<PAGE> 1
As Filed with the Securities and Exchange Commission on May 4, 1999.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
-------------------------
LEISURE TIME CASINOS & RESORTS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
COLORADO 7980 34-1763271
- ------------------------------- ---------------------------- ------------------
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
4258 COMMUNICATIONS DRIVE
NORCROSS, GEORGIA 30093
(770) 923-9900
-----------------------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
ALAN N. JOHNSON
4258 COMMUNICATIONS DRIVE
NORCROSS, GEORGIA 30093
(770) 923-9900
---------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With Copies to:
THOMAS S. SMITH, ESQ. ROBERT W. WALTER, ESQ.
KEVIN J. KANOUFF, ESQ. BERLINER ZISSER WALTER & GALLEGOS, P.C.
SMITH MCCULLOUGH, P.C. 1700 LINCOLN STREET
4643 SOUTH ULSTER STREET, SUITE 900 SUITE 4700
DENVER, COLORADO 80237 DENVER, COLORADO 80203
(303) 221-6000 (303) 830-1700
Approximate date of proposed sale to the public:
As soon as practicable following the date on which the Registration
Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act , check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
<PAGE> 2
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=======================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE(1) FEE
- --------------------------- ------------------- ----------------- ----------------- -------------
<S> <C> <C> <C> <C>
Common Stock......................... 1,265,000 Shares(2) $ 13.00 $16,445,000 $ 4,572.00
Representative's Warrants (3)........ 1 Warrant $ -- $ 100 $ 1.00
Common Stock Underlying
Representative's Warrants............ 110,000 Shares(4)(5) $ 15.60 $ 1,716,000 $ 478.00
Total.................. $18,161,100 $ 5,050.00
=======================================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(o) under the Securities Act of 1933,
as amended, solely for the purpose of calculating the registration fee.
(2) Includes 165,000 shares that the underwriters have the option to
purchase from the registrant to cover over allotments, if any.
(3) To be issued to the representative of the underwriters.
(4) In accordance with Rule 416 under the Securities Act of 1933, as
amended, a presently indeterminable number of shares of common stock are
registered hereunder which may be issued in the event provisions preventing
dilution become operative, as provided in the representative's warrants. No
additional registration fee has been paid for these shares of common stock.
(5) Issuable upon exercise of the representative's warrants for the
purchase of common stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
ii
<PAGE> 3
PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 4, 1999
1,100,000 SHARES OF COMMON STOCK
[LEISURE TIME LOGO]
This is an initial public offering of shares of common stock of Leisure
Time Casinos & Resorts, Inc. Leisure Time expects that the public offering price
of the common stock will be between $11.00 and $13.00 per share.
Leisure Time principally develops, manufactures and sells programmable
touchscreen video gaming machines. In addition, Leisure Time operates an
offshore gaming vessel and a gaming machine route and is renovating a hotel
property that Leisure Time anticipates will include a pulltab and bingo hall to
be operated by charities and that will feature Leisure Time's video pulltab and
bingo machines. Leisure Time plans to list the common stock on the Nasdaq
National Market(R) under the symbol "LTCR."
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 9.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price $ $
Underwriting discounts $ $
Proceeds to Leisure Time $ $
</TABLE>
The underwriters have a 45 day option to purchase up to an additional
165,000 shares from Leisure Time to cover over-allotments.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The underwriters expect to deliver the common stock against payment on
___________.
SCHNEIDER SECURITIES, INC.
__________________, 1999
Leisure Time will amend and complete the information in this prospectus.
Although Leisure Time is permitted by US federal securities laws to offer these
securities using this prospectus, Leisure Time may not sell them or accept an
offer to buy them until the documentation filed with the Commission relating to
these securities has been declared effective by the Commission. This prospectus
is not an offer to sell these securities or Leisure Time's solicitation of an
offer to buy these securities in any jurisdiction where that would not be
permitted or legal.
<PAGE> 4
[1ST PAGE GATEFOLD APPEARS HERE]
The chart below should help you understand Leisure Time's structure.
Leisure Time Casinos & Resorts, LEISURE TIME CASINOS & RESORTS, INC. is a
Inc. Colorado corporation formed on February 4,
1993. Leisure Time principally develops,
manufactures and sells programmable video
gaming machines and related software.
Leisure Time Technology, Inc. LEISURE TIME TECHNOLOGY, INC. was acquired
by Leisure Time in September 1996 and it
develops, manufactures and sells
programmable video gaming machines and
related software.
Solutia Gaming Systems, Inc. SOLUTIA GAMING SYSTEMS is developing new
video games and new video game software.
Leisure Time Cruise Corporation LEISURE TIME CRUISE CORPORATION conducts
offshore gaming cruises on the "Vegas
Express" and plans to conduct offshore
gaming cruises on the "Leisure Lady."
Leisure Express Cruise, LLC LEISURE EXPRESS CRUISE, LLC owns Florida
Casino Cruises, Inc.
Florida Casino Cruises, Inc. FLORIDA CASINO CRUISES, INC. owns the
"Vegas Express" offshore gaming vessel.
Leisure Belle Cruise, LLC LEISURE BELLE CRUISE, LLC owns and is
refurbishing the "Biloxi Belle," a
dockside gaming vessel for use in
Mississippi.
Leisure Time Gaming, Inc. LEISURE TIME GAMING, INC. owns One Eyed
Jacks Gaming, Inc. and distributes video
gaming machines in South Carolina.
One Eyed Jacks Gaming, ONE EYED JACKS GAMING, INC. operates a
Inc. video gaming route in which it shares the
revenue with location operators.
Leisure Time Hospitality, Inc. LEISURE TIME HOSPITALITY, INC. is
renovating a hotel property that it
anticipates will include a pulltab and
bingo hall to be operated by charities and
that will include Time's video pulltab and
bingo machines.
RP Capital Corporation RP CAPITAL CORPORATION provides equipment
financing for purchasers of Leisure Time's
products and other equipment.
<PAGE> 5
Leisure Time International LEISURE TIME INTERNATIONAL, LTD. operates as
a foreign international sales corporation.
Leisure Time is developing a website on the World Wide Web at
www.leisuretech.com. Leisure Time's website is not intended to be and should not
be considered a part of this prospectus.
<PAGE> 6
[SECOND PAGE GATEFOLD WITH PICTURES OF VIDEO GAMING MACHINES APPEARS HERE]
<PAGE> 7
[THIRD PAGE GATEFOLD WITH PICTURES OF GAMING VESSELS APPEARS HERE]
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................................................................... 3
Risk Factors................................................................................................ 9
Where Can You Find Additional Information................................................................... 18
Use of Proceeds............................................................................................. 19
Dividend Policy............................................................................................. 20
Dilution.................................................................................................... 21
Capitalization.............................................................................................. 23
Selected Consolidated Financial Data........................................................................ 25
Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 28
Business.................................................................................................... 42
Litigation.................................................................................................. 74
Management.................................................................................................. 76
Security Ownership of Certain Beneficial Owners and Management.............................................. 88
Description of Securities................................................................................... 90
Shares Eligible for Future Sale............................................................................. 92
Underwriting................................................................................................ 94
Legal Matters............................................................................................... 97
Experts..................................................................................................... 97
Index to Financial Statements............................................................................... F-1
</TABLE>
Unless otherwise stated, all information in this prospectus assumes no
exercise of the overallotment option by the underwriters.
Until ___________, 1999, all dealers selling shares of the common
stock, whether or not participating in this offering, may be required to deliver
a prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
2
<PAGE> 9
PROSPECTUS SUMMARY
Please open to the first page of the gatefold at the beginning of this
prospectus for a diagram that will help you better understand Leisure Time and
its related companies. This summary highlights information contained elsewhere
in this prospectus. This summary is not complete and does not contain all of the
information that you should consider before investing in the common stock.
LEISURE TIME. Leisure Time principally develops, manufactures and sells
programmable touch screen video gaming machines that offer players a choice of
up to 12 different games of chance on one machine. Leisure Time's proprietary
software features various well known games such as:
o poker;
o blackjack;
o keno;
o slots; and
o bingo
as well as other games developed by Leisure Time. Each machine is programmed by
Leisure Time prior to delivery with from one to 12 games selected by the
location operator from a menu of approximately 50 games with multiple payout
options. As video gaming machines have become increasingly popular, Leisure Time
has:
o successfully expanded its installed base of video gaming
machines;
o introduced software upgrades designed to enhance player appeal
and engender operator loyalty; and
o increased recurring revenue through the sale of new and
upgraded game software.
The video gaming machines manufactured by Leisure Time are used in:
o retail locations such as taverns, restaurants, supermarkets,
drug stores and convenience stores;
o small and medium sized casinos operated by Native American
tribes;
o smaller casinos with limited floor space; and
o gaming arcades and bingo halls.
In addition to seeking recurring revenue from software upgrades on a
growing base of installed video gaming machines, Leisure Time has recently
implemented strategies designed to enhance recurring revenue through:
o the sale of video pulltab machines and the refillable,
replaceable pulltab cartridges used in the machines;
3
<PAGE> 10
o purchase and operation of a "cruise to nowhere" vessel out of
Gloucester, Massachusetts that offers a range of gaming
activities in international waters, including Leisure Time's
video gaming machines, table games and traditional "slot"
games;
o acquisition of a multiple retail location base of video gaming
machines that Leisure Time will own and operate or provide to
third parties on a revenue sharing basis, known as a gaming
route;
o acquisition of a hotel now undergoing renovation next to Lake
Erie that Leisure Time plans will include a pulltab and bingo
hall to be operated by charities and that will feature Leisure
Time's video pulltab and bingo machines; and
o acquisition of a finance company to finance purchases of video
gaming machines from Leisure Time.
STRATEGY. Leisure Time's objectives are to be a leading provider of
video gaming, pulltab and bingo products and related software and to expand its
gaming operations to increase recurring revenue. Key strategies to achieve
Leisure Time's objectives include to:
o increase the installed base of Pot O Gold and Pulltab Gold
product lines;
o leverage growth in installed products to increase recurring
revenue from software sales;
o continue to identify and develop new touchscreen video games
and game enhancements;
o increase revenue through addition of gaming vessels and
passengers;
o expand gaming machine route operations;
o promote acceptance and use of video pulltab and bingo
products; and
o selectively explore domestic acquisition opportunities and
international expansion.
4
<PAGE> 11
FINANCIAL PERFORMANCE. In September 1996 Leisure Time commenced
operations by acquiring Leisure Time Technology. The following tables represent
the pro forma total revenue, the pro forma total gross profit, the pro forma net
income (loss) from operations before unusual item and income taxes, and the net
income (loss) for Leisure Time for the last five fiscal years ended June 30,
1998, and for the six months ended December 31, 1998:
[TOTAL REVENUE GRAPH] [TOTAL GROSS PROFIT GRAPH]
This bar graph shows Leisure Time's This bar graph shows Leisure Time's
total revenues by year and for the total gross profit by year and for
six months. The figures range from the six months. The figures range
$15.5 million to $29.0 million. from $6.8 million to $4.8 million.
[NET INCOME FROM OPERATIONS [NET INCOME (LOSS) GRAPH]
BEFORE UNUSUAL ITEM AND
INCOME TAXES GRAPH]
This bar graph shows Leisure Time's This bar graph shows Leisure Time's
net income from operations before net income (loss) by year and for
unusual item and income taxes by year the six months. The figures range
and for the six months. The figures from $.2 million to $2.7 million
range from $.3 million to $4.3 million except for 1998 which shows a loss
except for 1998 which shows a loss of of $1.1 million.
$1.4 million.
Leisure Time's principal executive offices are located at 4258
Communications Drive, Norcross, Georgia 30093. Leisure Time's telephone number
is (770) 923-9900 and its facsimile number is (770) 923-3344.
5
<PAGE> 12
THE OFFERING
Securities offered......................... 1,100,000 shares of common stock
Shares of common stock to be
outstanding after the offering............ 6,018,334 shares
In addition to the 6,018,334 shares of common stock outstanding after
the offering, Leisure Time may issue 5,536,751 shares of common stock on
exercise of currently outstanding options and warrants and upon conversion of
outstanding convertible notes into common stock and warrants and upon the
exercise of the warrants.
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table summarizes the financial data for Leisure Time's
business. The pro forma information for the five years ended June 30, 1998,
gives effect to the acquisitions of Leisure Time Technology effective July 1,
1993 and Florida Casino Cruises effective July 1, 1996.
SUMMARY PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the Year Ended June 30,
----------------------------------------------------------------------------
1994 1995 1996
----------------------- ----------------------- -----------------------
Historical Pro Forma Historical Pro Forma Historical Pro Forma
<S> <C> <C> <C> <C> <C> <C>
Revenue.................. $ - $ 15,494 $ - $ 22,393 $ - $ 28,292
Cost of goods sold....... - 8,657 - 12,338 - 15,678
Gross profit............. - 6,837 - 10,055 - 12,614
Operating expenses....... 603 6,441 1,013 8,651 1,397 11,678
Net income (loss) before
unusual item and income
taxes (603) 346 (1,013) 1,404 (1,397) 936
Unusual item - litigation - - - - - -
Income tax benefit
(expense).............. - (128) - (519) - (346)
Net income (loss)........ $ (603) $ 218 $ (1,013) $ 885 $ (1,397) $ 590
========== ========== ========== ========== ========== ==========
Earnings (loss) per common
share - basic.......... $ (.20) $ .07 $ (.33) $ .28 $ (.35) $ .15
========== ========== ========== ========== ========== ==========
Earnings (loss) per common
share -diluted......... $ (.20) $ .07 $ (.33) $ .28 $ (.35) $ .15
========== ========== ========== ========== ========== ==========
Weighted average number of
common shares
outstanding - basic.... 2,993,206 2,993,206 3,109,273 3,109,273 4,010,650 4,010,650
========== ========== ========== ========== ========== ==========
Weighted average number of
common shares
outstanding - diluted.. 2,993,206 2,993,206 3,109,273 3,109,273 4,010,650 4,010,650
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended June 30, For the Six Months Ended
------------------------------------------------- December 31,
-----------------------
1997 1998 1997 1998
----------------------- ----------------------- ---------- ----------
Historical Proforma Historical Proforma
<S> <C> <C> <C> <C> <C> <C>
Revenue.................. $ 29,838 $ 34,928 $ 28,643 $ 28,643 $ 19,405 $ 29,008
Cost of goods sold....... 16,616 19,060 16,517 16,517 10,451 14,026
Gross profit............. 13,222 15,868 12,126 12,126 8,954 14,982
Operating expenses....... 6,769 13,874 10,209 10,760 3,727 10,635
Net income (loss) before
unusual item and income
taxes 6,426 1,994 1,917 1,366 5,227 4,347
Unusual item - litigation - (527) (3,043) (3,043) (2,969) -
Income tax benefit
(expense).............. (1,738) (542) 197 620 (887) (1,609)
Net income (loss)........ $ 4,688 $ 925 $ (929) $ (1,057) $ 1,371 $ 2,738
========== ========== ========== ========== ========== ==========
Earnings (loss) per common
share - basic.......... $ 1.08 $ .21 $ (.21) $ (.23) $ .30 $ .59
========== ========== ========== ========== ========== ==========
Earnings (loss) per common
share -diluted......... $ .65 $ .16 $ (.21) $ (.23) $ .15 $ .27
========== ========== ========== ========== ========== ==========
Weighted average number of
common shares
outstanding - basic.... 4,343,397 4,343,397 4,516,528 4,516,528 4,505,380 4,642,753
========== ========== ========== ========== ========== ==========
Weighted average number of
common shares
outstanding - diluted.. 7,664,903 7,664,903 4,516,528 4,516,528 9,839,303 10,169,266
========== ========== ========== ========== ========== ==========
</TABLE>
6
<PAGE> 13
The following table sets forth a summary of Leisure Time's balance
sheet as of December 31, 1998.
The as adjusted column reflects:
o Leisure Time's receipt of the estimated net proceeds from the sale of
1,100,000 shares of common stock at an assumed initial public offering
price of $12.00 per share, after deducting underwriting discounts and
estimated underwriting expenses.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------
JUNE 30, 1998 ACTUAL AS ADJUSTED
------------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents ........................... $ 888 $ 3,543 $ 14,791
Working capital (deficit) ........................... (3,891) (2,158) 9,090
Total assets ........................................ 22,413 29,405 40,653
Long-term liabilities ............................... 9,186 11,155 11,155
Total stockholders' equity .......................... 3,706 7,257 18,505
Total liabilities and stockholders' equity .......... 22,413 29,405 40,635
</TABLE>
The foregoing table does not give effect to:
o 13,996 shares of common stock issued after December 31, 1998,
upon the conversion of approximately $32,000 of debt;
o 60,090 shares of common stock issued for approximately
$169,000 after December 31, 1998, upon the exercise of
warrants;
o 3,000 shares of common stock and warrants issued after
December 31, 1998, for $30,000;
o 100,000 shares of common stock and an option issued after
December 31, 1998, in connection with the acquisition of RP
Capital;
o 80,000 shares of common stock and warrants issued after
December 31, 1998, in connection with the acquisition of
Florida Casino Cruises;
o 5,536,751 shares of common stock issuable on exercise of
outstanding options and warrants and upon conversion of
outstanding convertible notes into common stock and warrants
and upon the exercise of the warrants; and
o 110,000 shares of common stock issuable on exercise of the
representative's warrants.
