ruben By: /s/ Edson R. Arneault
Title: Assistant Secretary Title:____________________________
MADELINE L.L.C. as Lender
By:________________________ By:_____________________________
Title:______________________ Title:____________________________
This Deed of Trust was prepared by
Carl D. Andrews, Esq.
Bowles Rice McDavid Graff & Love
P.O. Box 1386
Charleston, W. VA 25325-1386
(301) 347-1109
- 18 -
<PAGE>
STATE OF )
COUNTY OF ) SS:
ON THIS, the _____ day of _____________ 1997, before me, the undersigned
officer, personally appeared ________________________________ who acknowledged
himself to be the
of Mountaineer Park, Inc., a West Virginia corporation, and that he, as
such officer, being authorized to do so, executed the foregoing instrument for
the Inc. for the purposes therein contained by singing the name of the
corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
----------------------------
Notary Public
My Commission Expires:_______________________________
- 19 -
<PAGE>
STATE OF )
COUNTY OF ) SS:
ON THIS, the _____ day of _____________ 1997, before me, the undersigned
officer, personally appeared ________________________________ who acknowledged
himself to be the
of MADELEINE L.L.C., and that he, as such officer, being authorized to
do so, executed the foregoing instrument for the Inc. for the purposes therein
contained by singing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
----------------------------
Notary Public
My Commission Expires:_______________________________
- 20 -
<PAGE>
EXHIBIT 4
PROMISSORY NOTE
$16,100,000 Dated: December ___, 1996
New York, New York
FOR VALUE RECEIVED, MOUNTAINEER PARK, INC., a West Virginia
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of MADELEINE
L.L.C., a New York limited liability company (the "Lender") (i) the initial
principal amount of SIXTEEN MILLION ONE HUNDRED THOUSAND DOLLARS ($16,100,000),
or, the aggregate unpaid principal amount of the Loan (as defined in the Loan
Agreement hereinafter referred to) made by the Lender to the Borrower, payable
on the Maturity Date (as defined in the Loan Agreement), and (ii) interest on
the unpaid principal amount of the Term Obligations (as defined in the Loan
Agreement) under the Loan Agreement from the date such Loan is made until all
such Term Obligations are paid in full, at such interest rates, and payable at
such times, as are specified in the Loan Agreement.
Notwithstanding any other provision of this Note, interest paid or
becoming due hereunder or under the Loan Agreement, or any document or
instrument executed in connection herewith or therewith, shall in no event
exceed the maximum rate permitted by applicable law. Both principal and interest
are payable in lawful money of the United States of America in immediately
available funds to Madeleine L.L.C. at 950 Third Avenue, New York, New York
10022, Attention: Mr. Kevin Genda, or such other office as the Lender may
designate.
The Loan made by the Lender to the Borrower pursuant to the Loan
Agreement, and all payments made on account of principal hereof, shall be
recorded by the Lender and, prior to any transfer hereof, indorsed on Schedule A
attached hereto which is a part of this Note.
This Note is the Term Note referred to in the Amended and Restated
Term Loan Agreement, dated as of July 2, 1996, as amended on December 10, 1996
(as further amended or otherwise modified from time to time, the "Loan
Agreement"), among the Borrower, MTR Gaming Group, Inc. and the Lender, and is
entitled to the benefits of the Loan Agreement, the First Priority Deed of Trust
and the Amended and Restated Security Agreement as provided for therein. The
Loan Agreement, among other things, contains provisions for the acceleration of
the maturity of the unpaid principal amount of this Note upon the happening of
certain stated Events of Default (as defined in the Loan Agreement), and also
for prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions specified therein. The Borrower hereby waives
presentment for payment, demand, protest and notice of dishonor of this Note.
- 1 -
<PAGE>
This Note shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of New York applicable to
contracts made and to be performed therein without consideration as to choice of
law.
MOUNTAINEER PARK, INC.
By: /s/ Edson R. Arneault
Name:
Title:
- 2 -
<PAGE>
SCHEDULE A TO PROMISSORY NOTE
LOAN AND REPAYMENT OF PRINCIPAL
Amount of Loan Principal Paid Principal Balance Notation Made By
- 3 -
<PAGE>
EXHIBIT 6
AMENDMENT NO. 1 TO
REGISTRATION RIGHTS AGREEMENT
AMENDMENT NO. 1, dated as of ________ __, 1996, to the
REGISTRATION RIGHTS AGREEMENT, dated as of July 2, 1996, between Madeleine
L.L.C., a New York limited liability company ("Lender"), and MTR Gaming Group,
f/k/a Winners Entertainment, Inc., a Delaware corporation ( he "Company").
WHEREAS, the Company and Lender are parties to an AMENDED AND
RESTATED TERM LOAN AGREEMENT (the "Loan Agreement"), dated as of July 2, 1996,
as amended and restated as of November __, 1996, among MOUNTAINEER PAR , INC., a
West Virginia corporation (the "Borrower"), the Company and Madeleine;
WHEREAS, pursuant to the Loan Agreement, the Company will
issue shares of Common Stock and Warrants (as those terms are defined in the
Loan Agreement) to the Lender;
WHEREAS, the Company and the Lender wish to amend the
Registration Rights Agreement to effect certain provisions of the Loan
Agreement.
NOW, THEREFORE, the Company and the Lender hereby agree as
follows:
1. Definitions. All terms used herein which are defined in the Loan
Agreement o the Registration Rights Agreement and not otherwise defined herein
are used herein as defined therein.
2. Changes to Registration Rights.
(a) Section 2.2 of the Registration Rights Agreement is hereby amended and
restat d in its entirety to read as follows:
"2.2 Additional Securities. To the extent that the Holder acquires any
additional securities of the Company that constitute Registrable Securities, the
Company shall use its best efforts to, within 120 days after the date
registration of such Registrable Securities is requested by the Holder, effect
the registration on an applicable form under the Securities Act of the resale of
such Registrable Securities and, to the extent tha such Registrable Securities
are convertible into or exercisable for any other securities, the issuance or,
if not permissible under the Securities Act, resale of such other securities;
provided, however, that if (i) no Event of Default has occurred under the
AMENDED AND RESTATED TERM LOAN AGREEMENT (the "Loan Agreement"), dated as of
July 2, 1996, as amended and restated as of November __, 1996, among MOUNTAINEER
PARK, INC., a West Virginia corporation, the Company and the Lender, (ii) the
Obligations relating to the Term Loan (as defined in the Loan Agreement) have
<PAGE>
not been indefeasibly repaid in full and in cash, (iii) no single Person, group
of affiliated Persons or Affiliate thereof controls the voting rights of 35% or
more of the Common Stock, and (iv) the Company has not merged or consolidated
with any other Person in a transaction in which the Company is not the surviving
entity, or sold all or substantially all of its assets, then the Holder shall
not request such registration more than once in any calendar year."
3. Conditions. This Amendment shall become effective on the date (the
"Effective Date") on which each of the following conditions precedent shall have
been satisfied in a manner satisfactory to the Lender:
(a) The Lender shall have received on or before the Effective Date the
following, each in form and substance satisfactory to each Lender:
(i) this Amendment, duly executed by the parties hereto;
(ii) the Loan Agreement, duly executed by the parties thereto;
(iii) all of the other Loan Documents duly executed by the parties thereto;
(b) The Lender shall have made the Tranche B portion of the Term Loan
pursuant to the Loan Agreement, and all of the conditions to making the Tranche
B portion of the Term Loan shall have been satisfied.
(c) All proceedings in connection with the transactions contemplated by
this Amendment, and all documents inciden al thereto, shall be satisfactory to
the Lender in form and substance.
(d) All fees, expenses and taxes accrued and unpaid or otherwise due and
payable by the Borrower or a Loan Party pursuant to the Loan Agreement
(including, without limitation, the fees and other client charges of Schulte
Roth & Zabel LLP in connection with this Amendment and the related agreements,
instruments and other documents) shall have been paid in full.
4. Miscellaneous.
(a) Continued Effectiveness of the Registration Rights Agreement. Except as
otherwise expressly provided herein, the Registration Rights Agreement is, and
shall continue to be, in full force and effect and is hereby ratified and
confirmed in al respects.
(b) Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.
(c) Headings. Section headings herein are included for convenience of
reference only and shall not constitute a part of this Amendment for any other
purpos .
- 2 -
<PAGE>
(d) Governing Law. This Amendment shall be governed by, and construed in
accordance with, the law of the State of New York applicable to contracts made
and to be performed in such State without regard to conflicts of law principles.
Any legal action or proceeding with respect to this Amendment may be brought in
the courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and d livery of this Amendment, the
Borrower and the Company hereby irrevocably accept for themselves in respect of
their property, generally and unconditionally, the jurisdiction of the aforesaid
courts. The Borrower and the Company further irrevocably consent to the service
of process out of any of the aforementioned courts and in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Borrower at its address for notices contained in Section
9.01 of the Loan Agreement, such service to become effective thirty (30) days
after such mailing. The Borrower and the Company hereby irrevocably appoint Mr.
Robert A. Blatt, c/o CRC Group, 1890 Palmer Avenue, Suite 303, Larchmont, New
York 10538, or such other Person as shall be acceptable to the Lender, as their
agent for service of process in respect of any such action or proceeding.
Nothing herein shall affect the right of the Lender to service of process in any
other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Borrower and the Company in any other jurisdiction.
(e) Costs and Expenses. The Borrower and the other Loan Parties will pay on
demand (i) all fees, costs and expenses in connection with the preparation,
execution, delivery, filing, recording, amendment, modification, waiver and
administration of this Amendment, including, without limitation, the reasonable
fees, out-of-pocket expenses and other client charges of S hulte Roth & Zabel
LLP, counsel to the Lender, and Bowles Rice McDavid Graff & Love, West Virginia
counsel to the Lender and the reasonable fees, out-of-pocket expenses and other
client charges of all accountants, auditors and consultants retained by the
Lender in connection with the transactions contemplated by this Amendment, and
(ii) all costs and expenses, if any (including reasonable counsel fees,
out-of-pocket expenses and other client charges), in connection with the
enforcement of this Amendment and the other documents to be delivered pursuant
to the Loan Documents.
(f) Amendment as Loan Document. The Borrower and other Loan Parties hereby
acknowledge and agree that this Amendment constitutes a "Loan Document" under
the Loan Agreement. Accordingly, it shall be an Event of Default under the Loan
Agreement if (i) any representation or warranty made by the Borrower or any
other Loan Party under or in connection with this Amendment shall have been
untrue, false o misleading in any material respect when made, or (ii) the
Borrower or any other Loan Party shall fail to perform or observe any term,
covenant or agreement contained in this Amendment.
(g) Waiver of Jury Trial. EACH OF THE BORROWER, THE COMPANY AND THE LENDER
HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM CONCERNING ANY RIGHT UNDER THIS AMENDMENT, OR UNDER ANY FURTHER
AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AG EEMENT, DELIVERED
OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR
- 3 -
<PAGE>
ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AMENDMENT, AND
AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY. EACH OF THE BORROWER AND THE COMPANY HEREBY WAIVES
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE BORROWER AND THE
COMPANY CERTIFY THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE LENDER
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT, IN THE EVENT
OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING
WAIVERS. THE BORROWER AND THE COMPANY HEREBY ACKNOWLEDGE THAT THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AMENDMENT.
IN WITNESS WHEREOF, the partie hereto have caused this
Amendment to be executed and delivered as of the date first above written.
MTR GAMING GROUP, INC.
By: /s/ Edson R. Arneault
Name:
Ti le:
MADELEINE L.L.C.
By: _______________________________________
Name:
Title:
- 4 -
<PAGE>
EXHIBIT 7
PROMISSORY OTE
$5,376,500 Dated: December ___, 1996
New York, New York
FOR VALUE RECEIVED, MOUNTAINEER PARK, INC., a West Virginia
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of MADELEINE
L.L.C., a New York limited liability company (the "Lender") (i) the initial
principal amount not to exceed FIVE MILLION THREE HUNDRED SEVENTY SIX THOUSAND
FIVE HUNDRED DOLLARS ($5,376,500), or, the aggregate unpaid principal amount of
the Line Loans (as defined in the Loan Agreement hereinafter referred to) mad by
the Lender to the Borrower, payable on the Maturity Date (as defined in the Loan
Agreement), and (ii) interest on the unpaid principal amount of the Line
Obligations (as defined in the Loan Agreement) under the Loan Agreement from the
date each Line Loan is made until all such Line Obligations are paid in full, at
such interest rates, and payable at such times, as are specified in the Loan
Agreement.
Notwithstanding any other provision of this Note, interest
paid or becoming due hereunder r under the Loan Agreement, or any document or
instrument executed in connection herewith or therewith, shall in no event
exceed the maximum rate permitted by applicable law. Both principal and interest
are payable in lawful money of the United States of America in immediately
available funds to Madeleine L.L.C. at 950 Third Avenue, New York, New York
10022, Attention: Mr. Kevin P. Genda, or such other office as the Lender may
designate.
Each Line Loan made by the Lender to the Borrower pursu nt to
the Loan Agreement, and all payments made on account of principal hereof, shall
be recorded by the Lender and, prior to any transfer hereof, indorsed on
Schedule A attached hereto which is a part of this Note.
This Note is the Line Note referred to in the Amended and Restated Term
Loan Agreement, dated as of July 2, 1996, as amended as of December 10, 1996 (as
further amended or otherwise modified from time to time, the "Loan Agreement"),
among the Borrower, MTR Gaming Group, Inc. and th Lender, and is entitled to the
benefits of the Loan Agreement, the First Priority Deed of Trust and the Amended
and Restated Security Agreement as provided for therein. The Loan Agreement,
among other things, contains provisions for the acceleration of the maturity of
the unpaid principal amount of this Note upon the happening of certain stated
Events of Default (as defined in the Loan Agreement), and also for prepayments
on account of principal hereof prior to the maturity hereof upon the terms and
conditions specified therein. The Borrower hereby waives presentment for
payment, demand, protest and notice of dishonor of this Note.
- 1 -
<PAGE>
This Note shall be governed by, and construed and interpreted
in accordance with, the internal laws of the State of New York applicable to
contracts made and to be performed therein without consideration as to choice of
law.
MOUNTAINEER PARK, INC.
By: /s/ Edson R. Arneault
Name:
Title:
- 2 -
<PAGE>
SCHEDULE A TO PROMISSORY NOTE1
LINE LOANS AND REPAYMENT OF PRINCIPAL
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of
Borrowing or Principal Notation Made
Amount of Principal Paid Repayment Balance By
Loan
</TABLE>
//
1 This Schedule is the Schedule referred to in the Promissory Note, dated
December __, 1996, made by Mountaineer Park, Inc., payable to the order of
Madeleine L.L.C., in the original principal amount of $5,376,500.
- 3 -
<PAGE>
EXHIBIT 8
THE WARRANTS EVIDENCED BY THIS WARRANT
CERTIFICATE, AND THE WARRANT SHARES ISSUABLE
UPON EXERCISE THEREOF, HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY BE TRANSFERRED ONLY IN ACCORDANCE
WITH SECTION 5 OF THIS WARRANT CERTIFICATE
WARRANT CERTIFICATE
For the Purchase of 125,552 Shares of
Common Stock of MTR GAMING GROUP, INC.
WARRANT CERTIFICATE NO. 6
This Warrant Certificate certifies that Madeleine L.L.C. (the
"Original Holder") is the registered holder of 125,55 Warrants (as hereinafter
defined) to purchase shares of Common Stock (as hereinafter defined) of MTR
Gaming Group, Inc., a Delaware corporati n (the "Company"). Each Warrant
entitles the Holder (as hereinafter defined) upon exercise to receive one
Warrant Share (as hereinafter defined) at the Purchase Price (as hereinafter
defined), which shall initially be $1.06 per share, which shall be payable in
lawful funds of the United States of America. The number of shares of Common
Stock purchasable hereunder and the Purchase Price therefor are subject to
adjustment as hereinafter provided in Section 7 and Section 13. The Warrants
evidenced by this Warrant Certificate have been issued in connection with the
transactions contemplated by the Amended and Restated Term Loan Agreement, dated
as of July 2, 1996, as amended as of December 10, 1996, among Mountaineer Park,
Inc., a West Virginia corporation and a wholly-owned subsidiary of the Company
("Mountaineer"), the Company and the Original Holder (the "Term Loan
Agreement").
The Warrants are subject to the following further terms and
conditions:
l. DEFINITIONS
"Commission" shall mean the Securities and Exchange Commission
and any other similar or successor agency of the federal government of the
United States of America then administering the Securities Act or the Exchange
Act.
"Common Stock" shall mean and include the Company's authorized
voting Common Stock, $0.00001 par value per share, as constituted at the Date of
Issuance, and shall also include any class of t e capital stock of the Company
hereafter authorized which shall neither: (i) be limited to a fixed sum or a
percentage of par value in respect of the rights of the holders thereof to
receive dividends and to participate in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding-up of the Company;
nor (ii) be subject at any time to redemption by the Company; provided, however,
that, except as provided in Section 7, the Common Stock receivable upon exercise
of any Warrant shall include only
<PAGE>
shares of the capital stock of the Company designated as voting Common Stock on
the Date of Issuance, or shares of any class or classes of the voting capital
stock of the Company resulting from any reclassification or reclassifications of
such Common Stock which are not limited to any such fixed sum or percentage of
par value and which are not subject to any such redemption.
"Company" shall have the meaning given to such term n the
first paragraph of this Warrant Certificate.
"Controlling Interest" shall have the meaning given to such
term in Section 4.3(h).
"Convertible Securities" shall have the meaning given to such
term in Section 7.2.
"Date of Issuance" shall have the meaning given to such term
in Section 12.
"Event" shall have the meaning given to such term in Section 7.2.
"Exchange Act" shall ean the Securities Exchange Act of 1934,
as amended, or any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"Exercise Period" shall have the meaning given to such term in
Section 4.2.
"Exercise Time" shall have the meaning given to such term in
Section 4.3.
"Generally Accepted Accounting Principles" shall mean, at any
particular time generally accepted accounting principles as in effect at such
time; provided, however, that, if employment of more than one principle shall be
permissible at such time in respect of a particular accounting matter,
"Generally Accepted Accounting Principles" shall refer to the principle which is
then employed by the Company with the concurrence of its independent certified
public accountants.
"Holder" shall mean the Original Holder and its successors and
permitted assigns. U less the context otherwise requires, "Holder" shall include
a registered owner of Warrant Shares.