7
<PAGE> 14
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED JUNE 30, ENDED DECEMBER 31,
--------------------------------- --------------------
(IN THOUSANDS)
1996 1997 1998 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF CASH FLOWS
AND OTHER DATA:
Cash flow (used in) provided by
operating activities .................... $ (629) $ 7,379 $ 683 $ 4,588 $ 5,844
Cash flow used by investing activities... (292) (6,862) (1,188) (2,602) (4,029)
Cash flow provided by financing
activities .............................. 904 570 304 791 840
EBITDA (loss) ........................... (1,329) 8,523 1,578 3,576 6,078
</TABLE>
"EBITDA" reflects net income or loss plus depreciation, amortization
and net interest expense, income taxes and unusual items, if any. EBITDA is a
measure used by analysts and investors as an indicator of operating cash flow
because it excludes the impact of movements in working capital items, non-cash
charges and financing costs. However, EBITDA is not a measure of financial
performance under generally accepted accounting principles and should not be
considered a substitute for other measures of performance.
The term "Leisure Time" in this prospectus includes Leisure Time's
wholly owned subsidiaries unless otherwise stated.
8
<PAGE> 15
RISK FACTORS
Some of the statements contained in this prospectus under "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" are forward-looking. They
include statements that involve risks and uncertainties that might materially
adversely affect Leisure Time's operating results in the future. Such risks and
uncertainties include:
o a decrease in popularity of Leisure Time's video gaming
machines;
o technological innovations in video gaming machines;
o competition;
o regulation of the gaming industry;
o availability of financing; and
o adverse outcome of pending lawsuits.
Most of these risks are beyond Leisure Time's control. Actual results may differ
materially from those suggested by the forward-looking statements for various
reasons, including those discussed below.
You should carefully consider the following risks before you decide to
buy Leisure Time's common stock. The risks and uncertainties described below are
not the only ones facing Leisure Time. Additional risks and uncertainties not
presently known to Leisure Time or that Leisure Time currently deems immaterial
may also impair Leisure Time's business.
If any of the events described in the following risks actually occur,
Leisure Time's business, financial condition and results of operations could be
materially adversely affected. In such case, the trading price of Leisure Time's
common stock could decline and you could lose all or part of your investment.
MOST OF LEISURE TIME'S REVENUE HAS RESULTED FROM SALES OF ONE PRODUCT LINE OF
VIDEO GAMING MACHINES
Substantially all of Leisure Time's revenue has resulted from the sale
of the Pot O Gold product line of video gaming machines. A decrease in the
popularity of the Pot O Gold product line of video gaming machines with gaming
patrons could materially adversely affect Leisure Time's business, financial
condition and operating results. The popularity of the Pot O Gold may decrease
because of the introduction by competitors of other, more popular video gaming
machines.
LEISURE TIME FACES SIGNIFICANT COMPETITION IN THE SALE OF VIDEO GAMING MACHINES
The video gaming machine industry in which Leisure Time competes is
characterized by intense competition. The competition is based on the following:
9
<PAGE> 16
o the ability of a video gaming machine to generate wins through
product appeal to players;
o the ease of use, ease of service and support of video gaming
machines; and
o training, distribution, name recognition and price of video
gaming machines.
International Game Technology, Inc. is the largest manufacturer of gaming
machines and is a significant competitor of Leisure Time. IGT has greater
financial and technical resources than does Leisure Time and has a larger
customer base and wider distribution channels that may enable it to move rapidly
into Leisure Time's market and acquire significant market share. Competition
from IGT or another competitor would likely result in:
o reductions in the price Leisure Time charges for video gaming
machines;
o reduced operating margins; and
o loss of market share.
Increased competition from IGT or another competitor will likely materially
adversely affect Leisure Time's financial condition and operating results.
LEISURE TIME'S HISTORICAL SALES ARE CONCENTRATED IN ONE GEOGRAPHIC MARKET THAT
MAY BECOME SATURATED
The majority of Leisure Time's sales of video gaming machines over the
past few years has been in South Carolina. Leisure Time believes that the market
for its video gaming machines in South Carolina may level off over the next two
years as a result of factors including:
o increased regulation;
o market saturation;
o competition; and
o general economic conditions in South Carolina.
Leisure Time plans to market its video gaming machines in other jurisdictions. A
decline in sales of video gaming machines in South Carolina combined with the
failure of Leisure Time to sell video gaming machines in other jurisdictions
would materially adversely affect Leisure Time's financial condition and
operating results.
LEISURE TIME PREVIOUSLY RELIED ON THREE MAJOR CUSTOMERS
During the six months ended December 31, 1998, Leisure Time's sales
were concentrated among three customers that collectively accounted for 77% of
Leisure Time's total sales. Leisure Time has terminated formal distribution
arrangements with two of these customers. If Leisure Time is unable to continue
or increase its historical sales volume, its financial condition and operating
results would be materially adversely affected.
10
<PAGE> 17
LEISURE TIME LACKS DIRECT SALES EXPERIENCE
In the second quarter of fiscal 1999, Leisure Time's contracts for the
distribution of its video gaming machines in South Carolina terminated. The
inability of Leisure Time to maintain the sales it has achieved historically
through its distributors could adversely affect Leisure Time's financial
condition and operating results.
LEISURE TIME CURRENTLY RELIES ON SINGLE SOURCE SUPPLIERS IN THE MANUFACTURE OF
ITS VIDEO GAMING MACHINES
The cabinets and logic boards that Leisure Time uses in its video
gaming machines are now provided by single source suppliers. Leisure Time does
not have long term supply contracts with these suppliers. The loss of any single
source supplier could cause Leisure Time to encounter delays in manufacturing
and selling its video gaming machines, which could have a material adverse
effect on Leisure Time's financial condition and operating results. Leisure Time
expects to identify suitable alternate suppliers for the cabinets and logic
boards by July 1999. Failure to do so may result in Leisure Time's continued
reliance on single source suppliers with attendant risks.
LEISURE TIME HAS FOREIGN SUPPLIERS WHICH CAN CREATE LONGER LEAD TIMES FOR SOME
PARTS
Some of the suppliers of parts that Leisure Time uses to manufacture
its video gaming machines are overseas. This can create longer lead times to
obtain the parts. The long lead times can cause shortages or oversupplies of
inventory that both can materially adversely affect Leisure Time's business.
NEW OR REVISED REGULATIONS COULD ADVERSELY AFFECT LEISURE TIME'S BUSINESS
Leisure Time must maintain its existing licenses and approvals to sell
video gaming machines in its current markets. Leisure Time must also obtain
necessary licenses in all additional jurisdictions in which it intends to
distribute its video gaming machines. The loss of a license in a particular
jurisdiction will prohibit Leisure Time from distributing in that jurisdiction
and may prohibit Leisure Time from selling its video gaming machines in other
jurisdictions. The loss of one or more licenses held by Leisure Time could have
a material adverse effect on its financial condition and operating results.
The licensing and approval processes can involve extensive
investigation into Leisure Time and its:
o officers;
o directors;
o principal stockholders; and
o products.
11
<PAGE> 18
The licensing and approval process can require significant expenditures of time
and resources by Leisure Time. Leisure Time must comply with all applicable
regulations for its activities in any international jurisdictions into which it
expands. Leisure Time may not receive licensing approvals in the jurisdictions
in which it is currently seeking such approval. The regulations relating to
company and product licensing are subject to change and other jurisdictions,
including the federal government, may elect to regulate or tax gaming
operations. Any of these events could materially adversely affect Leisure Time.
LEISURE TIME EXPECTS TO RELY ON NEW MARKETS FOR GROWTH
Leisure Time believes that the recent trend among jurisdictions in the
United States to legalize gaming is slowing and that the current prospect of new
markets for legalizing gaming has been significantly reduced. If new
jurisdictions do not legalize gaming, Leisure Time believes that the demand for
video gaming machines will decline and Leisure Time's financial condition and
operating results will be materially adversely affected.
THE VIDEO GAMING MARKET IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE
The video gaming industry is characterized by rapid technological
change and frequent new product announcements and enhancements. The emergence of
video gaming machines that are technologically superior to Leisure Time's video
gaming machines or that achieve higher levels of player acceptance would
materially adversely affect Leisure Time's financial condition and operating
results. Leisure Time's future success depends to a large extent upon Leisure
Time's ability to design, manufacture and market video gaming machines that take
full advantage of state-of-the-art hardware and software and that achieve high
levels of player acceptance.
THE SOUTH CAROLINA VIDEO GAMING MACHINE COMMUNICATION SYSTEM MAY NOT BE YEAR
2000 COMPLIANT
South Carolina will soon require all video gaming machines in South
Carolina to communicate with South Carolina's central computer system. Leisure
Time plans to sell a year 2000 compliant data communication device that will
enable the Pot O Gold product line of video gaming machines in South Carolina to
communicate with South Carolina's central computer system. If the balance of the
video gaming machine communication system is not year 2000 compliant, Leisure
Time's sales of video gaming machines and route operations in South Carolina may
be interrupted. Any interruption would materially adversely affect Leisure
Time's financial condition and operating results.
LEISURE TIME HAS INCURRED LOSSES IN OPERATING ITS OFFSHORE GAMING VESSEL
Leisure Time has incurred losses in operating its first offshore gaming
vessel in Massachusetts and the prior owner incurred losses in operating the
vessel in Florida. Leisure Time has plans to operate additional offshore gaming
vessels. If Leisure Time is unable to generate sufficient revenue to cover
expenses incurred in operating offshore gaming vessels, its financial condition
and operating results will be materially adversely affected.
12
<PAGE> 19
THERE ARE LIMITATIONS ON EXPANSION OF OFFSHORE GAMING VESSEL OPERATIONS
Leisure Time plans to expand its offshore gaming vessel operations to
other United States ports. The availability of desirable ports is affected by:
o the population base of the area surrounding the port;
o existence or absence of intense competition;
o the presence of the port in an established vacation market;
o availability of suitable docking facilities and water depth;
o ability to comply with federal, state and local laws;
o favorable weather and sea conditions; and
o proximity to international waters.
If Leisure Time is unable to expand its offshore gaming vessel operations into
additional ports, its financial condition and operating results might be
materially adversely affected.
LEISURE TIME'S OFFSHORE GAMING VESSEL IS AFFECTED BY ADVERSE WEATHER
The number of customers taking cruises on Leisure Time's gaming vessel
decreases significantly immediately before and after poor weather and high seas
are encountered. Leisure Time's offshore gaming vessel operations and resulting
revenue are and will be adversely affected by adverse weather and sea
conditions.
LEISURE TIME'S OFFSHORE GAMING VESSEL AND GAMING ROUTE OPERATIONS FACE
COMPETITION FROM OTHER ENTERTAINMENT ACTIVITIES
Leisure Time competes with a variety of other entertainment activities
in the areas where Leisure Time operates its offshore gaming vessel and has its
gaming route operations. Such entertainment activities include land based
gaming, resort attractions, sporting events and other recreational activities.
Any increase in the popularity of these other activities could materially
adversely affect Leisure Time's financial condition and operating results.
LEISURE TIME COULD INCUR UNINSURED LOSSES FROM OFFSHORE GAMING VESSEL OPERATIONS
Leisure Time maintains $15,000,000 of liability and property insurance
related to its offshore gaming vessel operations. Leisure Time could suffer
uninsured losses as a result of an accident or catastrophic event affecting
Leisure Time's offshore gaming vessel operations. Any uninsured loss could
materially adversely affect Leisure Time's financial condition and operating
results.
13
<PAGE> 20
LEISURE TIME MAY NOT BE ABLE TO RECOUP ITS HOTEL INVESTMENT
Leisure Time plans to make a significant investment renovating a hotel.
Leisure Time may not be able to recoup its investment in the hotel. This could
materially adversely affect Leisure Time's financial condition and operating
results.
LEISURE TIME MAY NOT REALIZE A PROFIT FROM THE OPERATIONS OF ITS HOTEL
Leisure Time has little experience in operating a hotel. Even if
Leisure Time is able to enter into a license with an experienced hotel operator
to operate the hotel, Leisure Time may not realize a profit from the operation
of the hotel. This could materially adversely affect Leisure Time's financial
condition and operating results.
THERE IS COMPETITION FOR LEISURE TIME'S HOTEL
The hotel that Leisure Time is renovating will encounter significant
competition from several other lodging facilities in the area. The hotel was
vacant and was not operated for approximately seven years prior to Leisure Time
purchasing the hotel. The previous failure and closing of the hotel may be an
indication that the hotel will not succeed in generating sufficient revenue
after it is renovated and reopened by Leisure Time. This may materially
adversely affect Leisure Time's financial condition and operating results.
LEISURE TIME COULD ENCOUNTER SIGNIFICANT COMPETITION IN GAMING ROUTE OPERATIONS
Leisure Time currently has a gaming route in which Leisure Time shares,
with the proprietors of the establishments where the video gaming machines are
located, a percentage of the revenue from the video gaming machines. Additional
competition will reduce the revenue from Leisure Time's gaming route locations.
Competition also may limit Leisure Time's ability to open or acquire additional
gaming route locations on terms acceptable to Leisure Time.
LEISURE TIME MAY NOT BE ABLE TO RECOUP ITS INVESTMENT IN GAMING ROUTE OPERATIONS
Leisure Time plans to operate and acquire additional gaming route
locations. Leisure Time may not be able to recoup the cost of the video gaming
machines Leisure Time places in additional locations. In addition, Leisure Time
may not be able to recoup the investment it makes if it acquires additional
gaming route locations. A failure to recoup Leisure Time's investment could
require Leisure Time to reduce or write off the value of its investment, thereby
materially adversely affecting Leisure Time's financial condition and operating
results.
CHANGES IN LAWS PERTAINING TO GAMING ROUTE OPERATIONS COULD AFFECT LEISURE
TIME'S BUSINESS
South Carolina and other states could adopt laws that restrict or
prohibit gaming route operations. For example, in 1998, a proposal to ban gaming
in South Carolina was narrowly
14
<PAGE> 21
defeated. In the event such laws are adopted, Leisure Time's financial condition
and operating results would be materially adversely affected.
LEISURE TIME HAS A DEFICIENCY IN WORKING CAPITAL AND SUBSTANTIAL DEBT
As of December 31, 1998, Leisure Time had a working capital deficit of
approximately $2.2 million and had approximately $7.8 million in debt with
interest rates ranging from 6.64% to 11.73% that is due between January 2000 and
November 2003. Leisure Time may not be able to service its debt if Leisure Time
experiences a decrease in cash flow. Leisure Time's debt is secured by a
significant portion of Leisure Time's assets. If Leisure Time is unable to
service its debt and the lenders foreclose upon its assets, Leisure Time's
financial condition and operating results would be materially adversely
affected.
LEISURE TIME'S FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY CURRENT
LITIGATION
There is a judgment of approximately $3.5 million including interest
against Leisure Time resulting from litigation with one of its former video
gaming machine distributors. The judgment could have a material adverse effect
upon Leisure Time's financial condition.
Leisure Time has filed a lawsuit against the same distributor alleging
the distributor failed to complete a purchase order. The distributor has
counterclaimed against Leisure Time alleging similar claims to those the
distributor alleged in the lawsuit in which it was awarded the judgment. Any
additional judgment awarded the distributor could have an adverse effect upon
Leisure Time's financial condition.
In addition, Leisure Time is currently involved in a lawsuit filed by a
former officer of a subsidiary of Leisure Time that demands Leisure Time issue
additional options to him to purchase 200,000 shares of Leisure Time's common
stock at a price of $1.00 per share. Any such issuance could potentially cause
dilution to shares of common stock that you purchase and result in Leisure Time
incurring compensation expense. Leisure Time is unable to predict the outcome of
this litigation.
LEISURE TIME DEPENDS ON KEY PERSONNEL
Leisure Time believes that its success depends to a great extent on the
management efforts of its officers and other key personnel, particularly Alan N.
Johnson and Elden W. Rance, and on its ability to attract new key personnel and
retain existing key personnel in the future. The loss of Leisure Time's
management or key personnel could have a material adverse effect on Leisure
Time's financial condition and operating results. Leisure Time has no key man
insurance on any of its officers but intends to obtain key man insurance on the
lives of Alan N. Johnson and Elden W. Rance within six months after this
offering. This insurance may not be available or may be insufficient to
compensate Leisure Time for the loss of the services of either of these
individuals.
15
<PAGE> 22
THERE IS INTENSE COMPETITION FOR THE TYPE OF TECHNICAL PERSONNEL LEISURE TIME
EMPLOYS
There is intense competition for technical personnel such as are
employed by Leisure Time. Leisure Time may be unable to attract and retain such
personnel or may have to significantly increase payroll expenses in order to do
so. Leisure Time has entered into noncompetition agreements with most of its
engineering and software personnel. However, their noncompetition agreements may
be found to be unenforceable and such personnel could leave Leisure Time and
compete against Leisure Time.
EFFECTIVELY MANAGING LEISURE TIME'S GROWTH MAY BE DIFFICULT
Leisure Time has recently experienced significant growth and expects to
continue to grow rapidly by pursuing strategies intended to expand its business
domestically and internationally. This growth is likely to place a significant
strain on Leisure Time's financial, managerial and other resources. To manage
its growth, Leisure Time must continue to implement effective systems and hire
additional employees. Leisure Time's ability to manage its growth effectively
will depend on Leisure Time's ability to continue to improve its operational,
financial and management information systems and to attract, motivate and train
key employees. Leisure Time's business, operating results and financial
condition will be materially adversely affected if Leisure Time is unable to
effectively manage its growth.