"indemnified party" shall have the meaning given to such term
in Section 5.7(b).
"Mountaineer" shall have the meaning given to such term in the
first paragraph of this Warrant Certificate.
"Options" shall have the meaning given to such term in Section 7.2.
"Original Holder" shall have the meaning given such term in
the first paragraph of this Warrant Certificate.
"Person" shall mean a corporation, an association, a
partnership, an organization, a business, an individual or a government or
political subdivision thereof or any governmental agency.
"Purchase Price" shall have the meaning given such term in
Section 7.1.
- 2 -
<PAGE>
"Registrable Securities" shall mean the Warra ts and all
Warrant Shares issuable or issued upon exercise of the Warrants. Any such
securities shall cease to constitute "Registrable Securities" when such
securities have been disposed of by the Holder pursuant to an effective
registration statement under the Securities Act or pursuant to Rule 144 (or any
successor rule) of the Commission under the Securities Act. "Registrable
Securities" shall include any securities issued as a dividend or distribution on
account of Registrable Securities or resulting from a subdivision of the
outstanding Registrable Securities into a greater number of securities (by
reclassification, stock split or otherwise) or that may be issued in respect of,
in exchange for or in substitution of any Registrable Securities, whether by the
Company or its successors or assigns.
"Registration Expenses" shall have the meaning set forth in Section 5.6.
"Registration Rights Agreement" shall the mean the
Registrations Right Agreement, dated as of July 2, 1996, as amended by Amendment
No. 1 to Registration Rights Agreement dated as of December 10, 1996 and as
further amended or modified from time to time, between the Company and the
Original Holder.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"Term Loan Agreement" shall have the meaning given such term
in the first paragraph of this Warrant Certificate.
"Transfer" shall include any sale, transfer, assignment or
other disposition of any Warrants or Warrant Shares, or of any interest in
either thereof, which would constitute a sale thereof within the meaning of the
Securities Act.
"Underwriter" shall have the meaning given such term in Section 5.4.
"Wa rant Certificates" means this Warrant Certificate and the
other Warrant Certificates of the Company issued on the Date of Issuance or at
any time thereafter in connection with the transactions contemplated by Term
Loan Agreement, and any certificates issued in exchange or replacement thereof.
"Warrants" shall mean the Warrants represented hereby and such
other warrants as are issued in exchange, transfer or replacement of any
Warrants.
"Warran Shares" shall mean the shares of Common Stock
purchased or purchasable in connection with the exercise of Warrants pursuant to
Section 4 hereof.
Any terms used in this Warrant Certificate which are not
defined in this Section 1 have the meanings respectively set forth elsewhere in
this Warrant Certificate.
2. OWNERSHIP OF THE WARRANTS
- 3 -
<PAGE>
The Company may deem and treat the Person in whose n me the
Warrants are registered as the Holder for all purposes, notwithstanding any
notations of ownership or writing made hereon by anyone other than the Company,
and shall not be affected by any notice to the contrary, until presentation of
this Warrant Certificate for registration of transfer as provided in Section 3.
The Company shall maintain at its office in Laguna Beach, California or in
Chester, West Virginia, a register for the Warrants, in which the Company shall
record the name and address of the Person in whose name each Warrant has been
issued, as well as the name and address of each transferee and each prior owner
of such Warrant. Within five days after the Holder shall by written notice to
the Company request the same, the Company will deliver to the Holder a
certificate, signed by one of its officers, listing the names and addresses of
every other holder of Warrants and/or Warrant Shares who is a successor or a
direct or indirect assignee of the Original Holder, as such information appears
in said register and in the stock transfer books of the Company at the close of
business on the day before such certificate is signed.
3. EXCHANGE, TRANSFER AND REPLACEMENT
This Warrant Certificate is exchangeable, upon the surrender
hereof by the Holder to the Company at its office or agency provided for in
Section 2, for new Warrant Certificates of like tenor, representing in the
aggregate the right to purchase the number of shares of Common Stock purchasable
hereunder, each of such new Warrant Certificates to represent the right to
purchase such number of shares of Common Stock as shall be designated by the
Holder at the time of such surrender. Subject to Section 5 hereof, this Warrant
Certificate and all rights hereunder are transferable, in whole or in part, in
accordance with Section 2, by the Holder hereof in person or by duly authorized
attorney, and a new Warrant Certificate shall promptly be made and delivered by
the Company, of the same tenor as this Warrant Certificate but registered in the
name of the transferee, upon surrender of this Warrant Certificate together with
a duly completed Assignment, substantially in the form attached hereto as
Exhibit I, at the office of the Company where the register provided for in
Section 2 is maintained. Upon receipt by the Company at its office provided for
in Section 2 of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant Certificate, and, in the case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and upon surrender of this Warrant Certificate, if mutilated, the Company will
make and deliver a new Warrant Certificate of like tenor in replacement of this
Warrant Certificate. This Warrant Certificate shall be promptly canceled by the
Company upon the surrender thereof in connection with any exchange, transfer or
replacement. The Company shall pay all taxes and all other expenses and charges
payable in connection with the preparation, execution and delivery of Warrant
Certificates pursuant to this Section 3.
4. EXERCISE
4.1. Right to Exercise. The Holder may exercise, in whole or in part (but
not as to a fractional share of Common Stock), the purchase rights represented
by this Warrant Certificate at the times set forth in Section 4.2.
- 4 -
<PAGE>
4.2. Exercise Period. The Holder may xercise, in whole or in
part (but not as to a fractional share of Common Stock), the purchase rights
represented by this Warrant Certificate at any time and from time to time after
the date hereof and until 5:00 p.m., Pacific Time, on December 10, 2001 (the
"Exercise Period").
4.3. Exercise Procedure. (a) Warrants will be deemed to have been exercised
as of the date during the Exercise Period when the Company has received all of
the following items (the "Ex rcise Time"):
(i) a completed Exercise Agreement, as described in Section 4.4 below,
executed by the Holder;
(ii) this Warrant Certificate; and
(iii) cash or a certified or official bank check payable to
the Company in an amount equal to the then effective Purchase Price for the
shares for which this Warrant Certificate is being exercised.
(b) Certificates for Warrant S ares purchased upon the
exercise of Warrants will be delivered by the Company to the Holder within five
business days after the date of the Exercise Time. Unless the remaining Warrants
have expired or have been exercised, the Company will prepare a new Warrant
Certificate, substantially identical hereto, representing the Warrants formerly
represented by this Warrant Certificate which have not expired or been exercised
and will, within such five-day period, deliver such new Warrant Certificate to
the Holder. Notwithstanding anything to the contrary set forth herein, the
business day periods provided for in this paragraph shall, without any further
action, be reduced to such shorter time period as shall be necessary in order
for the Holder to effect any Transfer of Warrants or Warrant Shares in
accordance with any applicable clearing procedures or other procedures governing
registration of transfer. In the case of a public offering of any Registrable
Securities, the provisions set forth in this Section 4.3(b) shall, to the extent
applicable, be subject to clause (vi) of Section 5.5.
(c) The Warrant Shares shall, when issued, be duly authorized,
validly issued, previously unissued, fully paid and nonassessable and will be
free from all taxes, liens and charges with respect thereto.
(d) Warrant Shares will be deemed to have been issued at the
Exercise Time, and the Person in whose name such shares are registered will be
deemed for all purposes
o have become the Holder of such shares at the Exercise Time.
(e) The issuance of certificates for Warrant Shares upon the
exercise of Warrants will be made without charge for any issuance tax in respect
thereof or other cost incurred by the Company in connection with such exercise
and the related issuance of shares of Common Stock.
(f) The Company will not close its books against the transfer
of the Warrants or of any of the Warrant Share in any manner which interferes
with the timely exercise of the
- 5 -
<PAGE>
Warrants or the timely transfer of all or any part of this Warrant Certificate
or the Warrant Shares. The Company will from time to time take all such action
as may be necessary to assure that the par value per share of the unissued
Common Stock acquirable upon the exercise of Warrants is at all times equal to
or less than the Purchase Price then in effect.
(g) Upon the exercis of Warrants, the Holder of the Warrant
Shares issued upon the exercise of the Warrants shall be entitled to all of the
rights, and shall be subject to all of the obligations, set forth herein, in
each case to the extent provided for herein.
(h) The right of the Holder to exercise any Warrants hereunder
shall be expressly limited to the extent that the Holder (together with its
affiliates or other persons or entities controlled by or under common control
with the Holder) w ll thereafter own in the aggregate more than 5% of the then
issued and outstanding Common Stock (a "Controlling Interest"), unless the
Holder's ownership of such a Controlling Interest has been approved by the West
Virginia Lottery Commission or such approval shall no longer be required under
applicable law. The Company shall use its best efforts to obtain, or help
obtain, as applicable, any such approval.
4.4. Exercise Agreement. Upon any exercise of the War ants,
the Exercise Agreement will be substantially in the form set forth in Exhibit II
hereto, except that if the Warrant Shares are not to be issued in the name of
the Holder, the Exercise Agreement will also state the name or names of the
Person or Persons to whom the certificates for Warrant Shares are to be issued,
and the Holder shall comply with Sections 5.1 and 5.2 hereof in connection
therewith. The Exercise Agreement shall be dated the actual date of execution
thereof.