LEISURE TIME NEEDS ADDITIONAL CAPITAL FOR ITS LONG-TERM GROWTH
Leisure Time will need additional capital after this offering in order
to implement its long-term growth strategy. Leisure Time may be unable to obtain
such additional capital when needed. Leisure Time may have to scale back its
long-term growth strategy if it is not successful in raising additional capital.
ANTI-TAKEOVER PROVISIONS AND THE RIGHT TO ISSUE PREFERRED STOCK COULD MAKE A
THIRD PARTY ACQUISITION OF LEISURE TIME DIFFICULT
Leisure Time's articles of incorporation provide that its board of
directors may issue preferred stock without stockholder approval. In addition,
Leisure Time will amend its articles of incorporation and bylaws prior to the
date of this prospectus to provide that:
o directors will be elected for three-year terms, with
approximately one-third of the board of directors standing for
election each year;
o the affirmative vote of stockholders holding not less than
two-thirds of the votes entitled to be cast in the election of
directors is required to alter or repeal the staggered board
provision;
o directors may only be removed for cause;
16
<PAGE> 23
o directors are removable without cause only by stockholders
holding not less than two-thirds of all stock entitled to
vote; and
o the affirmative vote of stockholders holding two-thirds of
Leisure Time's common stock is required to approve the merger,
dissolution or sale of all or substantially all of Leisure
Time's assets.
The issuance of preferred stock and the existence of anti-takeover provisions in
Leisure Time's articles of incorporation and bylaws will discourage third party
bids to acquire Leisure Time.
ANTI-TAKEOVER PROVISIONS IN EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS WILL LIKELY
INHIBIT A THIRD PARTY ACQUISITION OF LEISURE TIME
Leisure Time has employment agreements with certain of its executive
officers pursuant to which the officers can require Leisure Time to repurchase
their common stock upon the occurrence of a change in control of Leisure Time.
Leisure Time also is required to issue low priced options to replace the
officers' current options upon the occurrence of a change in control of Leisure
Time. If enforceable, these provisions will likely inhibit a third party from
acquiring Leisure Time without the consent of these executive officers.
17
<PAGE> 24
WHERE YOU CAN FIND ADDITIONAL INFORMATION
Leisure Time has filed a registration statement with the Securities and
Exchange Commission registering the common stock offered by this prospectus.
This prospectus does not contain all of the information in the registration
statement and its exhibits and schedules. For further information about Leisure
Time and its common stock, please refer to the registration statement and the
exhibits and schedules filed with the SEC. Statements contained in this
prospectus as to the contents of any contract or other document filed as an
exhibit to the registration statement are qualified by reference to such exhibit
as filed.
A copy of the registration statement and its exhibits and schedules may
be inspected without charge at the public reference facilities maintained by the
SEC in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's regional offices located at the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
13th Floor, New York, New York 10048, and copies of all or any part of the
registration statement may be obtained from such offices upon the payment of the
fees prescribed by the SEC. The SEC maintains a website that contains
registration statements, reports, proxy and other information regarding
registrants that file electronically with the SEC. The address of the website is
http://www.sec.gov.
Leisure Time intends to furnish annual reports to stockholders
containing audited financial statements and will also make available quarterly
reports and such other periodic reports as it may determine to be appropriate or
as may be required by law.
18
<PAGE> 25
USE OF PROCEEDS
Based on an assumed initial public offering price of $12.00 per share,
the net proceeds from the sale of the shares of common stock are estimated to be
approximately $11.0 million.
Leisure Time intends to use the net proceeds as follows:
o approximately $4.0 million to establish additional gaming
routes;
o approximately $2.0 million to acquire gaming vessels;
o approximately $2.0 million as working capital;
o approximately $1.0 million to develop a new platform for its
Pot O Gold product line of video gaming machines and to
develop new software;
o approximately $1.0 million for the costs of investigations and
legal fees anticipated to be incurred in connection with
applications for additional gaming licenses; and
o approximately $1.0 million to expand manufacturing and
research and development facilities.
Leisure Time currently has proposed the acquisition of a company that
has gaming route operations in South Carolina. Except for such proposal, Leisure
Time has no agreements, arrangements or understandings with respect to any
acquisitions of additional gaming routes or other gaming businesses or assets.
Any net proceeds realized from the exercise of the underwriters' over-allotment
option will be used as working capital. The net proceeds to be used for working
capital, costs of licensing applications and facilities expansion might be used
to pay an approximate $3.5 million including interest judgment against Leisure
Time unless Leisure Time is able to negotiate a payment plan to pay the judgment
or unless Leisure Time has sufficient cash from operations to pay the judgment.
Leisure Time reserves the right to change the uses of the proceeds if
market conditions or unexpected changes in operating conditions or results of
operations occur. The amounts actually expended for each use may vary
significantly depending upon a number of factors including, but not limited to,
future growth, the amount expended for acquisitions and the amount of cash
generated by Leisure Time's operations. If the board of directors determines
that the proposed uses of proceeds are not in the best interests of Leisure
Time, the board of directors will decide how the proceeds will be used. Net
proceeds not immediately required to be used will be invested principally in
investment grade, interest-bearing securities.
19
<PAGE> 26
DIVIDEND POLICY
Leisure Time has never declared nor paid any dividends on its common
stock. Leisure Time currently anticipates that all earnings will be retained for
use in Leisure Time's business and that no cash dividends will be paid to
stockholders. One of Leisure Time's loan agreements prohibits Leisure Time from
paying, in any fiscal year, dividends in excess of Leisure Time's net income for
such fiscal year. Another of Leisure Time's loan agreements prohibits Leisure
Time from paying dividends if Leisure Time is in default on the loan. Leisure
Time is currently in compliance with all material terms of its loan agreements.
Any payment of cash dividends in the future on the common stock will depend on
Leisure Time's:
o financial condition;
o results of operations;
o current and anticipated cash requirements;
o plans for expansion;
o existing or future debt obligations and any restrictions
imposed by such obligations; and
other factors deemed relevant by the board of directors.
20
<PAGE> 27
DILUTION
Leisure Time's net tangible book deficit as of December 31, 1998 was
$(1,410,000), or approximately $(.30) per share.
Net tangible book value per share represents Leisure Time's tangible
assets less total liabilities, divided by the number of shares of common stock
outstanding. Dilution in net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of common
stock in this offering and the net tangible book value per share of common stock
immediately after completion of this offering. After giving effect to the sale
of the 1,100,000 shares of common stock offered hereby at an assumed initial
public offering price of $12.00 per share, the net tangible book value of
Leisure Time as of December 31, 1998, would have been $9,838,000 or $1.71 per
share of common stock. This amount represents an immediate increase in net
tangible book value of $2.01 per share of common stock to the existing holders
of common stock and an immediate dilution of $10.29 per share of common stock to
new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of common stock..................... $12.00
Net tangible book deficit per share of common stock as of
December 31, 1998.......................................................... $(.30)
Increase in net tangible book deficit per share of common
stock attributable to new investors........................................ 2.01
Net tangible book value per share of common stock after the offering ............... 1.71
------
Dilution in net tangible book value per share of common stock to new investors...... $10.29
======
</TABLE>
The following table sets forth as of December 31, 1998, the number of
shares of common stock acquired, the total cash consideration paid and the
average cash price per share of common stock paid to Leisure Time by Leisure
Time's existing stockholders and by new investors at an assumed initial public
offering price of $12.00 per share before deducting underwriting discounts and
other estimated offering expenses payable by Leisure Time.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ------------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................. 4,660,248 80.9% $ 4,297,000 24.6% $ .92
New investors.......................... 1,100,000 19.1% 13,200,000 75.4% $12.00
--------- ----- ----------- ------
Total............................. 5,760,248 100.0% $16,737,000 100.0%
========= ===== =========== ======
</TABLE>
21
<PAGE> 28
The foregoing table excludes:
o 13,996 shares of common stock issued after December 31, 1998,
upon the conversion of approximately $32,000 of debt;
o 60,090 shares of common stock issued for approximately
$169,000 after December 31, 1998, upon the exercise of
warrants;
o 3,000 shares of common stock and warrants issued after
December 31, 1998, for $30,000;
o 100,000 shares of common stock and an option issued after
December 31, 1998, in connection with the acquisition of RP
Capital;
o 80,000 shares of common stock and warrants issued after
December 31, 1998, in connection with the acquisition of
Florida Casino Cruises;
o 5,536,751 shares of common stock issuable on exercise of
outstanding options and warrants and upon conversion of
outstanding convertible notes into common stock and warrants
and upon the exercise of the warrants; and
o 110,000 shares of common stock issuable on exercise of the
representative's warrants.
22
<PAGE> 29
CAPITALIZATION
The following table sets forth the capitalization of Leisure Time as of
December 31, 1998. Leisure Time's capitalization is presented:
o on an actual basis;
o on an as adjusted basis to reflect:
o Leisure Time's receipt of the estimated net proceeds
from the sale of 1,100,000 shares of common stock at
an assumed initial public offering price of $12.00
per share, after deducting underwriting discounts and
other estimated offering expenses.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------
ACTUAL AS ADJUSTED
------- -----------
<S> <C> <C>
Long term debt (net of current portion) ...................................... $11,155 $11,155
======= =======
Stockholders' equity:
Preferred Stock, par value $0.001 per share; 5,000,000 shares authorized;
no shares issued or outstanding ........................................ $ -- $ --
Common Stock, par value $0.001 per share; 45,000,000 shares authorized;
4,660,248 shares issued and outstanding, and 5,760,248 shares issued and
outstanding, as adjusted
5 6
Additional paid-in capital ............................................. 4,292 15,539
Retained earnings ...................................................... 2,960 2,960
------- -------
Total stockholders' equity ................................................... $ 7,257 $18,505
======= =======
Total capitalization ......................................................... $18,412 $29,660
======= =======
</TABLE>
The foregoing table does not give effect to:
o 13,996 shares of common stock issued after December
31, 1998, upon the conversion of approximately
$32,000 of debt;
23
<PAGE> 30
o 60,090 shares of common stock issued for
approximately $169,000 after December 31, 1998, upon
the exercise of warrants;
o 3,000 shares of common stock and warrants issued
after December 31, 1998, for $30,000;
o 100,000 shares of common stock and an option issued
after December 31, 1998, in connection with the
acquisition of RP Capital;
o 80,000 shares of common stock and warrants issued
after December 31, 1998, in connection with the
acquisition of Florida Casino Cruises;
o 5,536,751 shares of common stock issuable on exercise
of outstanding options and warrants and upon
conversion of outstanding convertible notes into
common stock and warrants and upon the exercise of
the warrants; and
o 110,000 shares of common stock issuable on exercise
of the representative's warrants.
24
<PAGE> 31
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and are qualified by reference to the financial
statements and notes beginning on page F-1. The unaudited data at and for the
six months ended December 31, 1998 include, in the opinion of Leisure Time, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of Leisure Time's financial position at that date and results
of operations for that period. The results of operations for the six months
ended December 31, 1998 are not necessarily indicative of the results to be
expected for the full fiscal year or future periods.
The pro forma information for the five years ended June 30, 1998, gives
effect to the acquisitions of Leisure Time Technology effective July 1, 1993 and
Florida Casino Cruises effective July 1, 1996. In giving effect to these
acquisitions, the statement of operations was adjusted to recognize:
o a flat 37% effective tax rate;
o additional amortization of goodwill over 10 years that was
incurred in connection with the acquisition of Leisure Time
Technology;
o additional interest expense for the three years ended June 30,
1996 and reduced interest expense for the two fiscal years
ended June 30, 1998 to give effect to additional principal
payments made in prior years on debt incurred in the
acquisition of Leisure Time Technology; and
o additional depreciation expense for the Vegas Express in the
two fiscal years ended June 30, 1998, attributable to the
acquisition of Florida Casino Cruises. This vessel is
depreciated using the straight line method over 15 years.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the Year Ended June 30,
----------------------------------------------------------------------------
1994 1995 1996
----------------------- ------------------------ -----------------------
Historical Pro Forma Historical Pro Forma Historical Pro Forma
<S> <C> <C> <C> <C> <C> <C>
Revenue
Manufacturing......... $ - $ 15,494 $ - $ 22,393 $ - $ 28,292
Gaming................ - - - - - -
Other................. - - - - - -
---------- ---------- ---------- ---------- ---------- ----------
Total revenue....... - 15,494 - 22,393 - 28,292
---------- ---------- ---------- ---------- ---------- ----------
Cost of goods sold
Manufacturing......... - 8,657 - 12,338 - 15,678
Gaming................ - - - - - -
Other................. - - - - - -
---------- ---------- ---------- ---------- ---------- ----------
Total cost of goods - 8,657 - 12,338 - 15,678
---------- ---------- ---------- ---------- ---------- ----------
sold
Gross profit
Manufacturing......... - 6,837 - 10,055 - 12,614
Gaming................ - - - - - -
Other................. - - - - - -
---------- ---------- ---------- ---------- ---------- ----------
Total gross profit.. - 6,837 - 10,055 - 12,614
---------- ---------- ---------- ---------- ---------- ----------
Selling, general and
administrative expenses.. 579 4,885 808 6,532 1,343 10,237
Research and development - 778 - 1,134 - 800
costs
Stock based compensation. - - - - - -
Interest, net............ 24 828 205 985 54 641
---------- ---------- ---------- ---------- ---------- ----------
Total operating 603 6,441 1,013 8,651 1,397 11,678
---------- ---------- ---------- ---------- ---------- ----------
expenses.................
Net income (loss) before
unusual item and income
taxes (603) 346 (1,013) 1,404 (1,397) 936
Unusual item - litigation - - - - - -
Net (loss) income before
income tax benefit
(expense).............. (603) 346 (1,013) 1,404 (1,397) 936
Income tax benefit
(expense).............. - (128) - (519) - (346)A
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)........ $ (603) $ 218 $ (1,013) $ 885 $ (1,397) $ 590
========== ========== ========== ========== ========== ==========
Earnings (loss) per common
share - basic.......... $ (.20) $ .07 $ (.33) $ .28 $ (.35) $ .15
========== ========== ========== ========== ========== ==========
Earnings (loss) per common
share -diluted......... $ (.20) $ .07 $ (.33) $ .28 $ (.35) $ .15
========== ========== ========== ========== ========== ==========
Weighted average number of
common shares
outstanding - basic.... 2,993,206 2,993,206 3,109,273 3,109,273 4,010,650 4,010,650
========== ========== ========== ========== ========== ==========
Weighted average number of
common shares
outstanding - diluted.. 2,993,206 2,993,206 3,109,273 3,109,273 4,010,650 4,010,650
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended
For the Year Ended June 30, December 31,
------------------------------------------------- -----------------------
1997 1998 1997 1998
----------------------- ----------------------- ---------- ----------
Historical Proforma Historical Proforma
<S> <C> <C> <C> <C> <C> <C>
Revenue
Manufacturing......... $ 29,838 $ 32,532 $ 28,643 $ 28,643 $ 19,405 $ 25,632
Gaming................ - 2,396 - - - 3,100
Other................. - - - - - 276
---------- ---------- ---------- ---------- ---------- ----------
Total revenue....... 29,838 34,928 28,643 28,643 19,405 29,008
---------- ---------- ---------- ---------- ---------- ----------
Cost of goods sold
Manufacturing......... 16,616 17,917 16,517 16,517 10,451 13,423
Gaming................ - 1,143 - - - 326
Other................. - - - - - 277
---------- ---------- ---------- ---------- ---------- ----------
Total cost of goods 16,616 19,060 16,517 16,517 10,451 14,026
---------- ---------- ---------- ---------- ---------- ----------
sold
Gross profit
Manufacturing......... 13,222 14,615 12,126 12,126 8,954 12,209
Gaming................ - 1,253 - - - 2,774
Other................. - - - - - (1)
---------- ---------- ---------- ---------- ---------- ----------
Total gross profit.. 13,222 15,868 12,126 12,126 8,954 14,982
---------- ---------- ---------- ---------- ---------- ----------
Selling, general and
administrative expenses.. 5,615 12,334 8,727 9,185 2,878 8,919
Research and development 469 601 642 642 305 391
costs
Stock based compensation. - - - - - 760
Interest, net............ 712 939 840 933 544 565
---------- ---------- ---------- ---------- ---------- ----------
Total operating 6,769 13,874 10,209 10,760 3,727 10,635
---------- ---------- ---------- ---------- ---------- ----------
expenses.................
Net income (loss) before
unusual item and income
taxes 6,426 1,994 1,917 1,366 5,227 4,347
Unusual item - litigation - (527) (3,043) (3,043) (2,969) -
Net (loss) income before
income tax benefit
(expense).............. 6,426 1,467 (1,126) (1,677) 2,258 4,347
Income tax benefit
(expense).............. (1,738) (542) 197 620 (887) (1,609)
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)........ $ 4,688 $ 925 $ (929) $ (1,057) $ 1,371 $ 2,738
========== ========== ========== ========== ========== ==========
Earnings (loss) per common
share - basic.......... $ 1.08 $ .21 $ (.21) $ (.23) $ .30 $ .59
========== ========== ========== ========== ========== ==========
Earnings (loss) per common
share -diluted......... $ .65 $ .16 $ (.21) $ (.23) $ .15 $ .27
========== ========== ========== ========== ========== ==========
Weighted average number of
common shares
outstanding - basic.... 4,343,397 4,343,397 4,516,528 4,516,528 4,505,380 4,642,753
========== ========== ========== ========== ========== ==========
Weighted average number of
common shares
outstanding - diluted.. 7,664,903 7,664,903 4,516,528 4,516,528 9,839,303 10,169,266
========== ========== ========== ========== ========== ==========
</TABLE>
25
<PAGE> 32
The following table sets forth a summary of Leisure Time's balance
sheet as of December 31, 1998.
The as adjusted column reflects:
o Leisure Time's receipt of the estimated net proceeds from the
sale of 1,100,000 shares of common stock at an assumed initial
public offering price of $12.00 per share, after deducting
underwriting discounts and estimated underwriting expenses.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------
JUNE 30, 1998 ACTUAL AS ADJUSTED
------------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents ........................... $ 888 $ 3,543 $ 14,791
Working capital (deficit) ........................... (3,891) (2,158) 9,090
Total assets ........................................ 22,413 29,405 40,653
Long-term liabilities ............................... 9,186 11,155 11,155
Total stockholders' equity .......................... 3,706 7,257 18,505
Total liabilities and stockholders' equity .......... 22,413 29,405 40,635
</TABLE>
The foregoing table does not give effect to:
o 13,996 shares of common stock issued after December 31, 1998,
upon the conversion of approximately $32,000 of debt;
o 60,090 shares of common stock issued for approximately
$169,000 after December 31, 1998, upon the exercise of
warrants;
o 3,000 shares of common stock and warrants issued after
December 31, 1998, for $30,000;
o 100,000 shares of common stock and an option issued after
December 31, 1998, in connection with the acquisition of RP
Capital;
o 80,000 shares of common stock and warrants issued after
December 31, 1998, in connection with the acquisition of
Florida Casino Cruises;
o 5,536,751 shares of common stock issuable on exercise of
outstanding options and warrants and upon conversion of
outstanding convertible notes into common stock and warrants
and upon the exercise of the warrants; and
o 110,000 shares of common stock issuable on exercise of the
representative's warrants.
26
<PAGE> 33
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED JUNE 30, ENDED DECEMBER 31,
--------------------------------- --------------------
(IN THOUSANDS)
1996 1997 1998 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF CASH FLOWS
AND OTHER DATA:
Cash flow (used in) provided by
operating activities .................... $ (629) $ 7,379 $ 683 $ 4,588 $ 5,844
Cash flow used by investing activities... (292) (6,862) (1,188) (2,602) (4,029)
Cash flow provided by financing
activities .............................. 904 570 304 791 840
EBITDA (loss) ........................... (1,329) 8,523 1,578 3,576 6,078
</TABLE>
"EBITDA" reflects net income or loss plus depreciation, amortization
and net interest expense, income taxes and unusual items, if any. EBITDA is a
measure used by analysts and investors as an indicator of operating cash flow
because it excludes the impact of movements in working capital items, non-cash
charges and financing costs. However, EBITDA is not a measure of financial
performance under generally accepted accounting principles and should not be
considered a substitute for other measures of performance.
27
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements and notes thereto and the other financial information
included elsewhere in this prospectus. This discussion contains forward-looking
statements that involve risks and uncertainties. Leisure Time's actual results
could differ materially from those anticipated in these forward looking
statements as a result of any number of factors, including those set forth under
"risk factors" and elsewhere in this prospectus.
OVERVIEW
Leisure Time's manufacturing operations and offshore gaming cruises are
the two segments of Leisure Time's business that generated revenue during the
six months ended December 31, 1998. The following chart provides revenue, cost
of goods sold and gross profit information for these two segments and for
corporate operations as a percentage of total revenue, cost of goods sold and
gross profit for Leisure Time for the six months ended December 31, 1998.
<TABLE>
<CAPTION>
OFFSHORE CORPORATE
ITEM MANUFACTURING GAMING CRUISES AND OTHER
- ---- ------------- -------------- ----------
<S> <C> <C> <C>
Revenue............................... 88% 11% 1%
Cost of goods sold.................... 96 3 1
Gross profit.......................... 81 19 -
</TABLE>
MANUFACTURING
Description. Leisure Time's largest business segment is the manufacture
and sale of video gaming and pulltab machines. The Pot O Gold product line
comprises Leisure Time's principal product line. Since September 1996, Leisure
Time has sold the Pot O Gold product line of video gaming machines in 10 states
in the United States and in Norway and Brazil. In 1998, Leisure Time completed
its first video pulltab machine called the Pulltab Gold. A major component of
the Pulltab Gold machine is the replaceable cartridge that contains encrypted
electronic pulltabs. Each cartridge has a finite number of pulltabs and, when
they are depleted, the cartridge must be returned to Leisure Time to be
refilled. Additionally, Leisure Time is currently developing a video bingo
machine that Leisure Time expects to introduce in the first quarter of 2000.
Historically, Leisure Time has sold software to supplement revenue from
its video machine manufacturing operations. Leisure Time plans to expand its
software sales through sales of new games, chip upgrades and new operating
boards. One time software sales relate to changes in the operating software that
are necessary to comply with technological or regulatory
28
<PAGE> 35
changes, such as the year 2000 issue and South Carolina regulations. Leisure
Time has completed the software revisions necessary for its video gaming
machines to be year 2000 compliant and is selling the software to the current
owners of the Pot O Gold product line of machines. South Carolina has required
that all owners of video gaming machines comply with new requirements that each
video gaming machine be electronically connected through a data communication
device with a state centralized processing center by May 31, 1999. Leisure Time
has developed a data communication device that will enable South Carolina
operators of Leisure Time video gaming machines to comply with these provisions.
To date, all expenses related to the development of software and software
upgrades have been expensed as incurred.
Analysis and Trends. For the six months ended December 31, 1998,
Leisure Time's manufacturing segment accounted for 88% of Leisure Time's total
revenue and 81% of gross profit. Approximately 91% of revenue and 85% of gross
profit generated by the manufacturing segment resulted from sales of the Pot O
Gold product line. The remaining 9% of revenue and 15% of gross profit generated
by the manufacturing segment related to the sale of software. Leisure Time
anticipates that its profit margin on the sale of video gaming machines in South
Carolina will improve as a result of eliminating use of third party distributors
in South Carolina in the fourth calendar quarter of 1998.
Leisure Time plans to continue to expand its market for the Pot O Gold
product line of video gaming machines through the development of new video
gaming machines and game software, additional marketing and obtaining licenses
in states in which it is not currently licensed. One such state is California.
The Governor of California has publicly announced that he intends to negotiate
gaming compacts with California-based Native American tribes by June 1999. If
compacts are concluded, Leisure Time anticipates selling its Pot O Gold product
line of video gaming machines in California in the third quarter of calendar
1999. Leisure Time believes that sales to the various Native American tribes in
California could have a material positive effect on its revenue.
Leisure Time anticipates increasing sales of its Pulltab Gold machines
as more operators and regulators discover the benefits that video pulltab
technology provides to charitable organizations that sponsor pulltab and bingo
games. As the number of Pulltab Gold machines sold increases, so will the number
of cartridges that will need to be refilled and replaced by Leisure Time.
Leisure Time realizes a higher profit margin on cartridge sales than on machine
sales. The frequency of cartridges that need to be refilled depends upon how
quickly they are used. Leisure Time's experience to date is that the cartridge
in each Pulltab Gold machine is replaced as often as every two weeks.
Leisure Time anticipates generating revenue from the sales of its video
bingo machines in the first quarter of 2000.
Leisure Time acquired an equipment financing company in April 1999 to
provide financing to persons who purchase Leisure Time's video gaming, pulltab
and bingo machines. Financing in South Carolina had previously been provided by
Leisure Time's distributors.
29
<PAGE> 36
As a result of regulations recently adopted in South Carolina, video
gaming machine operators are required to purchase software that will enable
their machines to gather data and communicate with a statewide central computer
system. Operators that fail to comply with these regulations may have their
games confiscated. Of the approximately 17,000 Pot O Gold product line of video
gaming machines in South Carolina, Leisure Time believes that approximately
15,000 will require upgrading to include the data communication device developed
by Leisure Time. Any such sales will have a materially positive effect on
Leisure Time's total revenue over the next several months.
Factors that could adversely impact Leisure Time's manufacturing
revenue and associated income include:
o decreasing demand for video machines in South Carolina and
elsewhere;
o failure of new jurisdictions to permit gaming or video games
operated by charitable organizations;
o increasing competition that could affect the number of video
machines sold and decrease Leisure Time's gross margin; and
o regulatory changes or the belief that regulatory changes could
be implemented that limit gaming in jurisdictions where
Leisure Time sells its machines.
OFFSHORE GAMING CRUISES
Description. Leisure Time's other revenue generating segment for the
six months ended December 31, 1998, was offshore gaming cruises. Leisure Time
currently has two offshore gaming vessels. The first vessel, the Vegas Express,
was chartered under a long term arrangement in March 1998 from an independent
third party. Through June 1998, Leisure Time completed significant renovations
to the vessel and in July 1998 the vessel commenced offshore gaming cruises from
Gloucester, Massachusetts. Florida Casino Cruises owns the Vegas Express and was
purchased by Leisure Time in May 1999. Leisure Time's second vessel is the
Leisure Lady, which was purchased in January 1997 and since that time has
undergone repairs and renovations. Leisure Time anticipates that the Leisure
Lady will commence offshore gaming cruises from Hyannis, Massachusetts in late
May or early June 1999. Leisure Time also owns the Biloxi Belle, a dockside
gaming vessel located on the Mississippi River that is currently undergoing
renovations.
Analysis and Trends. For the six months ended December 31, 1998,
Leisure Time's offshore gaming cruise segment accounted for 11% of Leisure
Time's total revenue and 19% of gross profit. All of the revenue and gross
profit were derived from the operations of the Vegas Express.
30
<PAGE> 37
Leisure Time anticipates that the passenger count on the Vegas Express
will increase over the upcoming summer season because of a longer operating
season and as a result of the public exposure that the Vegas Express has
received since commencing operations in July 1998. It is planned that the
Leisure Lady will commence offshore gaming cruises in late May or early June
1999. Leisure Time believes that at least five offshore gaming vessels are
necessary to adequately service the New England area and to allow Leisure Time
to achieve certain anticipated operating efficiencies. Leisure Time currently is
investigating the possible acquisition of additional vessels for this and other
areas. It is planned that the Biloxi Belle will commence dockside gaming during
the third quarter of the fiscal year ending June 30, 2000.
Factors that could adversely impact Leisure Time's results from
operating offshore gaming cruises include:
o a failure to recoup startup and continuing costs of operating
one or more offshore gaming vessels;
o increased competition;
o adverse weather; and
o uninsured losses.
FISCAL 1999--ADDITION OF GAMING ROUTE OPERATIONS
Description. Leisure Time's third segment of business is gaming route
operations. Gaming route operations involve the installation, operation and
servicing of video gaming machines under various types of revenue participation
agreements. Leisure Time first realized revenue from this segment in February
1999, when Leisure Time acquired a small number of gaming route locations in
South Carolina.
Analysis and Trends. Through March 1999, Leisure Time has received
nominal revenue from its gaming route operations. Leisure Time anticipates that
significant revenue can be generated from gaming route operations if Leisure
Time acquires or establishes a significant base of gaming route locations.
Leisure Time anticipates building this base through the acquisition or
establishment of gaming route operations beginning in South Carolina. Additional
states that Leisure Time has identified as potential markets for gaming route
operations include Louisiana, Montana and New Mexico. Leisure Time is
investigating several gaming route operations for acquisition and has proposed
the acquisition of one company that has gaming route operations in South
Carolina. However, Leisure Time has not finalized any agreements, understandings
or arrangements with respect to any acquisitions of additional gaming routes.
Factors that could adversely impact Leisure Time's results from gaming
route operations include:
o changes in competitive or other conditions that cause location
owners to seek an increased share of revenue under revenue
sharing arrangements;
o inability to acquire new routes or expand existing routes such
that Leisure Time can realize operating efficiencies associated
with larger route operations; and
o a failure to realize sufficient revenue such that the cost of
route acquisitions exceeds Leisure Time's expected return on
invested capital.
31
<PAGE> 38
HOSPITALITY
Description. Leisure Time's fourth segment consists of a hotel
overlooking Lake Erie in the Cleveland metropolitan area. Leisure Time is
currently renovating the hotel.
Analysis and Trends. When renovations of the hotel are complete, it is
expected to have approximately 210 rooms, a conference center, enclosed swimming
pool and other amenities. Leisure Time anticipates that the hotel will be open
in early 2000. Leisure Time plans that a portion of the space in the hotel will
be used by charitable organizations as a pulltab and bingo hall to operate
Leisure Time's Pulltab Gold and bingo machines that Leisure Time plans to sell
to the charitable organizations. It is intended by Leisure Time that this
pulltab and bingo hall would serve as a showcase for Leisure Time to market its
Pulltab Gold machines in Ohio.
Factors related to the hotel that could adversely impact Leisure Time's
operating results and financial condition include:
o a failure to recoup the significant investment in the hotel;
o a failure to obtain an experienced manager of the hotel; and
o losses incurred in operating the hotel.
REVENUE RECOGNITION
Leisure Time's accounting policy is to recognize manufacturing revenue
as the product is shipped.
Offshore gaming cruise revenue is the net win from gaming activities,
which is the difference between gaming wins and losses. Gaming revenue also
includes ticket sales and food and beverage revenue generated from each offshore
gaming cruise. Gaming revenue does not include the retail amount of tickets and
food and beverages provided gratuitously to customers.
Revenue from gaming route operations is recognized at the time the play
activity takes place and is based upon the terms of the individual revenue
participation agreement.
No revenue has been generated from the hotel and no revenue was
generated from gaming route operations or from equipment financing until their
acquisition by Leisure Time after December 31, 1998.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the
percentages of total revenue of those items included in Leisure Time's
consolidated statements of operations.
32
<PAGE> 39
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
YEAR ENDED JUNE 30, ENDED DECEMBER 31,
------------------- -------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenue ................................. 100% 100% 100% 100%
Cost of goods sold ............................ 56 58 54 48
--- --- --- ---
Gross profit .................................. 44 42 46 52
Selling, general and administrative expenses... 19 30 15 31
Research and development costs ................ 2 2 2 1
Interest expense, net ......................... 2 3 3 2
--- --- --- ---
Total operating expenses ...................... 23 36 19 37
--- --- --- ---
Income before unusual item and income
taxes ......................................... 22 7 27 15
Unusual item--litigation ...................... -- 11 15 --
Income tax benefit (expense) .................. 6 -1 5 6
--- --- --- ---
Net income (loss) ............................. 16% -3% 7% 9%
=== === === ===
</TABLE>
No information has been included for the fiscal year ended June 30,
1996 because Leisure Time had no sales for that fiscal year. The information for
the fiscal year ended June 30, 1997 is for the period from September 13, 1996,
the date Leisure Time acquired Leisure Time Technology, to June 30, 1997.
The following chart provides information as to material changes in
Leisure Time's historical statements of operations for the six months ended
December 31, 1998 as compared to the six months ended December 31, 1997:
<TABLE>
<CAPTION>
STATEMENTS OF INCREASE PERCENTAGE
OPERATIONS ITEM (DECREASE) CHANGE REASON FOR CHANGE
- --------------- ------------ ---------- -----------------
<S> <C> <C> <C>
Manufacturing revenue $6.2 Million 32% Increased sales in South Carolina due to
favorable resolution of uncertainties regarding
the continued legality of gaming
Offshore gaming cruise $3.1 Million N/A Commenced offshore gaming cruises in July 1998
revenue
</TABLE>
33
<PAGE> 40
<TABLE>
<CAPTION>
STATEMENTS OF INCREASE PERCENTAGE
OPERATIONS ITEM (DECREASE) CHANGE REASON FOR CHANGE
- --------------- ------------ ---------- -----------------
<S> <C> <C> <C>
Cost of manufacturing revenue $3.0 Million 28% Increased sales in South Carolina
Cost of offshore gaming $0.3 Million N/A Direct costs incurred in connection with
cruise revenue commencement of offshore gaming cruises in July
1998
Selling, general and $6.0 Million 209% $4.5 million related to costs associated with
administrative expenses the Vegas Express, including startup, payroll
and establishing a reservation system; $1.0
million related to increased manufacturing
overhead, particularly rent; $0.5 million
related to renovation of the Leisure Lady
Research and development $0.1 Million 28% Increased research and development related to
costs video pulltab machines and to video gaming
machines for use in foreign countries
Stock based compensation $0.7 Million 100% No comparable amount in prior period
Interest expense, net $0.02 Million 4% Increased borrowings principally related to
refinancing of Leisure Lady and acquisition of
Biloxi Belle
Total operating expenses $6.9 Million 185%
Unusual item--litigation ($3.0 Million) (100%) Judgment recorded in fiscal 1998 with no
comparable amount in fiscal 1999
Income taxes $0.7 Million 81% Increase in income in fiscal six months
correlates to increase in taxes payable
Net income $1.4 Million 100%
</TABLE>
The following chart provides information as to material changes in
Leisure Time's historical statements of operations for the fiscal year ended
June 30, 1998, as compared to the fiscal year ended June 30, 1997:
34
<PAGE> 41
<TABLE>
<CAPTION>
STATEMENTS OF INCREASE PERCENTAGE
OPERATIONS ITEM (DECREASE) CHANGE REASON FOR CHANGE
- --------------- --------- ---------- -----------------
<S> <C> <C> <C>
Manufacturing revenue ($1.2 Million) (4%) Decreased sales in South Carolina due to
uncertainties regarding the continued legality
of gaming
Cost of manufacturing revenue ($0.1 Million) (0.6%) Decreased sales in South Carolina
Gross profit ($1.1 Million) (8%) Higher labor and material costs and higher
facility costs as a result of a move of
facilities
Selling, general and $3.1 Million 55% Increased activities, including an increase of
administrative expenses $.7 million in salaries; $.5 million due to
increased costs associated with the amortization
for a full year of the covenant not to compete
related to the purchase of Leisure Time
Technology in September 1996; new corporate
facilities which resulted in depreciation and
amortization costs of $.5 million; costs of $.5
million associated with the startup operations
of the Vegas Express; a $.2 million increase in
rent; and $.7 million due to increased marketing
and investigation of other product lines
Research and development $0.2 Million 37% Increased research and development related to
costs video pulltab machines and to video gaming
machines for use in foreign countries
Interest expense, net $0.1 Million 18% Increased borrowings primarily related to
refinancing of Leisure Lady
Total operating expenses $3.4 Million 51%
Unusual item--litigation $3.0 Million N/A Judgment recorded in fiscal 1998
Income taxes ($1.9 Million) (111%) Effective tax rate of tax benefit in fiscal 1998
is less than effective tax rate in fiscal 1997
due to nondeductible goodwill amortization
Net income ($5.6 Million) (120%)
</TABLE>
As discussed elsewhere in this prospectus, Leisure Time acquired
Leisure Time Technology in September 1996. Prior to the acquisition, Leisure
Time was in the development stage. A comparison of activity from fiscal 1997,
which activity consisted of nine and one half months of manufacturing
operations, to the activities of Leisure Time in fiscal 1996, the operations of
which were developmental in nature, would not be meaningful and has not been
included in this prospectus. The only significant costs incurred in fiscal 1996
represented selling, general and administrative expenses, which totaled $1.4
million. Of these expenses, $.7
35
<PAGE> 42
million were associated with salaries of personnel investigating the possibility
of establishing offshore gaming cruises and $.2 million were professional fees
related to obtaining appropriate licenses and to attempted acquisitions of
various gaming operations.