5 TRANSFER AND REGISTRATION
5.1. Restrictions on Transfer Generally. Notwithstanding any
provisions contained in this Warrant Certificate to the contrary, the Warrants
shall not be transferable and the related Warrant Shares shall not be issuable
to any Person, or transferable by the Holder thereof, except upon satisfaction
of the conditions specified in this Section 5.1. Such conditions are intended to
insure compliance with the provisions of the Securities Act in respect of the
exercise of the Warrants or the Transfer of the Warrants or Warrant Shares. The
Holder agrees that it will not: (i) Transfer Warrants prior to delivery to the
Company of the opinion of counsel referred to in, and to the effect described
in, Section 5.2, or until registration under the Securities Act of the Warrants
and all related Warrant Shares has become effective; (ii) request the issuance
to any Person of Warrant Shares issuable upon the exercise of Warrants prior to
delivery to the Company of the opinion of counsel referred to in, and to the
effect described in, Section 5.2, or until registration of the related Warrant
Shares under the Securities Act has become effective; or (iii) Transfer any
Warrant Shares prior to delivery to the Company of the opinion of counsel
referred to in, and to the effect described in, Section 5.2, or until
registration of such Warrant Shares under the Securities Act has become
effective. Compliance with the foregoing provisions shall not be required for
any Transfer of Warrants or of Warrant Shares by the Holder to the Company.
- 6 -
<PAGE>
5.2. Opinion of Counsel. Subject to Section 5.11, so long as
this Warrant Certificate, or any certificate for Warrant Shares issued upon the
exercise of Warrants, bears the legend required by Section 5.10, the Holder
agrees that, prior to any Transfer or attempted Transfer of Warrants or Warrant
Shares evidenced by such certificate, it shall give written no ice to the
Company of its intention to effect such Transfer. Any such notice shall describe
the manner and timing of the proposed Transfer in reasonable detail. Such notice
shall be accompanied by an opinion of counsel for the Holder, in form and
substance reasonably satisfactory to the Company, stating that the proposed
Transfer may be effected without registration of the securities to be
transferred under the Securities Act, following receipt of which the Company
shall promptly, at such time as shall be requested by the Holder, give effect to
such Transfer in accordance with the terms of the notice delivered by the Holder
to the Company. Each Warrant Certificate or certificate evidencing Warrants
Shares, as the case may be, issued to a transferee in such Transfer shall bear
the legend set forth in Section 5.10 if required by such Section, unless, in the
opinion of counsel for the Company, such legend is not required or appropriate
in order to insure compliance with the Securities Act. Notwithstanding anything
to the contrary in this Section 5.2, if in the reasonable opinion of counsel for
the Company, the proposed Transfer may not be effected without registration
under the Securities Act, the Company shall promptly (and, in any case, within
two business days after receiving the notice of proposed Transfer from the
Holder) so notify the Holder and the Holder shall not consummate such Transfer
until the required registration under the Securities Act has become effective,
except in another transaction exempt from the registration requirements of the
Securities Act.
5.3. Registration. The Company shall effect the registration
on an applicable form under the Securities Act of the resale of the Warrants and
the issuance or, if not permissible under the Securities Act, the resale of the
Warrant Shares, pursuant to the terms and conditions of the Registration Rights
Agreement. The Company shall use its best efforts to keep such registration
statement filed and declared eff ctive pursuant to this Warrant Certificate
continuously effective until such time as (i) none of the securities covered by
such registration statement shall constitute Registrable Securities or (ii) all
of the Registrable Securities covered by such registration statement are freely
transferable pursuant to Rule 144(k); provided, however, that, notwithstanding
the foregoing, prior to the suspension or termination of the effectiveness of
any registration statement pursuant to either clause (i) or clause (ii) of this
sentence, (A) the Company shall have delivered to the Holder an opinion of
counsel to the Company satisfactory in form and substance to the Holder and its
counsel stating that the applicable condition precedent to the termination of
the effectiveness of the registration statement set forth in this sentence has
been satisfied and (B) the Holder and its counsel shall have concurred with the
conclusions set out in such opinion. If the Company shall fail to file any
registration statement required to be filed by the Company pursuant to this
Section 5.3 on or before the date that is 90 days from the date of demand for
the filing of such registration statement (the date of such demand the "Demand
Date"), the Company shall, within five days thereafter, pay to the Holder, in
cash, with respect to each Warrant Share held by the Holder (determined on an
as-converted basis), an amount that is equal to the greater of (i) 10% of the
closing price of the Common Stock on the business day immediately preceding such
90th day and (ii) $350,000 divided by the number of Warrant Shares (determined
on an as-converted basis) required to be included on such registration
statement. In the event that a registration statement required to be filed
pursuant to this
- 7 -
<PAGE>
Agreement shall fail to be declared effective on or before the date (the "Second
Penalty Date") that is seven calendar months from the Demand Date, the Company
shall pay to the Holder an additional amount equal to 5% of the closing price of
the Common Stock on the business day immediately preceding the Second Penalty
Date for each Warrant Share (determined on an as-converted basis) to be included
on such registration statement. If such registration statement is not declared
effective on or before the date (the "Third Penalty Date") that is nine calendar
months from the Demand Date, the Company shall pay to the Holder an additional
penalty of 10% of the closing price of the Common Stock on the Third Penalty
Date, and on the last day of each month thereafter (each a "10% Due Date") on
the business day immediately preceding such 10% Due Date for each Warrant Share
(determined on an as-converted basis) to be included on such registration
statement until such registration statement is declared effective (the "Final
Penalties"). For purposes of this paragraph, the closing price of such security
for any day shall be the last reported sale price regular way or, in case no
such reported sale takes place on such day, the average of the closing bid and
asked prices regular way for such day, in each case (i) on the principal
national securities exchange on which such security is listed or to which such
security is admitted to trading or (ii) if such security is not listed or
admitted to trading on a national securities exchange, in the over-the-counter
market as reported by The Nasdaq National Market or a comparable system, or
(iii) if such security is not listed on The Nasdaq National Market or a
comparable system, as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time in good faith by the Board
of Directors of the Company for that purpose. In the absence of all of the
foregoing, or if for any other reason the closing price of such security cannot
be determined pursuant to the foregoing sentence, the closing price shall be the
fair market value of such security as determined in good faith by the Board of
Directors of the Company. Without limiting the remedies available to the Holder,
the Company acknowledges that any failure by the Company to comply with its
obligations under this Section 5.3 may result in material irreparable injury to
the Holder (and/or subsequent holders) for which there is no adequate remedy at
law, that it will not be possible to measure damages for such injuries precisely
and that, in the event of any such failure, the Holder (or any subsequent holder
of Registrable Securities) may obtain such relief as may be required to
specifically enforce the Company's obligations under this Section 5.3.
Notwithstanding anything in this Warrant certificate to the contrary, so long as
the Company is in compliance with its obligations with respect to the payment of
any penalties pursuant to this Section 5.3, it shall not be in breach of its
obligation to register Common Stock or Warrants under this Section 5.3. The
Company hereby acknowledges that any Holder of this Warrant shall be entitled to
the benefits of the Registration Rights Agreement.
5. . Underwritten Offering. The Holder may sell any or all of
its Registrable Securities in an underwritten offering; provided, however, that,
nothing contained in this Section 5.4 shall in any way accelerate the obligation
of the Company set forth in the first sentence of Section 5.3. If the Holder
desires to do so, it shall so notify the Company in writing, stating in such
notice the number and class of securities proposed to be sold. Within five days
after receipt of such notice, the Company shall mail a notice stating that the
Holder has requested an underwritten offering of all or part of its Registrable
Securities (which notice shall state the number and class of securities proposed
to be sold by the Holder) to any other holders of Registrable Securities and to
any other holders of "Registrable Securities" under any other Warrant
Certificates or the Registration Rights Agreement. Any such other holder
desiring to
- 8 -
<PAGE>
participate in the underwritten offering shall be entitled to do so, provided
that such holder notifies the Company of its intent to so participate
(specifying in its notice the number of securities proposed to be sold, all of
which shall be required to be of the same class as those set forth in the
Holder's notice) not later than the date that is fifteen days after the date on
which the Company mailed notice of such underwritten offering to such other
holder. In any such underwritten offering requested by the Holder, the
investment banker or investment bankers and manager or managers (the
"Underwriters") that will administer the offering will be selected by the
Holder, subject to the reasonable approval of the holders of a majority of the
securities (determined on an as-converted basis and including the Holder's
Registrable Securities) proposed to be included in such offering and the
reasonable approval of the Company. Notwithstanding anything to the contrary set
forth herein, if the Underwriter determines that the number of securities
includable in an underwritten offering requested by the Holder is limited due to
market conditions, priority shall be given first to the Registrable Securities
and any other securities constituting "Registrable Securities" under any other
Warrant Certificate or the Registration Rights Agreement held by the Holder and
then to securities held by all other holders of securities proposing to sell
securities in such underwritten offering on a pro rata basis (determined on an
as-converted basis). Any holder of securities requesting the inclusion of
securities held by such holder in an underwritten offering pursuant to this
Section 5.4 (including the Holder) may, at any time (subject to any arrangements
entered into with the Underwriters), withdraw all or any part of its securities
from such underwritten offering. Notwithstanding anything to the contrary
herein, the provisions of this Section 5.4 shall not apply to any securities
that are freely transferable pursuant to Rule 144(k) under the Securities Act.