The discussion below of pro forma combined results of operations for
the three fiscal years ended June 30, 1998 gives effect to the acquisitions of
Leisure Time Technology effective July 1, 1993 and Florida Casino Cruises
effective July 1, 1996. The following chart provides information as to material
changes in Leisure Time's pro forma combined statements of operations for the
fiscal year ended June 30, 1998 as compared to the fiscal year ended June 30,
1997:
<TABLE>
<CAPTION>
STATEMENTS OF INCREASE PERCENTAGE
OPERATIONS ITEM (DECREASE) CHANGE REASON FOR CHANGE
- --------------- ---------- ---------- -----------------
<S> <C> <C> <C>
Manufacturing revenue ($3.9 Million) (12%) Decreased sales in South Carolina due to the
uncertainties regarding the continued legality
of gaming
Cost of manufacturing revenue ($1.4 Million) (8%) Decreased sales in South Carolina and higher
facility costs
Offshore gaming cruise ($2.3 Million) (100%) Revenue decreased because the gaming vessel was
revenue in dry dock for renovation and repairs and was
not in operation after July 1997
Cost of offshore gaming ($1.1 Million) (100%) Discontinuation of offshore gaming cruises for
cruise revenue vessel renovation
Selling, general and ($3.1 Million) (26%) $1.3 million related to deferred compensation in
administrative expenses 1997 not present in 1998; decreased costs of $.7
million associated with the gaming cruise
operations; decreased rent of $.6 million
Research and development $0.04 Million 7% Increased research and development related to
costs video pulltab machines and to video gaming
machines for use in foreign countries
Interest expense, net $0.006 Million 0.6%
Total operating expenses ($3.1 Million) (22%)
Unusual item--litigation $2.5 Million 477% Balance of judgment recorded in 1998
Income taxes ($1.2 Million) (214%) Reflects a pro forma 37% effective rate
Net income ($2.0 Million) (214%)
</TABLE>
36
<PAGE> 43
The following chart provides information as to material changes in
Leisure Time's pro forma combined statements of operations for the fiscal year
ended June 30, 1997 as compared to the fiscal year ended June 30, 1996:
<TABLE>
<CAPTION>
STATEMENTS OF INCREASE PERCENTAGE
OPERATIONS ITEM (DECREASE) CHANGE REASON FOR CHANGE
- --------------- ---------- ---------- -----------------
<S> <C> <C> <C>
Manufacturing revenue $4.2 Million 15% Increased sales in South Carolina and to Native
American tribes
Cost of manufacturing revenue $2.2 Million 14% Increased sales in South Carolina and to Native
American tribes
Offshore gaming cruise
revenue $2.4 Million 100% Increased revenue due to the pro forma
acquisition of the Vegas Express
Cost of offshore gaming
cruise revenue $1.1 Million 100% Costs increased due to the pro forma acquisition
of the Vegas Express
Selling, general and $2.1 Million 20% Increase due to the pro forma acquisition of the
administrative expenses Vegas Express
Research and development ($0.2 Million) (25%) Reduced research and development effort due to
costs pending purchase of Leisure Time Technology
Interest expense, net $0.3 Million 47% Increased interest charges on debt incurred in
connection with pro forma acquisitions
Total operating expenses $2.2 Million 19%
Unusual item--litigation $0.5 Million 100% Accrual of estimate of loss related to litigation
Income taxes $0.2 Million 57% Reflects a pro forma 37% effective tax rate
Net income $0.3 Million 57%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Since the acquisition of Leisure Time Technology in September 1996,
Leisure Time has funded its operations primarily through revenue generated by
the sale of video gaming machines. Leisure Time has acquired its assets, such as
the Vegas Express and the Leisure Lady offshore gaming vessels and its hotel
property, through long term debt and cash available from operations.
37
<PAGE> 44
As of December 31, 1998, Leisure Time had a working capital deficit of
approximately $2.2 million. This deficit is primarily due to an approximate $3.5
million judgment including interest that was rendered against Leisure Time in
September 1998.
The following information relates to Leisure Time's sources and uses of
cash during the six months ended December 31, 1998.
Leisure Time generated $5.8 million of cash from operations that
resulted primarily from:
o net income of $3.2 million;
o $.9 million in depreciation; and
o a $1.5 million increase in accounts payable.
Leisure Time utilized $4 million in cash in investing activities
related primarily to the purchase of:
o the Biloxi Belle for $1.5 million;
o the hotel for approximately $1.0 million; and
o approximately $.6 million of equipment.
Leisure Time received cash from financing activities that consisted of:
o receipt of proceeds of approximately $5.3 million of long term
debt.
Leisure Time used this cash as follows:
o approximately $2.8 million to refinance the debt on the
Leisure Lady;
o approximately $1.5 million to finance the purchase of the
Biloxi Belle; and
o approximately $1.0 million to finance the purchase of the
hotel.
Leisure Time paid approximately $4.4 million of the following debt:
o approximately $3.0 million to refinance the Vegas Express; and
o approximately $1.4 million to pay other debt at maturity.
38
<PAGE> 45
Leisure Time's current financial plan requires capital to be used
during the next 12 months as follows:
o approximately $1.0 million for manufacturing facilities for
video gaming, pulltab and bingo machines;
o approximately $2.0 million to acquire additional offshore
gaming vessels;
o approximately $4.0 million to acquire or establish additional
gaming route operations;
o approximately $9.5 million to renovate the hotel; and
o approximately $1.0 million as capital for the equipment
financing business.
Leisure Time believes that the proceeds from the offering together with
cash flow and additional debt financing it may obtain will be sufficient for it
to satisfy the above capital needs.
Leisure Time expects to secure bank or other institutional financing to
complete the planned hotel renovations. If Leisure Time is unsuccessful in
obtaining this financing at all or at competitive rates, Leisure Time may elect
to extend its renovation schedule or to sell the hotel.
Subsequent to December 31, 1998, Leisure Time entered into an agreement
with an unaffiliated financing company to guarantee loans made to third parties
to purchase Leisure Time's video gaming machines. At April 30, 1999, such
guarantees totaled $1.3 million. If Leisure Time is required to perform under
such guarantees with respect to a material principal amount, its liquidity could
be adversely affected.
INFLATION
Although Leisure Time cannot accurately anticipate the effect of
inflation on its operations, Leisure Time does not believe that inflation has
had, or is likely in the foreseeable future to have, a material effect on its
financial condition or operating results.
YEAR 2000 COMPLIANCE
Leisure Time is aware of the issues associated with the programming
code in existing computer systems as the year 2000 approaches. The "year 2000"
problem is pervasive and complex as virtually every computer operation will be
affected in some way by the rollover of the two-digit year value to 00. The
issue is whether computer systems will properly recognize date-sensitive
information when 1999 changes to 2000. Systems that do not properly recognize
such information could generate erroneous data or cause a system to fail.
All of Leisure Time's material internal computer systems are year 2000
compliant. Leisure Time is in the process of verifying whether or not its
primary vendors are year 2000 compliant. Leisure Time has not yet completed its
full assessment of the potential effect a failure of one or more of its primary
vendors to be year 2000 compliant will have on Leisure Time's operations and
management has not yet established a contingency plan in the event of any such
failure. The year 2000 problem could also affect the computer systems of Leisure
Time's
39
<PAGE> 46
customers, which in turn could adversely impact Leisure Time's revenue if such
customers are unable to purchase Leisure Time's products due to their own year
2000 issues.
South Carolina will soon require video gaming machines in South
Carolina to communicate with South Carolina's central processing center. Leisure
Time plans to sell a year 2000 compliant data communication device that will
enable video gaming machines in South Carolina to communicate with the central
processing center. If the balance of the communication system is not year 2000
compliant, Leisure Time's sales of video gaming machines and route operations in
South Carolina may be interrupted. Any interruption would materially adversely
affect Leisure Time's financial condition and operating results.
INTRODUCTION OF THE EURO
On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing sovereign currencies
and a new currency called the "Euro." These countries agreed to adopt the Euro
as their common legal currency on that date. The Euro trades on currency
exchanges and is available for non-cash transactions. The existing sovereign
currencies will remain legal tender in these countries until January 1, 2002. On
that date the Euro is scheduled to replace the sovereign legal currencies of the
member countries.
Leisure Time plans to sell its video gaming machines in countries that
have adopted the Euro. Leisure Time will evaluate the impact the implementation
of the Euro will have on its business operations, but does not expect the Euro
to have a material effect on its competitive position. Leisure Time can provide
no assurance, however, that the implementation of the Euro will not have a
material adverse effect on its financial condition and operating results. In
addition, Leisure Time cannot accurately predict the impact the Euro will have
on currency exchange rates or its currency exchange risk. Leisure Time has
historically priced its foreign sales in dollars and, as a result, Leisure Time
has had no material need to hedge any foreign currency exposure. If competitive
conditions require Leisure Time to sell its products for the Euro or other
currencies, it may engage in currency hedging to manage this exposure in the
future if appropriate for it to do so.
FORWARD-LOOKING STATEMENTS
Certain of the information discussed in this prospectus contains
forward-looking statements that involve risks and uncertainties that might
adversely affect Leisure Time's operating results in the future in a material
way. Leisure Time's expectations or beliefs concerning future events include
statements containing expressions such as "anticipates," "believes," "expects,"
"intends," or "plans." Leisure Time cautions that such statements included in
this prospectus are subject to risks and other important factors, including,
without limitation, the following: a decline in demand for Leisure Time's
products or reduction in the growth rate of new and existing markets; the effect
of changes in economic conditions; a decline in market acceptability; political
and economic instability in developing international markets; prohibition of
gaming in jurisdictions that now permit gaming or failure of additional
jurisdictions to authorize gaming; a decline in the demand for replacement
machines; a decline in player appeal
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for Leisure Time's gaming machines or an increase in the popularity of existing
or new games of competitors; loss or retirement of key Leisure Time executives;
approval of pending patent applications of parties unrelated to Leisure Time
that restrict the ability of Leisure Time to compete effectively with products
that are the subject of such pending patents or infringement upon existing
patents; the effect of regulatory and governmental actions; unfavorable
determination of suitability by gaming regulatory authorities with respect to
Leisure Time's officers, directors or key employees; the limitation,
conditioning or suspension of any material Leisure Time license; fluctuations in
foreign exchange rates and tariffs and establishment of trade barriers; adverse
changes in the creditworthiness of parties for whom Leisure Time has guaranteed
debt; and adverse judgments in legal actions pending against Leisure Time.
ACCOUNTING STANDARDS NOT YET ADOPTED BY LEISURE TIME
In February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." Statement 132 revises
employers' disclosures about pension and other postretirement benefit plans.
Statement 132 does not change the measurement or recognition of those plans, but
requires additional information on changes in benefit obligations and fair
values of plan assets and eliminates certain disclosures previously required by
SFAS Nos. 87, 88 and 106. Statement 132 is effective for financial statements
with fiscal years beginning after December 15, 1997.
During June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities." Statement 133 establishes new
standards by which derivative financial instruments must be recognized in an
entity's financial statements. Besides requiring derivatives to be included on
balance sheets at fair value, Statement 133 generally requires that gains and
losses from later changes in a derivative's fair value be recognized currently
in earnings. Statement 133 also unifies qualifying criteria for hedges involving
all kinds of derivatives, requiring that a company document, designate and
assess the effectiveness of its hedges. Statement 133 is required to be adopted
by Leisure Time in 2000.
Leisure Time has not determined what additional disclosures, if any,
may be required by the provisions of Statements 132, and 133 but does not expect
adoption of these statements to have a material effect on its results of
operations.
During April 1998, Statement of Position 98-5, "Reporting the Costs of
Start-Up Activities" was issued. SOP 98-5 requires costs of start-up activities
and organization costs to be expensed as incurred. SOP 98-5 is required to be
adopted by Leisure Time in 1999. Upon adoption, Leisure Time does not anticipate
SOP 98-5 will have a material impact on its financial statement presentation,
financial position or results of operations.
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BUSINESS
Leisure Time:
o manufactures and distributes video gaming and video pulltab
machines, related software and replacement cartridges for
video pulltab machines;
o owns and operates one and owns and plans to operate another
offshore gaming vessel;
o owns and operates video gaming machines; and
o owns and is renovating a hotel which Leisure Time plans will
feature video pulltab and bingo machines owned and operated by
charities.
INDUSTRY BACKGROUND
U.S. GAMING MACHINE MARKET. Bear Stearns & Co. Inc. has estimated in
its 1998 Global Gaming Almanac that there were approximately 417,000 gaming
machines installed in the United States at the end of 1998. The estimates in the
Almanac are based on industry data gathered by Bear Stearns. The industry data
has recently been updated and will continue to be updated by Bear Stearns.
However, Leisure Time does not intend to update the estimated Bear Stearns'
information or provide other similar estimated information. In 1997, traditional
slot machines accounted for approximately 64% of the total U.S. gaming machine
market. Video gaming machines, like those manufactured and sold by Leisure Time,
accounted for approximately 32% of the total U.S. gaming machine market. The
following table represents Bear Stearns' estimate of the gaming machines
installed in the U.S.:
<TABLE>
<CAPTION>
=============================================================================================================================
1996 1997 1998E 1999E 2000E 2001E 2002E CAGR*
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INSTALLED BASE (BEGINNING OF PERIOD) 321,386 367,340 401,516 416,705 445,565 453,740 462,965
New Machines 45,955 34,176 14,545 27,860 9,175 9,225 23,875
Replacement Machines 30,204 31,222 25,068 34,889 38,511 40,093 43,438
INSTALLED BASE (END OF PERIOD) 367,340 401,516 416,705 444,565 453,740 462,965 486,840 12.4%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Compound annual growth rate.
Source: Bear Stearns & Co. Inc. estimates
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The following table represents Bear Stearns' forecast of the demand for
new gaming machines in the U.S.:
<TABLE>
<CAPTION>
==================================================================================================================================
1996 1997 1998 1999E 2000E 2001E 2002E CAGR*
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL MACHINE DEMAND 76,159 65,398 39,613 62,749 47,686 49,318 67,313
New Machines 45,955 34,176 14,545 27,860 9,175 9,225 23,875 5.0%
% of Total 60.3% 52.3% 36.7% 44.4% 19.2% 18.7% 35.5%
Replacement Machines 30,204 31,222 25,068 34,889 38,511 40,093 43,438 7.4%
% of Total 39.7% 47.7% 63.3% 55.6% 80.8% 81.3% 64.5%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Compound annual growth rate.
Source: Bear Stearns & Co. Inc. estimates
Leisure Time believes that traditional slot machines are currently
losing market share to video gaming machines. Leisure Time believes that the
increased demand for video gaming machines results from:
o legalization of gaming in new jurisdictions;
o casino expansion; and
o replacement of older machines.
Demand for gaming equipment is influenced by the legalization of gaming
in the U.S. The increased legalization and popularity of gaming as a component
of the "leisure time" industry has presented growth opportunities for Leisure
Time. In the last decade, the introduction of riverboat gaming in the Midwest
U.S., the expansion of Native American casino gaming, the growth in state
markets and government-sponsored gaming have expanded markets for video gaming
machines. While Leisure Time anticipates future growth in the gaming industry,
the rate of growth in the U.S. market has diminished since the substantial
growth experienced in the early 1990's. The further expansion of gaming will
continue to be the subject of public debate with legalization typically
requiring a public referendum or other legislative action.
Leisure Time believes that video gaming machines have a useful life
cycle of approximately seven to ten years. Replacement cycle times are driven by
market preferences and technical advancements and may shorten the typical life
cycle. Leisure Time believes that replacement occurs as a result of
technological advancements, new designs, graphic improvements and improved audio
quality, the development of new games, general wear and tear from use and the
evolving preferences of players. The replacement market has also expanded due to
increased competition in the industry to provide customers more entertaining and
sophisticated games than traditional slot machines.
REPLACEMENT MARKET. Leisure Time's initial sales and marketing efforts
were concentrated in South Carolina. As a result, most of its video gaming
machine revenue is derived from South Carolina. According to the South Carolina
Video Game Machine quarterly
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report for the 3rd and 4th quarters of 1997, there were approximately 30,000
video gaming machines in operation in the state. According to the same report,
of these 30,000 video gaming machines, approximately 17,000 were video gaming
machines manufactured by Leisure Time. This represents a better than 50% market
share in video gaming machines for Leisure Time in South Carolina.
Leisure Time believes that there is a market opportunity as operators
in South Carolina and elsewhere consider replacing their existing video gaming
machines. Leisure Time believes that operators will evaluate available video
gaming and other machines and will, in certain cases, consider new types of
machines with the objective of maximizing revenue. Bear Stearns & Co. Inc.
estimates the demand for the replacement market in the U.S. was approximately
30,000 machines in 1996, and will grow to approximately 43,000 machines in 2002.
Conversely, Bear Stearns estimates that the demand for new machines (from new
properties and expansions) was approximately 46,000 machines in the U.S. in
1996, declining to approximately 24,000 machines in 2002. This suggests that the
replacement market will represent a greater proportion of total gaming machine
sales in the future. Demand for replacement products is dependent, in part, upon
the willingness of owners or operators to incur the costs associated with
replacing existing gaming machines with new machines.
The existence of Leisure Time's video gaming machines that operators
may decide to replace in South Carolina and elsewhere, coupled with the Bear
Stearns' estimate that there are 417,000 installed gaming machines in the U.S.,
creates an opportunity for the sale by Leisure Time of new video gaming machines
to replace currently installed machines.
STRATEGY
Leisure Time's objectives are to be a leading provider of video gaming,
pulltab and bingo products and related software and to expand its gaming
operations to increase recurring revenue. Key strategies to achieve Leisure
Time's objectives include:
Increase Installed Base of Pot O Gold, Pulltab Gold and Bingo Product
Lines
Leisure Time intends to continue increasing its installed base of video
gaming and pulltab products by:
o continuing to market its Pot O Gold product line to newly
established casinos and route operators both in existing
markets and in jurisdictions in which gaming is legalized,
including to Native American tribes;
o expanding the sale of the Pot O Gold product line through
marketing initiatives directed at the replacement market;
o placing Pot O Gold, Pulltab Gold and bingo products in
locations owned or operated on a revenue sharing basis by
Leisure Time;
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o seeking to expand its market for Pulltab Gold and bingo
products by promoting its video pulltab and video bingo
machines for use by charitable organizations;
o providing casino and route customers with equipment financing
to facilitate increased sales; and
o offering a wide variety of interactive touchscreen video games
featuring new designs, graphic improvements, improved audio
quality, sophisticated data communication capabilities,
customized formats and features designed to increase player
appeal.
Leverage Growth in Installed Products to Increase Recurring Revenue
From Software Sales
To date, most of Leisure Time's revenue has been derived from the sale
of video gaming machines. As its installed product base has grown, Leisure Time
has experienced an increase in customers for, and sales of:
o newly developed game software;
o software enhancements for existing games; and
o cartridge replacements for video pulltab machines.
Because software and cartridge sales have a lower associated cost of
goods sold than Leisure Time's other products, Leisure Time believes growth in
software and cartridge sales will have a favorable impact on Leisure Time's
gross profit. In addition, growth in the installed base of machines offers
Leisure Time the opportunity to spread software research and development costs
over a wider base, thereby reducing development costs per machine or game sold.
Leisure Time believes it can leverage its growing installed base of video gaming
machines to expand software and cartridge sales to existing and new customers.
Continue to Identify and Develop New Touchscreen Video Games and Game
Enhancements
Leisure Time intends to continue to pursue the development and
introduction of new and enhanced video games designed to increase player appeal.
The objectives of Leisure Time's continuing research and development activities
are to:
o develop new video games and game enhancements using common
platforms, thereby enhancing manufacturing efficiencies and
accelerating development times;
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o identify new games or enhancements with substantial player
appeal;
o enhance player entertainment using improved sound and
graphics;
o incorporate attractive bonus features and local game
preference options;
o increase operator appeal through reliability improvements and
use of sophisticated security and data communication devices;
and
o promote early identification of trends in patron preferences.
Leisure Time believes that achievement of these objectives may result
in increased revenue, creation of economies of scale and improved earning power
for Leisure Time's video gaming, video pulltab and video bingo machines.
Increase Revenue Through Addition of Gaming Vessels and Passengers
Leisure Time expects to commence the operation of and to acquire
additional offshore gaming vessels in the near future are expected to be based
in ports near that of its currently operating offshore gaming vessel. By
achieving density within adjacent markets sharing similar demographic profiles,
Leisure Time will seek to:
o increase its rate of market penetration;
o spread the costs of centralized services such as reservations,
advertising and promotion and management and training over a
larger base of vessels;
o obtain volume pricing discounts for fuel, food and beverage
and port services;
o concentrate its marketing and promotional activities to
develop loyalty among patrons and thereby increase revenue;
and
o expand the installed base of Leisure Time video gaming
machines to broaden market awareness of its products.
As Leisure Time expands its offshore gaming vessel operations, Leisure
Time anticipates increasing its market presence, realizing certain economies of
scale and utilizing its cumulative experience to achieve operating efficiencies.
Subject to licensing, Leisure Time expects to initiate dockside gaming
operations in Mississippi and may increase additional dockside installations as
it gains operating experience in this market.
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Expand Gaming Machine Route Operations
Leisure Time acquired its first gaming machine route in South Carolina
in February 1999. Leisure Time expects to expand its gaming route operations
through:
o acquisition of additional routes in South Carolina;
o acquisition or establishment of routes in Louisiana, Montana,
New Mexico and selected other states; and
o addition of route locations in establishments not currently
served by existing route operations.
Leisure Time believes that creation of additional gaming route
operations will offer benefits such as:
o recurring revenue;
o increases in market share for the Pot O Gold product line,
thereby facilitating additional software sales; and
o opportunities for Leisure Time to increase video gaming
product sales to the replacement market.
Promote Acceptance and Use of Video Pulltab and Bingo Products
Leisure Time intends to complete the renovation of its hotel
overlooking Lake Erie in early 2000. Leisure Time anticipates having discussions
with a small number of charitable organizations in the near future concerning
the establishment and opening of a video pulltab and bingo hall in the hotel. It
is planned that this hall will feature Leisure Time video pulltab and video
bingo machines that will be sold to the charities by Leisure Time. Leisure
Time's video pulltab machines offer, and Leisure Time's video bingo machines
will offer, a number of benefits over traditional paper pulltabs and bingo
games, including:
o enhanced tracking and accountability through data collection
devices incorporated in each machine;
o extended hours of operation, thus increasing opportunities for
revenue generation; and
o improved earnings potential through enhancing the speed of
play.
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Leisure Time will seek to use its hotel facility to demonstrate these
benefits for charitable organizations active in these forms of fundraising,
thereby:
o increasing its market presence;
o increasing revenue from machine sales; and
o increasing recurring revenue from software and cartridge
sales.
Selectively Explore Domestic Acquisition and International Expansion
Opportunities
Leisure Time expects to pursue acquisitions of domestic companies
engaged in:
o development and sale of software designed for the gaming
market;
o operation or ownership of offshore gaming vessels;
o gaming route operations; and
o purchase, ownership or licensing of rights to proprietary
games or enhancements.
Leisure Time will selectively evaluate potential international
expansion opportunities as they become available. Although Leisure Time has
proposed the acquisition of a company that has gaming route operations, Leisure
Time currently has no formal agreement for any acquisition. Leisure Time's
acquisition strategy will continue to focus on enhancing video machine sales,
promoting recurring revenue through increased software sales and gaming
operations and offering leading technologies in the video gaming industry.
POT O GOLD PRODUCT LINE
Leisure Time's principal video gaming machine is the Pot O Gold product
line. This product line offers three video gaming machines, the Pot O Gold,
Shamrock Poker and Keno Gold, which share a common platform. The common platform
contains all of the components of a single video gaming machine with software
and cosmetic variations. Leisure Time's common platform strategy allows:
o a streamlined manufacturing process with lower inventories;
o the versatility to develop new games through software updates
and cosmetic changes; and
o a synergy between all of the games in the product line where
the improvement of one game is useable to improve other games.
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Leisure Time's principal video gaming machine, the Pot O Gold, features
a multi-game video package, including poker, blackjack, keno, slots and bingo,
that can be chosen by the operator from a library of approximately 50 games. The
Pot O Gold is designed to enable the player to have a desirable level of
interactivity without excessively slowing play. Leisure Time believes that the
Pot O Gold provides a balance of player interactivity and game sequence that
results in desired entertainment quality and continuing player interest to
maximize revenue for the operator. The Shamrock Poker and Keno Gold video gaming
machines that are a part of the Pot O Gold product line are similar to the Pot O
Gold with different games and cosmetics.
The current technology in the Pot O Gold product line is designed to
offer the operator game play configurations that Leisure Time believes are
unmatched by other current video gaming machines. The Pot O Gold product line
has the ability to display up to 12 games represented by icons on the video
monitor. The player may choose any one game for individual play from this menu.
Each game program may be set by the operator for up to six different percentages
of the total amount bet that will be paid to the player. This enables the
operator to select the desired percentage payout of each game for the targeted
market.
A standard feature of the Pot O Gold product line, usually an option
offered at extra cost by other manufacturers, is a built-in LED display located
above the video monitor which offers a "progressive jackpot." The "progressive
jackpot" is a prize that a player may win by striking a combination of symbols
or cards. The "progressive jackpot" is set at a base amount that varies
according to the value of the coin or token denomination for which the machine
is set. The base amount and the progressive rate of each game is easily
configured by the operator.
Leisure Time believes that the Pot O Gold product line is attractive to
operators because of its:
o large library of approximately 50 games from which the
operator may choose;
o ability to utilize different percentage payouts set by the
operator;
o ability to display 12 games from which the player may choose;
o multi-colored LED display and progressive jackpot feature; and
o ability to provide an interactive experience for the player.
Leisure Time believes that it has developed a successful formula that
creates a higher level of entertainment and video game appeal that generates
player loyalty and revenue for operators. Leisure Time carefully evolves its
product designs to take advantage of the latest technology and materials with a
modern look and play that still retains the critical elements of the Pot O Gold
product line identity.
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Leisure Time has implemented a product quality construction and design
improvements program and in the third quarter of 1999 plans to introduce its
current Pot O Gold product line with:
o new graphic art on the machine glass;
o matching game theme overhead signs; and
o new game software graphic presentations of the most popular
games which will feature additional variations of game
pay-table configurations to meet new market requirements.
Also, in the third or fourth quarter of 1999, Leisure Time plans to introduce
its current Pot O Gold product line in upgraded and redesigned cabinets. The new
cabinets will include newly designed upright cabinets in the traditional "round
top," "square top" and "no top" versions and will feature two versions of the
front door to suit route and casino markets. The new designs will be engineered
to house the latest industry standard bill acceptors and other hardware to
facilitate the interface and integration with casino and route operations.
The Pot O Gold product line library of games has been developed to meet
various market and jurisdictional requirements in the United States and
internationally. Leisure Time is designing and developing new game software for
its video gaming machines. The new games will be sold separately to owners of
Leisure Time's video gaming machines.
Leisure Time believes that the experience it has gained from its
current markets will assist it in marketing the Pot O Gold product line in other
jurisdictions.
NEW POT O GOLD PLATFORM. Leisure Time is currently developing a new Pot
O Gold platform. Leisure Time anticipates that the new Pot O Gold platform will
be available in the first quarter of 2000. Leisure Time's Pot O Gold platform
has historically been based upon various combinations of poker, blackjack, keno,
slots and bingo style video games that are custom tailored for each gaming
jurisdiction according to regulatory requirements and player preferences. The
new video gaming machine will incorporate this and other desirable features of
the current Pot O Gold platform. The new platform will also feature updated
memory and software functions for the latest integrated banknote currencies,
validation acceptors and industry standard required interfaces to all major on
line data systems providers.
Leisure Time's video gaming machine platform has provided Leisure Time
with a powerful yet cost effective mechanism for serving the needs of many
sectors of the gaming industry at one time. Leisure Time has realized a lower
cost of manufacturing by selecting a single platform instead of the more
traditional multi-platform. Leisure Time believes that this enables Leisure Time
to achieve better profit margins and provides customers with product diversity.
This same approach will be used in Leisure Time's new video game machine.
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Leisure Time plans to incorporate personal computer technology in its
next generation video gaming machine platform because personal computer
technology:
o expedites the game development process by utilizing
commercially available hardware and software development tools
which are readily available from many different suppliers;
o is cheaper than custom technology;
o is familiar to operators and players alike; and
o offers increased speed, video resolution and color depth and
compact disk audio quality.
Leisure Time believes that the newly redesigned video gaming machines
will enable it to expand its market, including in traditional casinos and in
jurisdictions where Leisure Time is or plans to be licensed. Most or all of the
jurisdictions where Leisure Time has applied for licenses or plans to apply for
licenses require that all gaming machines meet certain hardware and software
configurations. These requirements are dictated by the computer system installed
in the casino property that links all installed machines to collect data for
security, financial and maintenance information.
PULLTAB GOLD PRODUCT LINE AND PLANNED VIDEO BINGO PRODUCT LINE
PULLTAB GOLD PRODUCT LINE. Leisure Time has developed a product line of
video machines that offer the popular game of pulltabs. The Pulltab Gold video
machine is Leisure Time's first pulltab product. It was designed to address the
growing concerns of pulltab operators and regulators. Frequently, paper pulltabs
are used in environments that require integrity and accountability levels that
cannot easily be achieved with paper pulltabs. Pulltabs are often sold by
attendants or sales representatives that receive gratuities. Leisure Time
believes that this invites corruption because the attendants or sales
representatives coach patrons to purchase from a particular box or to avoid a
box that has no large winners left. Some pulltab boxes purchased for resale can
be manipulated to pay out less by removing some of the winners. The winners are
often shipped from the factory bound separate from the losers. Ensuring that the
proper funds are received for pulltabs sold is often another labor-intensive
activity, increasing the overhead of the operation.
Leisure Time's Pulltab Gold video gaming machine provides pulltab
cartridges that cannot be manipulated and automates many of the tasks associated
with paper pulltab operations. Leisure Time believes that the Pulltab Gold video
gaming machine increases not only the integrity of the game, but also the profit
potential for the operator. Leisure Time believes that regulators and operators
alike are realizing that there are no solid arguments against the application of
technology, such as that contained in the Pulltab Gold, to bring heightened
security and play appeal to the game.
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The Pulltab Gold machine is comprised of one or more touchscreen-based
video pulltab dispensers that are used by patrons to play the game of pulltabs.
Each machine has a minimum of a bill acceptor for taking cash and a printer for
either printing pulltabs or vouchers in high security situations. Instead of
using printed pulltabs for determining gameplay outcomes, the Pulltab Gold
system utilizes encrypted electronic pulltabs stored inside operator-replaceable
cartridges. Each cartridge currently contains 40,000 pulltabs. Leisure Time
believes that these cartridges add significantly to the simplicity and security
of the Pulltab Gold machine. Cartridges are recyclable and are filled in random
order at Leisure Time's manufacturing facility. No one knows the sequence of the
various winners and losers. Encrypted data is used to discourage hackers from
manipulating the cartridges. Leisure Time sells the replacement cartridges
directly to Pulltab Gold operators.
Each Pulltab Gold video machine can be configured to contain its own
set of cartridges or a number of the Pulltab Gold machines can be linked into
what is called a bank. Only one of the machines contains the cartridges and is
considered the master machine. The other machines in the bank are called slaves
and receive pulltabs from the master machine. This allows everyone playing the
same game to play out of the same cartridge and to compete for the available
prizes. Leisure Time believes that this is an important aspect of many pulltab
operations, since it puts players in competition with each other, not with the
pulltab operator.
To help ensure a smooth operation, the cartridges in the master machine
are organized as pairs. One cartridge is opened for use and when that cartridge
is emptied the machine automatically opens the other in the pair. This allows
the operator to replace the empty cartridge without disrupting play and without
the players knowing that a new cartridge was opened.
Since it is common for a pulltab operation to offer many different
games, the Pulltab Gold machine can accommodate up to eight different games at
one time, meaning that up to sixteen cartridges can be loaded into the master
machine. For added flexibility, the choice of how many games and which games are
available on each machine is separately configurable. Games installed in the
master do not have to be enabled for play on the master. If desired, an
eight-machine bank can be configured to have each machine playing only one game,
with a different game on each machine. Conversely, all eight machines could have
all eight games available. The bank size limit for cartridge-based machines is
32, but Leisure Time recommends that there be no more than 20 machines on a bank
if the master machine is going to be available for play.
There are approximately 30 graphics sets for the Pulltab Gold from
which an operator may choose. Leisure Time can match any of these graphics sets
to any of over 150 lot payables that have been created for various pulltab
games. Leisure Time can also customize pulltab cartridges to a particular
jurisdiction's regulatory requirements.