5.5. Registration Procedures; Obligations of the Company. In
connection with its obligations under Section 5.3 and Section 5.4, the Company
shall, in addition to such other requirements as are set forth elsewhere in this
Warrant Certificate, including, without limitation, in Section 5.3 and Section
5.4:
(i) prepare and file with the Commission a registration
statement on an applicable form under the Securities Act with respect to the
applicable securities, use its best efforts to cause such registration statement
to become effective within the applicable time period and promptly prepare and
file with the Commission such amendments and supplements to the registration
statement and the prospectus used in connection therewi h as may be necessary to
keep the registration statement effective and current and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all securities covered by the registration statement, including, without
limitation, such amendments and supplements as may be necessary to reflect the
intended method of disposition from time to time of the prospective seller or
sellers of such securities or as may be necessary upon the occurrence of an
event contemplated by clause (E) of paragraph (ii) of this Section 5.5, and use
its best efforts to cause any such amendment to become effective and such
registration statement to become usable as soon as thereafter practicable;
(ii) notify the Holder promptly and, if requested by the H lder,
confirm such advice in writing, (A) when any registration statement filed
- 9 -
<PAGE>
hereunder has become effective and when any post-effective amendments and
supplements thereto have been filed and become effective, (B) of any request by
the Commission or any state securities authority for amendments and supplements
to any registration statement filed hereunder and related prospectus or for
additional information after the registration statement has become effective,
(C) of the issuance by the Commission or any state securities authority of any
stop order suspending the effectiveness of any registration statement filed
hereunder or the initiation of any proceedings for that purpose, (D) if, between
the effective date of any registration statement filed hereunder and the closing
of any sale of Registrable Securities covered thereby, the representations and
warranties of the Company contained in any underwriting agreement, securities
sales agreement or other similar agreement, if any, relating to such offering
cease to be true and correct in all material respects or if the Company receives
any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose, (E) of the happening of any event which makes any
statement made in any registration statement filed hereunder or the related
prospectus untrue in any material respect or which requires the making of any
changes in the registration statement or prospectus in order to make the
statements therein not misleading and (F) of any determination by the Company
that a post-effective amendment to any registration statement filed hereunder
would be appropriate;
(iii) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of any registration statement filed hereunder
at the earliest possible moment and provide prompt notice to the Holder of the
withdrawal of an such order;
(iv) promptly furnish to the Holder and any Underwriter such number of
copies of a prospectus, including a preliminary prospectus and any prospectus
supplement, in conformity with the requirements of the Securities Act, and such
other documents as the Holder and/or Underwriter may reasonably request in order
to facilitate the public sale or other disposition of Registrable Securities;
(v) use its best efforts to register or qu lify on a timely basis the
Registrable Securities covered by any registration statement filed hereunder
under such other securities or blue sky or other applicable laws of such
jurisdictions within the United States as the Holder shall reasonably request to
enable the Holder to consummate the public sale or other disposition in such
jurisdictions of Registrable Securities;
(vi) cooperate with the Holder to facilitate the timely preparation and
delivery of certificates rep esenting Registrable Securities to be sold and not
bearing any restrictive legends and enable such Registrable Securities to be in
such amounts and registered in such names as the Holder may reasonably request
at least two business days prior to the closing of any sale of Registrable
Securities;
- 10 -
<PAGE>
(vii) upon the occurrence of any event contemplated by clause (E) of
paragraph (ii) of this Section 5.5, notify the Holder to suspend use of any app
icable prospectus as promptly as practicable after the occurrence of such an
event;
(viii) within a reasonable time prior to the filing of any registration
statement to be filed hereunder, prospectus to be included therein, or amendment
or supplement to either of the foregoing, provide copies of such document to the
Holder and its counsel, and make such of the representatives of the Company as
shall be reasonably requested by the Holder or its counsel available for discuss
on of such document, and shall not at any time file or make any amendment or
supplement to any such document of which the Holder and its counsel shall not
have previously been advised and furnished a copy or in a form in which the
holders of a majority of the securities covered by such registration statement
(determined on an as-converted basis) or their counsel shall reasonably object
on a timely basis;
(ix) make available for inspection by a representative of the Holder,
any Underwriter participating in any disposition pursuant to any registration
statement filed hereunder and attorneys and accountants designated by the Holder
or any Underwriter, at reasonable times and in a reasonable manner, all
financial and other records, pertinent documents and properties of the Company,
and cause the respective officers, directors and employees of the Company to
supply all information reasonably requested by any such representative,
Underwriter, attorney or accountant in connection with the registration
statement; provided, however that such representatives, Underwriters, attorneys
or accountants agree to keep confidential any records, information or documents
that are designated by the Company in writing as confidential and to use such
information obtained pursuant to this provision only in connection with the
transaction for which such information was obtained, and not for any other
purpose, unless (A) such records, information or documents (I) are available to
the public, (II) were already in such representatives', Underwriters',
attorneys' or accountants' possession prior to their receipt from the Company
and they do not otherwise have any obligation to keep such records, information
or documents confidential or (III) are obtained by such representatives,
Underwriters, attorneys or accountants from a third person who, insofar as is
known to such representatives, Underwriters, attorneys or accountants, is not
prohibited from transmitting the information to such representatives,
Underwriters, attorneys or accountants by a contractual, legal or fiduciary
obligation to the Company or a third party, or (B) disclosure of such records,
information or documents is required by court or administrative order after the
exhaustion of appeals therefrom;
(x) use its best efforts to cause all Registrable Securities to be
listed or traded on any securities exchange or any automated quotation system on
which similar securities issued by the Company are then listed or tr ded, to the
- 11 -
<PAGE>
extent such Registrable Securities satisfy applicable listing or trading
requirements; provided, that, for purposes of this clause (x), the Warrants
shall not be deemed to be similar to the Common Stock.
(xi) enter into such customary agreements and take all such other
reasonable actions in connection therewith in order to expedite or facilitate
the disposition of Registrable Securities (including, but not limited to,
pursuant to an underwritten offering), and in such connection, (A) to the extent
possible, make such representations and warranties to the Holder and any
Underwriters of Registrable Securities with respect to the business of the
Company and its subsidiaries and its or its subsidiaries' joint ventures, the
applicable registration statement, prospectus and documents incorporated by
reference or deemed incorporated by reference, if any, in each case, in form,
substance and scope as are customarily made by issuers to Underwriters in
underwritten offerings, and confirm the same if and when requested, (B) obtain
opinions of counsel to the Company (which counsel and opinions, in form, scope
and substance, shall be reasonably satisfactory to the Holder and any
Underwriters and their respective counsel) addressed to the Holder and any
Underwriter, covering the matters customarily covered in opinions requested in
underwritten offerings, (C) obtain "cold comfort" letters from the independent
certified public accountants of the Company (and, if necessary, any other
certified public accountant of any subsidiary of the Company or any joint
venture in which the Company or any of its subsidiaries is a partner, or of any
business acquired by the Company for which financial statements and financial
data are or are required to be included in the applicable registration
statement) addressed to the Holder and any Underwriter, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings, and (D) deliver such
documents and certificates as may be reasonably requested by the Holder or any
Underwriter, and which are customarily delivered in underwritten offerings, to
evidence the continued validity of the representations and warranties of the
Company made pursuant to clause (A) above and to evidence compliance with any
customary conditions contained in any underwriting agreement.
(xii) take, or refrain from taking, such other actions, and execute and
deliver such other documents, as may reasonably be requested by the Holder or
any Underwriter.
5.6. Expenses of Registration. All expenses incurred in
effecting any registration pursuant to this Section 5 (colle tively,
"Registration Expenses"), including, without limitation, all registration and
filing fees, listing fees, printing expenses, expenses of compliance with blue
sky laws, fees and disbursements of counsel for the Company and expenses of any
audits incidental to or required by any such registration, shall be borne by the
Company; provided, that, in the case of all registrations, the Holder shall pay
the fees and disbursements of its own counsel and underwriting discounts and
commissions in connection with an underwriter offering.
- 12 -
<PAGE>
5.7. Indemnification. (a) The Company hereby indemnifies and holds
harmless the Holder and each officer, director and controlling person of the
Holder against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document incident to any registration, qualification or
compliance (or in any related registration statement, notification or the like)
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of any rule or regulation promulgated under the
Securities Act or any state securities law applicable to the Company and
relating to any action required of or inaction by the Company in connection with
any such registration, qualification or compliance, and will reimburse the
Holder and each such officer, director and controlling person for any legal and
any other expenses incurred in connection with investigating or defending any
such claim, loss, damage, liability or action; provided, however, that the
Company will not be liable to the Holder in any such case to the extent that any
such claim, loss, damage or liability arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company in
an instrument duly executed by the Holder and stated to be specifically for use
in the document containing such untrue statement of a material fact or omitting
to state the material fact required to be stated therein.
(b) Each party entitled to indemnification hereunder (each an
"indemnified party") shall give notice to the Company promptly after such
indemnified party has actual knowledge of any claim as to which indemnity ay be
sought, and shall permit the Company (at its expense) to assume the defense of
any claim or any litigation resulting therefrom, provided that counsel for the
Company who shall conduct the defense of such claim or litigation shall be
reasonably satisfactory to the indemnified party. The indemnified party may
participate in such defense, but only at such indemnified party's expense. The
omission by any indemnified party to give notice as provided herein shall not
relieve the Company of its obligations under this Section 5.7(b) except to the
extent that the omission results in a failure of actual notice to the Company
and the Company is damaged solely as a result of the failure to give notice. The
Company shall not, in the defense of any such claim or litigation, except with
the consent of each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability with respect to such claim or litigation.
(c) The reimbursement required by this Section 5.7 shall be
made by periodic payments during the course of the investigation or defense, as
and when bills are received or expenses incurred.
(d) To the extent any indemnification by the Company is
prohibited or limited by law, the Company agrees to make the maximum
contribution permitted by applicable law with respect to any am unts for which
it would otherwise be liable under Section 5.7(a).
(e) The Company will enter into indemnification and
contribution arrangements with the Holder, any other participating
securityholders and the Underwriters that are usual and customary and/or
reasonable under the circumstances in connection with any underwritten
- 13 -
<PAGE>
offering to be effected pursuant to Section 5.4; provided, that, nothing
contained herein shall require the Company o indemnify any Underwriter in
connection with any statement expressly provided for inclusion in any
registration statement by such Underwriter.
5.8. Other Registrations. (a) The Company may not, without the
prior written consent of the holders of a majority of the participating
Registrable Securities (determined on an as-converted basis), permit present or
subsequent investors in the Company (other than transferees of Registrable
Securities) to participate in any r gistrations initiated pursuant to Section
5.3 or underwritten offerings requested pursuant to Section 5.4; provided,
however, that, nothing contained herein shall be interpreted so as to prohibit
the Company from entering into and performing its obligations under Section 5.4,
under Section 5.4 of any of the other Warrant Certificates, under the
Registration Rights Agreement (including, but not limited to, in respect of
securities to be received on future dates pursuant to the Term Loan Agreement)
or under any of the registration rights agreements listed on Schedule 5.8(a).
(b) To the extent that an underwritten offering is requested
pursuant to any other Warrant Certificate or the Registration Rights Agreement,
the Holder shall be given the opportunity to elect to participate in such
underwritten offering on the terms and subject to the conditions set forth in
the Registration Rights Agreement. The Company shall not amend any of such terms
in any Warrant Certificate or in t e Registration Rights Agreement in a manner
adverse to the Holder without the prior written consent of the holders of a
majority of the Registrable Securities (determined on an as-converted basis).
5.9. Rule 144 Requirements; Adequate Information for Private
Sales. (a) At all times and from time to time, the Company shall undertake to
make publicly available and available to the Holder, pursuant to Rule 144 of the
Commission under the Securities Act, such informati n as is necessary to enable
the Holder to make sales of Registrable Securities pursuant to that Rule. The
Company shall furnish to the Holder, upon request, a written statement executed
by the Company as to the steps it has taken to comply with the current public
information requirements of Rule 144. Notwithstanding the foregoing, the Company
shall have no further obligations under this Section 5.9 at such time as all
then outstanding Registrable Securities may be sold pursuant to paragraph (k) of
Rule 144, as determined by, and set forth in an opinion of, counsel to the
Company who is reasonably acceptable to the Holder. The Holder shall notify the
Company promptly after it ceases to hold any Registrable Securities.
(b) If the Holder desires to effect a Transfer of Registrable
Securities without registration under the Securities Act, and if at such time
such Transfer cannot be effected pursuant to Rule 144, then the Company, at the
Holder's request and at the Company's e pense, shall provide the Holder with all
such information regarding the Company as would be required in order to enable
the Holder to comply with the exemption from registration provided by Section
4(l) of the Securities Act (or any successor provision) or any other applicable
exemption from registration.
5.10. Legends. (a) Each Warrant Certificate issued in exchange, transfer,
or replacement of this Warrant Certificate shall (unless otherwise permitted by
Section .2 or unless the Warrants to be evidenced by such Warrant Certificate
shall have been transferred
- 14 -
<PAGE>
pursuant to an effective registration statement under the Securities Act or
pursuant to Rule 144 or any successor rule) be stamped or otherwise imprinted
with a legend substantially in the form of the legend appearing at the top of
the first page of this Warrant Certificate.
(b) Each certificate for Warrant Shares, including any such
certificate issued to a subsequent transferee, shall (unless otherwise permitted
by Section 5.2 or unless the Warrant Shares to be evidenced by such certificate
shall have been issued or transferred pursuant to an effective registration
statement under the Securities Act or pursuant to Rule 144 or any successor
rule) be stamped or otherwise imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND THE TRANSFER OF SAID SECURITIES IS SUBJECT TO THE
RESTRICTIONS SET FORTH IN SECTION 5 OF THE WARRANT CERTIFICATE, DATED AS OF
DECEMBER __, 1996, OF WINNERS ENTERTAINMENT, INC., A COPY OF WHICH HAS BEEN
DELIVERED TO THE REGISTERED HOLDER OF THE SECURITIES REPRESENTED HEREBY AND
WHICH IS AVAILABLE FOR INSPECTION AT THE HEAD OFFICE OF WINNERS ENTERTAINMENT,
INC. NO TRANSFER OF SAID SECURITIES SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL
THE TERMS AND CONDITIONS OF SECTION 5 OF THE WARRANT CERTIFICATE SHALL HAVE BEEN
COMPLIED WITH."
(c) The provisions of Sections 4.3(h), 5.1 and 5.2 and this Section 5.10
shall be binding upon all subsequent Holders.
5.11. Exchange of Certificates. At such time as shall
reasonably be requested by the Holder, subject to applicable law regarding the
unrestricted transfer of securities, the Company will deliver to the Holder,
upon delivery to the Company of a certificate or certificates representing
Warrants or Warrant Shares bearing the legend set forth in S ction 5.10, a new
certificate or certificates representing such Warrants or Warrant Shares but not
bearing such legend.
6. COMPANY'S ACKNOWLEDGMENT OF OBLIGATIONS
The Company will, at the time of any exercise of Warrants,
upon the request of the Holder, acknowledge in writing its continuing obligation
to afford to the Holder all rights to which the Holder shall continue to be
entitled after such exercise in accordance with the provisions of this W rrant
Certificate; provided, however, that, if the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to the Holder any such rights.
7. ADJUSTMENTS
The number of Warrant Shares purchasable pursuant hereto and
the Purchase Price per Warrant Share shall be subject to adjustment from time to
time on and after the Date of Issuance as hereinafter provided in this Section
7.
- 15 -
<PAGE>
7.1. Adjustment of Purchase Price. The initial purchase price
per Warrant Share of $1.06 per share shall be subject to adjustment from time to
time as hereinafter provided on or after the Date of Issuance (as so adjusted
from time to time, the "Purchase Price"). Upon each adjustment of the number of
Warrant Shares purchasable pursuant hereto, the Purchase Price shall be reduced
to a price determined by dividing the aggregate Purchase Price of all
unexercised Warrant Shares in effect immediately prior to such adjustment by the
maximum total number of Warrant Shares purchasable immediately after such
adjustment.
7.2. Adjustment of Number of Shares. If and whenever after the
Date of Issuance the Company shall in any manner (i) issue or sell any shares of
its Common Stock, (ii) grant any rights to subscribe for or to purchase, or any
options for the purchase of, Common Stock or any stock or securiti s convertible
into or exchangeable for Common Stock (such rights or options being herein
called "Options" and such convertible or exchangeable stock or securities being
herein called "Convertible Securities"), (iii) issue or sell Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, or (iv) declare a dividend or make any other
distribution upon any stock of the Company payable in Common Stock, Options or
Convertible Securities (any of the matters referred to in clauses (i), (ii),
(iii) and (iv) being an "Event"), the Holder shall thereafter be entitled to
purchase in the aggregate, at the Purchase Price resulting from the adjustment
provided by Section 7.1, the number of Warrant Shares equal to that percentage
of the total number of shares of Common Stock (determined on an as-converted
basis) that the Holder was entitled to purchase immediately prior to such Event;
provided, however, that, if an adjustment is required to be made pursuant to
this sentence in respect of any Event that involves the offer and/or issuance of
securities to all of the holders of the Common Stock, the Holder shall
thereafter be entitled to receive the number of Warrant Shares which the Holder
would have owned immediately following such Event (on an as-converted basis) had
the Warrants been exercised immediately prior thereto. Notwithstanding the
foregoing, no adjustment shall be made pursuant to any Event: (i) at any time
prior to the date that is 30 months after the repayment in full of all of the
outstanding principal under the Term Loan Agreement if (A) the securities issued
in connection with the Event were sold for a price (determined on an
as-converted basis) exceeding the Purchase Price or (B) if the Event that would
result in such adjustment was approved in advance in writing by the holders of a
majority of the shares of Common Stock (determined on an as-converted basis)
issuable upon the exercise of the warrants represented by the Warrant
Certificates, which approval shall not be unreasonably withheld; and (ii)
following the date that is 30 months after the repayment in full of all of the
outstanding principal under the Term Loan Agreement; provided, however, that,
notwithstanding anything to the contrary set forth in clauses (i) and (ii)
above, the adjustments provided for in the first sentence of this Section 7.2
shall continue to be made in respect of any Event to the extent that such Event
involves the offer and/or issuance of securities to all of the holders of any
class of securities of the Company; provided, further, however, that, nothing
contained in this sentence shall limit the effect of any adjustment to be made
pursuant to any other Section of this Warrant Certificate. Notwithstanding the
first sentence of this paragraph, no adjustment shall be made pursuant to this
Section 7.2 in respect of the issuance of (i) Common Stock or Options to
employees, directors and officers of the Company and its subsidiaries under bona
fide employee benefit plans adopted by the Board of Directors, to the extent
that, with respect to any applicable fiscal year, shares of Common Stock or
Options representing (on an as-converted basis) no more
- 16 -
<PAGE>
than 1% of the issued and outstanding shares of Common Stock on the Date of
Issuance are issued, (ii) Common Stock in the ordinary course of business, the
issuance of which has been approved by the Board of Directors, to the extent
that, with respect to any applicable fiscal year, shares of Common Stock
representing (on an as-converted basis) no more than .5% of the issued and
outstanding shares of Common Stock on the Date of Issuance are issued or (iii)
warrants or shares of Common Stock pursuant to the terms of the Term Loan
Agreement.