VIDEO BINGO. Leisure Time is currently developing a video bingo
machine. In 1997 Leisure Time believes that there were approximately 37,000
licensed bingo halls operating in 46 states and the District of Columbia. Most
people learn to play bingo in church basements or at
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charity fund-raisers. Bingo is one of the oldest and most popular types of
entertainment in the country and provides revenue for both suppliers and
sponsors. Leisure Time believes that bingo is exciting because it involves risk,
reward, and in many cases, big dollar prizes all housed in a unique social
environment that people value. Current laws are changing to allow bigger prizes
and faster games and technology is now capable of delivering those games.
Traditional bingo is played on a paper bingo card. Players "mark" the
card face with an ink dauber when the bingo number is called. Most skilled paper
bingo players can manage up to 20 paper cards a time. As players are able to
play more cards at one time, their odds of winning greatly improve.
Leisure Time believes that video bingo combines the excitement of
traditional paper bingo with the advanced multimedia and networking capabilities
of the latest computers. With the aid of these computers, called player
stations, video bingo players are capable of playing as many as 600 bingo cards
simultaneously. Leisure Time believes that, because a significant majority of
players who use video bingo player stations also purchase paper cards, the use
of Leisure Time's video bingo player stations will generate additional revenue
for bingo hall operators. Leisure Time is developing the following video bingo
related products:
o Frame Relay Network. In the second quarter of 1999, Leisure
Time plans to implement a state-of-the-art telecommunications
infrastructure that will be used as the backbone for Leisure
Time's wide area networked, progressive jackpot video bingo
games. With this network Leisure Time anticipates being able
to monitor, service and upgrade its products from a single
location. The frame relay network may also be used to deliver
other services such as e-mail, Internet access,
video-conferencing and voice communications.
o Network Operations Center. In the third quarter of 1999,
Leisure Time plans to have a network operations center that
maintains Leisure Time's frame relay communications network.
This network operations center will also monitor Leisure
Time's wide area networked, progressive jackpot video bingo
games.
o Progressive Jackpot Bingo Game. In the third quarter of 1999,
Leisure Time expects to have developed a nationwide,
progressive jackpot bingo game. By linking player stations and
progressive jackpot prize pools locally, regionally and
nationally into a single bingo game, Leisure Time will be able
to offer prizes surpassing those offered by single bingo halls
and casinos. Leisure Time expects these progressive jackpots
to enhance player attraction, generate increased revenues for
the operator and promote long-term player participation.
o Sit-Down Player Station. Leisure Time anticipates that its
video bingo player station will be available in the third
quarter of 1999. The standard sit-down player station will use
15" and 17" monitors that will be mounted on a table where
players mark bingo cards. This will give players the ability
to play traditional
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paper bingo concurrently with video bingo. Leisure Time also
plans to develop a next-generation video bingo sit-down
cabinet using three full-color, 18.1" touch-screen LCD panels
that will be mounted side-by-side. With this design, Leisure
Time will be able to offer 200% more viewable area than that
of a conventional 19" sit-down cabinet. The casino operator
will have control over the "attraction mode graphics". Instead
of manually replacing static attraction graphics, the
operator, using software, will be able to display full-motion
advertisements on the LCD panels. Leisure Time believes that
this design will offer durability, longevity, flexibility and
esthetic appeal all in a footprint that is smaller than that
of today's existing 19" sit-down cabinets.
o Player Tracking/Cashless Gaming. In the fourth quarter of
1999, Leisure Time plans to have developed a player tracking
system for its video bingo player stations. This system will
store player account information, player tracking information
and the player's personalized game preferences. A copy of the
player's account information will be stored in a
high-performance database that is updated in real time. Any
time the player is logged into a player station, the database
will automatically update the player's account information
including credits, spendings, winnings and player points. This
information will be available to the player from any player
station. The database will be updated, through Leisure Time's
high-speed frame relay network, to all participating casinos.
This will allow the player to use the player's player card to
play Leisure Time's video bingo games at any participating
location. The casino operator will be able to use player
tracking to monitor its player base and for marketing and
promotions. This system will be the basis for implementing a
cashless gaming environment.
o Enhanced Player Services. In the fourth quarter of 1999,
Leisure Time plans to offer enhanced services to the player.
These services will enable the player to order food, drinks or
merchandise directly from the player station, monitor the
player's point information and make reservations for future
gaming events. Other services may include Internet access,
personalized e-mail accounts and e-commerce capabilities
directly accessed from the player station. The player will be
able to access the services offered and still continue to play
without interruption.
o Handheld Video Bingo Units. In the first quarter of 2000,
Leisure Time plans to have developed a wireless, touch-screen
handheld video bingo player station. This station will give
the video bingo player the same advantage over the paper bingo
player as the standard sit down station with the added
benefits of portability and a smaller footprint. The station
will be offered with either a monochrome LCD panel or a full
color LCD panel. Leisure Time anticipates that various video
bingo games will be able to be played from any location within
a casino using the handheld unit.
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o Continuing Game Development. In the first quarter of 2000
Leisure Time plans to continue developing new interactive
linked video bingo games with even larger progressive
jackpots. These games will operate on Leisure Time's frame
relay network and will be available for play 24 hours a day,
365 days a year. They will include such features as multi-game
and multi-level buy-in, ever-increasing progressive jackpot
prizes, player interaction and fast-paced game play. As
facilitator of these linked games, Leisure Time has the
opportunity to enter into revenue sharing arrangements with
each facility operating these games. In addition to the
revenue from the initial sale of games, Leisure Time will have
the opportunity to generate revenue directly proportional to
gameplay for the life of the game. Leisure Time also expects
reduced development cost and time for these games due to the
versatility of Leisure Time's universal gaming platform and
Leisure Time's planned high-speed frame relay network
backbone.
SOFTWARE SALES AND DEVELOPMENT
Leisure Time believes that it will realize material revenue during the
remainder of 1999 through the sale of a data communication device required to be
installed into all video gaming machines in South Carolina and through the sale
of year 2000 software upgrades for its installed video gaming machines.
DATA COMMUNICATION DEVICE. The state of South Carolina has recently
implemented regulations requiring all gaming devices to be connected with the
state's central computer system. This regulation has required the development of
a data communication device that will collect and forward accounting information
to the system. Leisure Time has responded to this requirement with its latest
product, the N-DAT 1000(TM). Leisure Time has worked closely with an independent
testing laboratory for the gaming industry to ensure that development efforts
closely follow regulatory requirements. The laboratory has begun to review and
test the N-DAT 1000(TM) and Leisure Time expects approval by mid May 1999. Of
the approximately 30,000 video gaming machines in South Carolina, approximately
17,000 are Pot-O-Gold product line machines. A data communication device is
required for every five video gaming machines. Further, under the new
regulation, each Pot O Gold will need new software that sets single payout
percentages per machine. Leisure Time believes that due to its established
customer base in the state, sales of the N-DAT 1000(TM) and new payout software
will be a significant source of revenue.
YEAR 2000 SOFTWARE. Leisure Time has developed and is selling software
upgrades for its video gaming machines which enable the machines to operate past
the year 2000. Leisure Time is making this year 2000 software upgrade available
to the owners of its currently installed video gaming machines.
SOFTWARE DEVELOPMENT. In addition to Leisure Time's sales of the data
communication device and year 2000 software, Leisure Time anticipates receiving
recurring revenue from the sale of software upgrades. Leisure Time believes that
it has created games that are user friendly,
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entertaining and comfortable to play for extended periods of time and that
instill in the player a desire to return to play again. Leisure Time plans to
incorporate the aspects of its current software into its future generation of
games.
Leisure Time believes that the basis for competition in most gaming
markets is driven by two primary elements: the costs of the gaming equipment and
the potential profit to the location operator. Many of the games developed by
Leisure Time are offered as software upgrades. These software upgrade packages
allow the operator to change existing games and cabinet glass display artwork
without changing the actual video gaming machine. For many operators, this
process can extend the life of the video gaming machine. Leisure Time believes
that as its base of installed video gaming machines increases, its market for
software upgrades will also increase. Leisure Time's software upgrades have a
greater gross margin than sales of its video gaming machines. Software
engineering personnel are being added to help Leisure Time attain its goal of
developing approximately six new games per year for existing video gaming
machines. Leisure Time plans to continue developing new game software to support
its current Pot O Gold product line platform for approximately 2 to 3 years.
After that time, owners of the current platform will have to purchase a new
board from Leisure Time to be able to use new game software developed by Leisure
Time. Leisure Time plans to introduce the next generation of its Pot O Gold
video gaming machine platform with new systems and games in the second quarter
of 2000.
RESEARCH AND DEVELOPMENT EXPENSES
During the fiscal years ended June 30, 1996, 1997 and 1998 and during
the six months ended December 31, 1998, Leisure Time spent $0, $469,000,
$642,000 and $391,000 on research and development, all of which was conducted
and paid for by Leisure Time.
MANUFACTURING AND SERVICING
Leisure Time's manufacturing facility is approximately 40,000 square
feet. In a work week of four ten-hour days with 45 employees and a supervisory
staff, Leisure Time is able to produce up to 400 video gaming machines. Leisure
Time conducts both sub-assembly and final assembly operations. Leisure Time's
manufacturing operation builds the components at the sub-assembly stage and, in
turn, the sub-assemblies are placed in stations where they are incorporated into
a final assembly or cabinet. As the cabinet moves along the production line from
station to station, sub-assembled components, complete components or parts are
built into the cabinet. The completed video gaming machine is then tested to
ensure the software is functioning properly and all operating standards are met.
After testing, the video gaming machine is packaged for shipment to the
customer.
As of March 31, 1999, Leisure Time had a backlog of orders of
approximately $10,000,000 that Leisure Time believes is firm. Leisure Time
anticipates that all of the backlog will be filled by June 30, 1999. Leisure
Time believes that backlog may not be a meaningful indicator of revenue expected
in future periods.
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As of December 31, 1998, Leisure Time had an inventory value of
approximately $2.5 million that Leisure Time maintains to meet the delivery and
repair requirements of its customers. Leisure Time's inventory increases in
anticipation of orders and a significant amount of Leisure Time's current assets
is invested in inventory and accounts receivable until payment is received from
the sale of video machines.
Leisure Time currently services the video gaming machines it sells.
Leisure Time is considering expanding its service operations by becoming an
authorized repair center for manufacturers of items such as bill acceptors and
printers so that Leisure Time can service video gaming machines sold by others.
Leisure Time has not yet been authorized as a repair center by any other
manufacturer.
SALES AND MARKETING OF VIDEO MACHINES
Leisure Time believes that the experience it has gained from the
markets where its video gaming machines are currently located will assist its
marketing personnel in developing new markets. In order to achieve these goals,
Leisure Time believes in utilizing experienced gaming industry personnel for its
sales and marketing efforts. These gaming personnel are able to interface, guide
and advise the operator on methods that will contribute to profitability for the
operator.
Leisure Time has developed a customer base for its video gaming
machines in South Carolina, on Native American reservations in several states,
in Brazil and in Norway. Leisure Time plans to continue to expand its customer
base in those areas and is evaluating the marketing of its video gaming machines
in other states and countries.
Leisure Time believes that in order to be successful in expanding the
market for its video gaming machines into new states and jurisdictions, a good
customer relationship needs to be established by a professional and experienced
sales and service organization. Leisure Time is continuing to create such a
sales and service organization to support market opportunities in the various
geographical areas of the United States and in the international market. The
sales organization utilizes a central reporting system linked to Leisure Time's
headquarters that is complemented by sales policies, training, market analysis
and operations meetings held on a regular basis.
As of March 31, 1999, Leisure Time had nine employees engaged in sales
and marketing. Leisure Time plans to add additional sales and marketing people
in the near future.
Leisure Time has appointed Sao Paulo Games Comercial LTDA as the
exclusive distributor of the Pot O Gold product line in Brazil. Sao Paulo
purchases the Pot O Gold machines at a fixed price for resale or for Sao Paulo's
use. The agreement is in effect until December 31, 2000, if Sao Paulo purchases
a minimum number of Pot O Gold machines each calendar quarter. If not, Leisure
Time has the right to terminate the agreement. The agreement will be
automatically renewed for two one-year terms unless either party determines not
to renew the agreement.
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In the Native American bingo/casino markets, laws are changing to allow
for games with a higher level of player interaction that will generate more
player interest. Leisure Time believes that these changes will provide an
increase in video bingo revenue and a demand for more video bingo player
stations. In some Native American bingo markets, operators are beginning to
replace paper bingo games with video bingo games.
Laws are changing in the charity bingo markets as well. These changes
allow for wide area networked, progressive jackpot games and games with larger
cash prizes. Leisure Time believes that these changes will facilitate an
increase of the current player base and thus an increased demand for Leisure
Time's video pulltabs and bingo gaming machines. Leisure Time markets and plans
to market sit-down video pulltabs and bingo machines, wireless portable video
bingo units and wide area networked, progressive jackpot units within the
charity markets.
Leisure Time's video bingo player stations will be marketed to Native
American bingo/casino venues and charity bingo halls. Leisure Time can sell,
lease or rent video bingo player stations to both markets. Leisure Time plans to
enter into one to three year contracts under which it will receive a portion of
the revenue generated by the player stations where permitted by applicable law
or, to a lesser extent, a fixed rate per bingo session. Although capital
intensive, Leisure Time believes that the "revenue share" agreement is typical
within the bingo industry where permitted by applicable law and has been
profitable for the vendor of the machines.
Leisure Time has sold approximately 70 Pulltab Gold machines in Ohio.
Leisure Time intends to increase its marketing efforts for Pulltab Gold machines
in Ohio and in other jurisdictions where pulltab operations may be conducted.
Leisure Time also plans to enter into distribution agreements and/or
strategic alliances with qualified representatives where jurisdictional and/or
particular market situations make it advantageous to do so. For example, Leisure
Time is engaged in discussions with Paul-Son Gaming Supplies, Inc. relating to
Leisure Time becoming the exclusive distributor of Paul-Son's gaming supplies in
Europe. Leisure Time believes that Paul-Son is the largest manufacturer of
gaming supplies in the United States. Also, Leisure Time is acting as a
nonexclusive agent on a commission basis for the sale to a casino in Europe of
casino signs, electronic progressive meters and animated technology manufactured
by a European company.
During the fiscal year ended June 30, 1998, Drews Distributing, Inc.
and Collins Entertainment Corp. accounted for approximately 47% and 23% of
Leisure Time's total sales. During the six months ended December 31, 1998, Drews
Distributing, Inc., Collins Entertainment Corp. and Sao Paulo accounted for
approximately 48%, 17% and 12% of Leisure Time's total sales. Leisure Time's
distributor agreements with Drews Distributing, Inc. and Collins Entertainment
Corp. terminated in November and December, 1998, respectively. Leisure Time is
currently in litigation with both former distributors. See "--Litigation."
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GAMING VESSELS
OFFSHORE GAMING CRUISES. Leisure Time currently owns two offshore
gaming vessels, the Vegas Express and the Leisure Lady, which are or will be in
the "cruise-to-nowhere" business. Federal law allows gaming on a vessel once the
vessel has left state waters. On the East Coast of the United States, state
waters generally extend three miles from land. Each offshore gaming cruise
vessel departs from its respective port and returns to the same port without any
intervening stops, hence the name "cruise-to-nowhere."
The "cruise-to-nowhere" industry began in the mid-1980s in Florida.
Until 1992, only foreign flagged vessels could have gaming equipment on board.
In 1992, United States flagged vessels were permitted to have gaming equipment
on board. The new law provides that any state could "opt out" and make
"cruises-to-nowhere" illegal in that particular state. To date, only California
and Hawaii have done so.
The Vegas Express operates out of Gloucester, Massachusetts, which is
approximately 35 miles north of Boston, Massachusetts. The Vegas Express began
operations in July 1998. It is anticipated that the Leisure Lady will begin
operations out of Hyannis, Massachusetts in late May or early June 1999. In
addition to offering full gaming casinos that include reel and video slot
machines, blackjack, roulette, dice and poker, the cruises offer dining, dancing
and entertainment. The cruises last from four to six hours.
The Vegas Express is a United States flagged vessel. She is
approximately 202 feet long and approximately 38 feet wide with a capacity for
approximately 426 gaming passengers. In addition, she has approximately 277
positions in which to place gaming machines.
The Leisure Lady is a United States flagged vessel. She is
approximately 137 feet long and approximately 45 feet wide with a capacity for
approximately 400 gaming passengers. She has approximately 257 positions in
which to place gaming machines.
The Vegas Express, weather permitting, conducts nine cruises each week
during the winter months and two cruises each day during the summer months. The
current price for a cruise on the Vegas Express is $39.00. The price for a
cruise on the Leisure Lady will depend on the port, the market, the competition
in the market, the day of the week, the time of day, the time of year and
whether or not it is a holiday season. Leisure Time offers various discount
passenger rates to groups, charterers of an entire vessel, and others and offers
various special fares and complimentary fare programs for its rated casino
patrons.
The offshore gaming cruise business is subject to seasonal fluctuations
as a result of adverse weather conditions. The revenue derived from offshore
gaming cruises suffers as a direct result of inclement weather, decreasing both
the number of cruises conducted and passenger counts. In addition, passenger
counts are lower immediately before and immediately after inclement weather
conditions.
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Other than local, occupational, liquor and food licensing and
permitting, Leisure Time's offshore gaming cruise vessels are not subject to
gaming regulation or licensing. Gaming cruise vessels are regulated by the
United States Coast Guard and are periodically inspected for regulatory
compliance. Both the Vegas Express and the Leisure Lady hold current
certificates of inspection from the United States Coast Guard.