7.3. Record Date. In case at any time the Company shall take a
record of the holders of the Common Stock for the purpose of entitling them (i)
to receive a dividend or other distribution payable in shares of Common Stock
Options or in Convertible Securities or (ii) to subscribe for or purchase shares
of Common Stock, Options or Convertible Securities, then such record date shall,
for purposes of the adjustments to be made pursuant to this Section 7, be deemed
to be the date of the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the payment of such dividend or of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
7.4. Liquidating Dividends. The Company will not declare a
dividend upon the Common Stock payable other (i) than out of consolidated
earnings for the fiscal year of the Company in respect of which the dividend is
paid, determined in accordance with Generally Accepted Accounting Principles
consistently applied by the Company's independent certified public accountants,
including the making of appropriate deductions for minority interests, if any,
in subsidiaries, or (ii) than in ommon Stock, unless, in either case, the
Company shall pay over to the Holder, on the dividend payment date, the cash,
stock or other securities and other property which the Holder would have
received if the Holder had exercised the Warrants in full to purchase Warrant
Shares and had been the record holder of such Warrant Shares on the date on
which a record is taken for the purpose of such dividend, or, if a record is not
taken, the date as of which the holders of Common Stock of record entitled to
such dividend are to be determined. For the purposes of the foregoing, a
dividend other than in cash shall be considered payable out of earnings only to
the extent that such earnings are charged an amount equal to the fair value of
such dividend as determined in good faith by the Board of Directors of the
Company.
7.5. Subdivision or Combination of Shares. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of share , the Purchase Price in effect immediately prior to such
subdivision shall thereafter be proportionally reduced and the number of shares
of Common Stock purchasable hereunder shall be proportionately increased so that
the Holder shall be entitled to receive the number of Warrant Shares which the
Holder would have owned immediately following such action had the Warrants been
exercised immediately prior thereto at the aggregate Purchase Price in effect
immediately prior to such action. In case the outstanding shares of Common Stock
shall be combined into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall be proportionately increased, and
the number of shares of Common Stock purchasable hereunder shall be
proportionately reduced so that the Holder shall thereafter be entitled to
receive the number of Warrant Shares which the Holder would have owned
immediately following such action had the Warrants been exercised immediately
prior thereto at the aggregate Purchase Price in effect immediately prior to
such action.
- 17 -
<PAGE>
7.6. Reorganization, Merger, etc. If any capital
reorganization or reclassification of the capital stock of the Company (other
than as provided in Section 7.5), or consolidation or merger of the Company with
another corporation, or the sale or conveyance, of all or substantially all of
its assets to another corporation, shall be effected in such a way that holders
of the Common Stoc shall be entitled to receive stock, securities or assets with
respect to or in exchange for shares of Common Stock, then, prior to and as a
condition of such reorganization, reclassification, consolidation, merger, sale
or conveyance, lawful and adequate provision shall be made whereby the Holder
shall thereafter have the right to purchase and receive upon the basis and upon
the terms and conditions specified in this Warrant Certificate and in lieu of
the Warrant Shares immediately theretofore purchasable and receivable upon the
exercise of the Warrants, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of Common Stock equal to the number of shares of Common Stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby had such reorganization, reclassification, consolidation,
merger, sale or conveyance not taken place. In any such case, appropriate
provision shall be made with respect to the rights and interests of the Holder
to the end that the provisions hereof (including, without limitation, provisions
for adjustment of the Purchase Price and of the number of Warrant Shares
purchasable upon the exercise of the Warrants and for the registration of
Registrable Securities to the extent provided in Section 5) shall thereafter be
applicable, as nearly as may be in relation to any stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company shall not effect
any such consolidation, merger, sale or conveyance unless prior to or
simultaneously with the consummation thereof the survivor or successor
corporation (if other than the Company) resulting from such consolidation or
merger or the corporation purchasing or otherwise acquiring such assets shall
(i) assume by written instrument executed and sent to the Holder, the obligation
to deliver to the Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to receive,
and containing the express assumption by such survivor or successor corporation
of the due and punctual performance and observance of every provision of this
Warrant Certificate to be performed and observed by the Company and of all
liabilities and obligations of the Company hereunder, and (ii) deliver to the
Holder an opinion of counsel, in form and substance reasonably satisfactory to
the Holder, to the effect that such written instrument has been duly authorized,
executed and delivered by such survivor or successor corporation and constitutes
a legal, valid and binding instrument enforceable against such survivor or
successor corporation in accordance with its terms, and to such further effects
as the Holder may request.
7.7. Exceptions to Adjustment of Purchase Price. Anything
herein to the contrary notwithstanding, the Company shall not be required to
make any adjustment of the Purchase Price upon the issuance of Warrants or the
issuance of Warrant Shares upon the exercise of Warrants.
7.8. Treasury Shares. The number of shares of Common Stock
outstanding at any time shall not include shares owned or held by or for the
account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of Section 7.
- 18 -
<PAGE>
7.9. Company to Prevent Dilution. In case at any time or from
tim to time conditions arise, which are not adequately covered by the provisions
of this Section 7, and which might materially and adversely affect the exercise
rights of the Holder, the Board of Directors of the Company shall appoint a firm
of independent certified public accountants of recognized national standing,
which may be the firm regularly retained by the Company, which shall give their
opinion upon the adjustment, if any, necessary with respect to the Purchase
Price and/or number of Warrant Shares issuable upon the exercise of the
Warrants, on a basis consistent with the standards established in the other
provisions of this Section 7, so as to preserve, without dilution, the exercise
rights of the Holder. Upon receipt of such opinion, the Board of Directors of
the Company shall forthwith make the adjustments described therein.
7.10. Adjustment Notices to Holder. Upon any increase or
decrease in the number of Warrant Shares purchasable upon the exercise of the
arrants, or upon any adjustment in the Purchase Price (in each case to the
extent applicable), then, and in each such case, the Company within 5 days
thereafter, shall deliver written notice thereof to the Holder, which notice
shall state the increased or decreased number of Warrant Shares purchasable upon
the exercise of the Warrants, setting forth in reasonable detail the method of
calculation and the facts upon which such calculations are based. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the provisions of Section 9.
8. SPECIAL COVENANTS OF THE COMPANY
The Company covenants and agrees that:
(a) The Company will not, by amendment of its Certificate of
Incorporation or through any capital reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, directly or indirectly avoid or seek to avoid the observance
or performance of any of the terms of the Warrants, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (i) will not increase the par value of the Warrant
Shares above the Purchase Price payable therefor upon such exercise, or take any
other action that would cause the Purchase Price to be less than the par value
of the Warrant Shares, (ii) will take all such action as may be necessary or
appropriate in order that the Company may at all times validly and legally issue
fully paid and non-assessable Warrant Shares upon the exercise of all Warrants
from time to time outstanding and (iii) will not issue any capital stock of any
class which is preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary dissolution, liquidation or winding-up, unless the
rights of the holders thereof shall be limited to a fixed sum or percentage of
par value in respect of participation in dividends and in any such distribution
of assets.
(b) If any shares of Common Stock required to be reserved for
the purpose of exercising the Warrants require registration with or approval of
any governmental authority under any federal law (other than the Securities Act)
or under any state law before su h shares may be issued upon exercise of the
Warrants, the Company will, at its expense, as expeditiously
- 19 -
<PAGE>
as possible, use its best efforts to cause such shares to be duly registered or
approved, as the case may be.
(c) The Company will give notice to the Holder within ten days
after the Company shall have filed with the Commission an application to
register any securities of the Company pursuant to the Exchange Act. The Company
will review ts stock ledgers, stock transfer books and other corporate records
periodically (and not less than once in each calendar quarter) in order to
determine whether the Holder is or shall have become, directly or indirectly,
the owner of record of more than such percentage of any class of the Company's
equity securities (as defined in the Exchange Act) as shall cause such Holder to
be required to make any filing or declarations to the Company, the Commission or
any securities exchange or inter-dealer quotation system pursuant to the
provisions of the Exchange Act or the rules and regulations of any such
securities exchange or inter-dealer quotation system. The Company will give
prompt notice to the Holder whenever it shall have so determined, but in any
event not less than quarterly, and such notice shall also specify the
information upon which the Company bases such determination; provided, that, the
Company shall be required to give such notice only once in each fiscal year to
the Holder if its percentage of ownership of record of the Company's equity
securities has not changed since the date that the last such notice was given.
Nothing contained in this paragraph (c) of Section 8 be construed so as to
qualify or limit any reporting obligation of the Holder under the Exchange Act.
9. NOTIFICATION BY THE COMPANY
In case at any time:
(i) the Company shall declare any dividend or any other distribution upon
its Common Stock;
(ii) the Company shall offer for subscription pro rata to the holders of
its Common Stock any additional shares of stock of any class or any Convertible
Securities or Options;
(iii) the Board of Directors of the Company shall authorize any capital
reorganization or reclassification of the capital stock of the Company, or a
sale or conveyance of all or substantially all of the assets of the Company, or
a consolidation or merger of the Company with or into another Person;
(iv) actions or proceedings shall be authorized or commenced for a
voluntary or involuntary dissolution, liquidation or winding-up of the Company;
or
(v) the Company shall propose to take any other action that would
require a vote of the Company's stockholders; then, in any one or more of such
cases, the Company shall give written notice to the Holder, at the earliest time
legally practicable (and to the extent legally practicable and to the extent
determined as of such time), not less than 30 days before any record date or
other date set for definitive action) of the date on which (A) the books of the
Company shall close or a record shall be taken with respect to such dividend,
distribution, subscription rights or Options or (B) such
- 20 -
<PAGE>
reorganization, reclassification, sale, conveyance, consolidation, merger,
dissolution, liquidation, winding-up or other action shall take place or be
voted on by the stockholders of the Company, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in said dividend, distribution, subscription rights or Options
or shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, sale,
conveyance, consolidation, merger, dissolution, liquidation or winding-up, as
the case may be. If the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act or to a
favorable vote of stockholders, the notice required by this Section 9 shall so
state.
10. LIMITATION ON EXERCISE
Notwithstanding any other provision hereof, the Holder shall
not be entitled to exercise the Warrants if, as a result of such exercise, the
Holder would own, control or have power to vote a greater quantity of securities
of any kind issued by the Company than the Holder shall be ermitted to own,
control or have the power to vote under any law or under any regulation, rule or
other requirement or any governmental authority at any time applicable to the
Holder. For purposes of this Section 10, a written statement of the Holder, to
the effect that the Holder is legally entitled to exercise Warrants and that
such purchase of the Warrant Shares purchasable upon the exercise of such
Warrants will not violate the prohibitions set forth in the preceding sentence,
shall be sufficient evidence of the legality thereof and shall obligate the
Company to deliver certificates representing the Warrant Shares so purchased in
accordance with the other provisions hereof unless the Company shall reasonably
disagree as to the accuracy of any material portion of such written statement.
11. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY
The Warrants will not entitle the Holder to any voting rights
or other rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Holder to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall give rise to
any liability of the Holder for any portion of the Purchase Price or as a
stockholder of the Company.
12. DATE OF ISSUANCE
The date the Company initially issues the Warrants will be
deemed to be the "Date of Issuance" thereof and of each new Warrant issued in
xchange, transfer or replacement thereof, regardless of the number of times new
certificates representing the unexplored and unexercised rights formerly
represented by this Warrant Certificate shall be issued.
13. AMENDMENT AND WAIVER
Except as otherwise provided herein, the provisions of the
Warrant Certificates may be amended and the Company may take action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the prior written consent of the holders of a
majority of the "Warrant Shares" then outstanding under all of the Warrant
Certificates (determined on an as-converted basis), or, in the case of any
amendment to, or action
- 21 -
<PAGE>
prohibited or required under, Section 5.3, 5.4, 5.5, 5.6, 5.8 or 5.9 of any
Warrant Certificate, the holders of a majority of the "Registrable Securities"
under all of the Warrant Certificates (determined on an as-converted basis);
provided, that, changes that are detrimental to the Holder in (i) the Purchase
Price, (ii) the number of or class of securities issuable upon the exercise of
Warrants, (iii) the conversion adjustment provisions set forth in Section 7 and
(iv) the indemnification and contribution provisions set forth in Section 5.7,
shall not be made as to the Holder without the consent of the Holder.
14. NO FRACTIONAL SHARES
The Company shall not be required to is ue stock certificates
representing fractions of shares of Common Stock, but may at its option in
respect of any final fraction of a share make a payment in cash based on the
then effective Purchase Price.
15. RESERVATION OF SHARES
The Company will authorize, reserve and keep available at all
times, free from preemptive rights, a sufficient number of shares of Common
Stock or other securities, if so required, to satisfy the exercise of the
Warrants
16. NOTICES
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed first-class postage prepaid or when delivered by courier:
(i) if to the Original Holder, at 950 Third Avenue, New York, New York
10022, or at such other address as may have been furnished to the Company in
writing by the Holder; and
(ii) if to the Company, at Route 2 South, Chester, West Virginia 26034,
Attention: President, or at such other address as may have been furnished to the
Holder in writing by the Company, with a copy to Robert L. Ruben, Esq., Freer &
McGarry, 1000 Thomas Jefferson Stree , N.W., Suite 600, Washington, D.C. 20007.
17. HEADINGS
The headings of the Sections and subsections of this Warrant
Certificate are inserted for convenience only and shall be deemed not to
constitute a part of this Warran Certificate.
18. GOVERNING LAW; CONSENT TO JURISDICTION
This Warrant Certificate shall be governed by, and construed
in accordance with, the laws of the State of New York, without regard to the
principles of conflicts of laws of such State. If any action or proceeding shall
be brought by the Holder in order to enforce any right or obligation in respect
of this Warrant Certificate or the Warrants, the Company hereby consents
- 22 -
<PAGE>
and will submit to the jurisdiction of any state or federal court of competent
jurisdiction sitting within the area comprising the Southern District of New
York, and agrees that venue will be proper in any such court.
19. BINDING EFFECT
The terms and provisions of this Warrant Certificate shall inure to the
benefit of the Original Holder and its successors and permitted assigns and
shall be binding upon the Company and its succe sors and permitted assigns,
including, without limitation, any Person succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
20. CALCULATION OF AMOUNTS AND PERCENTAGES
To the extent that any provision of this Warrant Certificate requires the
approval of the holders of a stated percentage or amount (to the extent
constituting less than all) of the Warrants, Warrant Shares or R gistrable
Securities, all of the "Warrants," "Warrant Shares" and "Registrable
Securities," as the case may be, under all of the Warrant Certificates held by
the "Original Holders" thereof and their respective successors and permitted
assigns shall be included when making such calculation.
21. REPRESENTATIONS OF ORIGINAL HOLDER
The Original Holder represents and warrants that it is an "accredited
investor" as such term is defined in the R le 501(c) of Regulation D under the
Securities Act and that it is acquiring the Warrants for its own account or for
one or more accounts (each of which is an "accredited investor") as to which it
exercises sole investment discretion, for investment and not with a view to
resale or distribution thereof.
22. OTHER REPRESENTATIONS
(a) The Company represents and warrants that it has not
entered into, and covenants that, on and after the Date o Issuance it will not
enter into, any agreement that is inconsistent with or that may prejudice the
rights granted to the Holder in this Warrant Certificate or that otherwise
conflicts with the provisions hereof. The rights granted to the Holder hereunder
do not in any way conflict with and are not inconsistent with the rights granted
to the holders of the Company's other issued and outstanding securities, other
than rights underlying agreements set forth on Schedule 5.8(a) hereto, copies of
which have been provided to the Holder.
(b) The Company has validly reserved for issuance upon
exercise of all of the Warrants, out of its authorized but unissued share
capital, a sufficient number of shares of Common Stock so as to enable the
Holder to exercise the Warrants in full.
WITNESS the seal of the Company and the signatures of its duly
authorized officers.
Dated: _________ __, 1997 MTR GAMING GROUP, INC.
By: /s/ Edson R. Arneault
Name: Edson R. Arneault
Title: President
Attest:
/s/ Robert L. Ruben
Assistant Secretary
- 23 -
<PAGE>
EXHIBIT I
ASSIGNMENT
To Be Executed by the Registered Holder Desiring to
Transfer Purchase Rights Evidenced by
the Within Warrant Certificate of
MTR GAMING GROUP, INC.
FOR VALUE RECEIVED, the undersigned registered Holder hereby sells, assigns and
transfers unto _________________ the right to purchase ________ Warrant Shares
(as defined in the Warrant Certificate) covered by the within Warrant
Certificate, and does hereby irrevocably constitute and appoint
_____________________ Attorney to transfer the applicable number of Warrants on
the books of the Company (as defined in the Warrant Certificate), with full
power of substitution.
Name of
Registered Holder
Signature
Title
Address
Dated: __________, 19__
In the presence of
____________________________
NOTICE:
The signature to the foregoing Assignment must correspond to the name written
upon the face of the within Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
- 24 -
<PAGE>
EXHIBIT II
EXERCISE AGREEMENT
To Be Executed by the Registered Holder Desiring to
Exercise Warrants Represented by the Within Warrant Certificate of
MTR GAMING GROUP, INC.
The undersigned registered holder hereby exercises the right
to purchase _____ shares of the Common Stock covered by the within Warrant
Certificate, according to the conditions thereof, and herewith make payment in
full of he Purchase Price of such shares,
$------.
Name of
Registered Holder
Signature
Title
Address
Dated: __________, 19__
- 25 -