MARKETING. Leisure Time focuses and will focus its marketing in areas
primarily within a 100 mile radius of Gloucester and within a 100 mile radius of
Hyannis. Leisure Time must attract passengers from both the local and tourist
populations to offset to some degree the seasonal fluctuations that are known to
occur in the Massachusetts tourist industry. Leisure Time focuses its efforts on
local markets and on tourists visiting the local markets on vacation. Leisure
Time markets its offshore gaming cruises through general advertising, direct
mailings, travel agents and Leisure Time's own sales and reservation personnel.
DOCKSIDE VESSEL. Leisure Time has acquired the Biloxi Belle, a dockside
gaming vessel that is currently located on the Mississippi River. The Biloxi
Belle is approximately 217 feet long and approximately 40 feet wide with a
capacity for approximately 1,900 passengers. The Biloxi Belle has approximately
780 gaming positions. Leisure Time is currently renovating the Biloxi Belle and
plans to have it in operation during the first quarter of 2000, provided Leisure
Time becomes licensed in Mississippi. Leisure Time intends to locate the Biloxi
Belle as a riverboat operation on the Mississippi River in Mississippi. The
competition for the Biloxi Belle will include the many other riverboats and
dockside gaming vessels and land-based casinos within a 200 mile radius from
where the Biloxi Belle is finally located.
RESERVATIONS SYSTEM. Leisure Time is developing a central reservations
system that will link each port to a web site via the Internet. This system also
will enable customers to make their own reservations "on line," monitor their
"frequent traveler" information and purchase Leisure Time merchandise. Leisure
Time believes this centralization will allow it to operate each vessel more
efficiently, control passenger counts and enable guest services to utilize
capacity in each vessel by offering more than one port, time and vessel to the
customer. The system is also expected to allow Leisure Time to verify credit
card information and inform passengers via e-mail of new promotions.
GAMING MACHINE ROUTE OPERATIONS
In February 1999, Leisure Time acquired a gaming machine route
operation in South Carolina. A gaming machine route operation involves the
installation, operation and servicing of video gaming machines under revenue
participation agreements with local retail establishments, such as taverns,
restaurants, supermarkets, drug stores and convenience stores. Leisure Time's
route operation currently has 12 locations containing approximately 47 video
gaming machines in various parts of South Carolina. Leisure Time's agreements
for its locations generally are in the form of revenue sharing agreements and
give Leisure Time the exclusive right to install gaming machines at such
locations. The agreements are generally terminable by either party on 30 days'
written notice.
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Leisure Time believes that gaming machine route operations will provide
Leisure Time with a long-term, stable revenue source. Accordingly, Leisure Time
intends to acquire additional gaming machine route operations in South Carolina
and to either establish or acquire gaming machine route operations in other
states with the initial focus being on Louisiana, Montana and New Mexico.
Although Leisure Time has proposed the acquisition of a company that currently
operates gaming routes, Leisure Time has no formal agreements for the
acquisition of any gaming machine route operations.
MARKET. Leisure Time believes that the single biggest factor in
determining the success of gaming machine routes is player demand. Based on
reported revenue for the locations, Leisure Time's Pot 0 Gold video gaming
machine product line has been the most popular video gaming machine route
product line in South Carolina. Leisure Time believes that the Pot O Gold
product line will continue to be the game of choice in South Carolina.
Leisure Time attempts to attract and retain gaming machine route
patrons through direct mailings which offer an attractive selection of video
gaming machines. Prior to installing video gaming machines at a location,
Leisure Time studies the market potential and customer base and determines the
appropriate video gaming machine mix for the location. Most of the video gaming
machines in Leisure Time's route operation have progressive jackpots.
In marketing its services to location owners, Leisure Time emphasizes
quality of service. Leisure Time operates and services its video gaming machines
using its own employees, who routinely repair and maintain Leisure Time's video
gaming machines in order to improve reliability and in-service time. Leisure
Time believes that its video gaming machines and related equipment in its route
locations are well maintained and in good working condition.
In addition to physically servicing the gaming machines, employees of
Leisure Time may also remove coins and bills from the machines, refill machines
that have exhausted their supply of coins and provide payment of jackpots in
excess of machine limits. The services provided by Leisure Time can vary based
on the terms of its revenue sharing arrangements with location owners.
POSSIBLE ACQUISITION. Leisure Time has proposed the acquisition of a
company that has gaming route operations in South Carolina. The owner of the
company has orally indicated to Leisure Time that he agrees with the proposal.
If the acquisition is consummated as proposed, the owner would receive the
following from Leisure Time:
o at the closing, $2 million plus certain machine license
renewal fees paid by the company;
o at the closing, 363,640 shares of Leisure Time's common stock;
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o an agreement by Leisure Time to repurchase the 363,640 shares
if the owner is not able to sell them for at least $13.00 per
share one year after the date of closing;
o an additional $2 million 90 days after the closing;
o up to $75,000 in income taxes associated with the company's
income prior to the closing; and
o a three year consulting agreement that will pay the owner
$7,500 per month plus a commission of 10% of the first
$500,000 and 5% of any amount over $500,000 paid by the
company for a gaming route.
The company has approximately 65 locations containing approximately 333
video gaming machines.
There are no assurances Leisure Time and the owner will enter into an
agreement or that the acquisition will occur.
RELATED BUSINESSES
HOTEL. In June 1998, Leisure Time acquired a hotel property in the
Cleveland, Ohio area that Leisure Time plans to open in the first quarter of
2000. The hotel has been closed for approximately seven years and was formerly
operated as a Howard Johnson Plaza hotel. Leisure Time is currently renovating
the hotel and, when completed, it is planned that the hotel will have
approximately 210 rooms, all with a view of Lake Erie, a full-service conference
center, an enclosed swimming pool, a fitness center and a restaurant. Leisure
Time has been granted approval from the Franchise Committee of Radisson Hotels
International, Inc. to receive a license to operate the hotel under the Radisson
Hotels franchise system. The approval is subject to the execution of Radisson's
standard license agreement, no adverse change in Leisure Time's financial
condition and the completion of the renovation of the hotel in accordance with
plans to be approved by Radisson. Leisure Time is currently investigating an
affiliation with a national restaurant chain that, if obtained, would result in
the hotel restaurant being operated by an independent third party.
Leisure Time has approximately 70 Pulltab Gold machines that it has
sold in Ohio. Leisure Time plans that a portion of the space in the hotel will
be used by charitable organizations to operate a video pulltab and bingo hall
using Leisure Time's Pulltab Gold and video bingo machines. It is intended by
Leisure Time that the hall would serve as a showcase for Leisure Time to market
its Pulltab Gold and video bingo products.
Leisure Time anticipates that approximately $9.5 million will be spent
by Leisure Time in renovating the hotel. Leisure Time plans to finance most of
the amount needed for this
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renovation with construction financing. The total cost per room to Leisure Time
in renovating the hotel is approximately $50,000 per room, including real
property acquisition costs.
FINANCE COMPANY. Leisure Time began its financing operations in April
1999, when it acquired RP Capital. RP Capital was established in 1989 as a
service oriented lessor of diversified types of equipment. RP Capital provides
equipment financing to qualified applicants in the small to middle markets in
Minnesota and in the surrounding five states. The primary objective of RP
Capital is to provide financing services to purchasers of Leisure Time's video
gaming, pulltab and bingo machines as well as to purchasers of other equipment.
Leisure Time believes that having financing available for a vendor's
products enhances the ability of a vendor to market the products. Leisure Time
believes that the financing program will enhance its marketing efforts for its
machines and provide a potential new profit center.
RP Capital's marketing efforts historically have been directed at
establishing vendor relationships and calling on equipment users primarily in
the printing, construction and machine tool industries. As of April 23, 1999, RP
Capital had three people engaged in marketing RP Capital's financing
arrangements.
RP Capital has acquired a lease accounting operating system to assure
year 2000 compliance and manage the volume of information associated with
originating and servicing of financing arrangements. RP Capital expects to
upgrade and enhance its administrative and technical capabilities in order to
provide professional service to its customers and accurate reporting for Leisure
Time. RP Capital's marketing strategy is to increase its volume of lease
originations by (i) maintaining a strong, experienced sales force, (ii)
establishing a network of independent lease brokers, (iii) structuring
relationships with small and medium-sized local accounting firms, and (iv)
supplying lease programs to rural community banks that do not have internal
leasing capabilities. Many of these community banks provide funding for RP
Capital's current lease portfolio.
RP Capital competes for equipment financing with brokers, major bank
leasing companies and three other small lease companies in the Minneapolis-St.
Paul area that are similar in size to RP Capital. Each of these companies is
successful in that market.
RP Capital had unaudited net income of approximately $74,000 and
$19,000 on revenue of approximately $633,000 and $100,000 for the year ended
December 31, 1998, and for the two months ended February 28, 1999, respectively.
COMPETITION
VIDEO MACHINES. The video gaming machine market is highly competitive
and is dominated by a small number of manufacturers. Leisure Time believes that
the principal competitive factors in this market are the appeal of the machine
to players, knowledge of customer requirements and player preferences, service,
support and training, distribution, name and product recognition and price. The
principal competitors in the video gaming machine
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market are IGT and WMS Industries, Inc. IGT may be viewed as a dominant
competitor. Leisure Time estimates that IGT had a market share in video game
machines of 70% and that WMS Industries had a market share of 15% in 1998.
Additional competitors or potential competitors include Acres Gaming, Inc.,
Atronic Casino Technology, Inc., Anchor Games, Aristocrat Leisure Limited, Bally
Gaming, a subsidiary of Alliance Gaming Corporation, Casino Data Systems,
Innovative Gaming Corporation of America, Sigma Games, Inc. and Video Lottery
Consultants, Inc. Companies in historically unrelated industries, such as Sega,
have technological resources that could give them a competitive advantage in
developing multimedia-based video gaming machines. There can be no assurance
that other companies in the video gaming or multimedia market will not
successfully enter the market for video gaming machines, nor can there be any
assurance that the manufacturers of traditional slot machines will not develop
products that are superior to, or that achieve greater market acceptance than,
Leisure Time's video gaming machines.
Leisure Time currently has two to three significant competitors in the
pulltab video machine industry.
Leisure Time currently has two significant competitors in the wide area
networked, progressive jackpot bingo industry and three significant competitors
in the video bingo industry.
In general, Leisure Time's existing competitors, as well as many
potential new competitors, have significantly greater financial and technical
resources than Leisure Time, as well as more established customer bases and
distribution channels, which may afford them competitive advantages. Increased
competition is likely to result in price reductions, reduced operating margins
and loss of market share, any of which could materially and adversely affect
Leisure Time's business, operating results and financial condition.
GAMING ROUTE OPERATIONS. Leisure Time currently has very few locations
from which it shares in the revenue from video gaming machines. All of these
locations are within South Carolina. Competition from other locations having
video gaming machines in South Carolina has increased and will likely increase
in the future. Additional competition will reduce income from the locations from
which Leisure Time currently, and in the future, may derive revenue. Leisure
Time plans to acquire or establish additional gaming route operations. Leisure
Time may be unable to acquire or establish additional gaming route operations on
acceptable terms.
OFFSHORE GAMING CRUISES. Competition for Leisure Time's offshore gaming
cruises arises from all forms of entertainment available in the general area in
which the cruises operate. At the present time, there are no other offshore
gaming cruise operators in the Boston, Massachusetts area and there are no local
land-based casinos. An influx of operators into Massachusetts will place a
premium on new port locations that will make expansion more expensive and cause
greater competition for customers. Once the Leisure Lady commences operations,
Leisure Time will be subject to the same competitive factors within the area of
operations. Any material increase in competition could have an adverse impact
upon Leisure Time's operating results and financial condition.
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Leisure Time intends to acquire additional vessels that Leisure Time
can renovate and use as offshore gaming vessels. At this time, however, Leisure
Time has no agreements for the acquisition of any such additional vessels.
REGULATION
GENERAL GAMING REGULATION. The manufacture and distribution of gaming
machines and the conduct of gaming operations is subject to extensive federal,
state, local and foreign regulation by various gaming regulatory bodies.
Although the laws and regulations of the various jurisdictions in which Leisure
Time operates vary in their technical requirements and change from time to time,
they are consistent in requiring extensive background investigations regarding
the criminal, financial and personal integrity of the major stockholders,
officers, employees, debt holders and principals of Leisure Time.
In most jurisdictions, any beneficial owner of a certain percentage of
Leisure Time's common stock and the officers, directors, holders of debt
obligations, employees and persons with a material relationship to Leisure Time
are subject to filing of applications with gaming authorities and to being
investigated and found suitable. Any stockholder who is found unsuitable during
the investigative process may be required to immediately dispose of his or her
stock. Any officer, employee or principal of Leisure Time found unsuitable
during the investigative process may be required to resign from Leisure Time. If
a debt holder is found to be unsuitable, Leisure Time may be forced to retire or
redeem the debt.
Leisure Time and its key personnel have obtained all governmental
licenses and approvals necessary for the manufacture, distribution and
operation, where permitted, of its gaming machines in the jurisdictions in which
it currently does business. Generally, these approvals must be renewed annually
and are not transferable. However, there can be no assurance that such licenses
and approvals will be given, retained or renewed in the future or that Leisure
Time will obtain the licenses necessary to operate in new markets.
FEDERAL REGULATION. The Federal Gambling Devices Act of 1962 makes it
unlawful for a person to ship gaming machines, parts and software across state
lines into states where gaming is not legal. The Gambling Devices Act also
requires persons in the gaming business to register with the Attorney General of
the United States. Leisure Time Technology and Leisure Time Cruise have complied
with such registration requirements and are required to renew their
registrations annually. In addition, various record keeping and equipment
identification requirements are imposed by the Gambling Devices Act. Violation
of the Gambling Devices Act may result in seizure and forfeiture of the
equipment, as well as other penalties.
NATIVE AMERICAN GAMING. Gaming on Native American reservations,
including the terms and conditions under which gaming equipment can be sold or
leased to Native American tribes, is or may be subject to regulation under the
laws of the tribes, the laws of the host state, the Indian Gaming Regulatory Act
of 1988, which is administered by the National Indian Gaming Commission and the
Secretary of the United States Department of the Interior, and also may be
subject to the provisions of certain statutes relating to contracts with Native
American
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tribes, which are administered by the Secretary. As a precondition to gaming
using gaming machines, the Indian Gaming Regulatory Act requires that the tribe
and the state have entered into a written agreement, referred to as a
tribal-state compact, that specifically authorizes such gaming and that has been
approved by the Secretary, with notice of such approval published in the Federal
Register. Tribal-state compacts vary from state to state. Many require that
equipment suppliers meet ongoing registration and licensing requirements of the
state or the tribe or both, some establish equipment standards that may limit or
prohibit the placement of electronic gaming systems in Native American
reservations and some impose background check requirements on the officers,
directors and stockholders of gaming equipment suppliers. Under the Indian
Gaming Regulatory Act, tribes are required to regulate all gaming under
ordinances approved by the National Indian Gaming Commission. Such ordinances
may impose standards and technical requirements on gaming hardware and software
and may impose registration, licensing and background check requirements on
gaming equipment suppliers and their officers, directors and stockholders.
BINGO. Bingo is legal in 46 states and the District of Columbia (the
exceptions are Arkansas, Hawaii, Tennessee and Utah). Nonprofit or charity
organizations sponsor bingo games for fund raising purposes, while Native
American tribes, casinos and government-sponsored entities operate bingo games
for profit. Video bingo systems are permitted for use by charitable
organizations in 26 states. Under the Indian Gaming Regulatory Act, video bingo
may be played on Native American reservations in the 46 states where bingo is
legal. Leisure Time believes video bingo is currently played on Native American
reservations in 28 states.
PULLTABS. Leisure Time currently sells the Pulltab Gold machine only in
Ohio where video pulltab machines may be sold to and operated by charitable
organizations. Leisure Time believes that the law relating to the legality of
the sale and use of video pulltabs in many jurisdictions is unclear. Before
Leisure Time sells its Pulltab Gold machines in additional jurisdictions,
Leisure Time will review the applicable law to determine whether or not video
pulltabs may be legally sold in the jurisdictions.
APPLICATION OF FUTURE OR ADDITIONAL REGULATORY REQUIREMENTS. In the
future, Leisure Time Technology intends to seek the necessary registrations,
licenses, approvals and findings of suitability, referred to as licenses, for
Leisure Time Technology, its products and its personnel in other states and
foreign jurisdictions in which Leisure Time Technology identifies significant
sales potential for its products. However, there can be no assurance that such
licenses will be obtained and will not be revoked, suspended or conditioned or
that Leisure Time Technology will be able to obtain the necessary approvals for
its future products as they are developed in a timely manner, or at all. If a
license is required by a regulatory authority and Leisure Time Technology fails
to seek or does not receive the necessary license, Leisure Time Technology may
be prohibited from selling its products in the respective jurisdiction or may be
required to sell its products through other licensed entities at a reduced
profit to Leisure Time Technology.
In 1997, Congress created the National Gambling Impact and Policy
Commission to conduct a comprehensive study of all matters relating to the
economic and social impact of gaming in the United States. The enabling
legislation provides that the commission will be
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required to issue a report by June 18, 1999 containing its findings and
conclusions, together with recommendations for legislation and administrative
actions. Leisure Time understands that the commission has voted, in a five to
four vote, to recommend a moratorium in the growth of legalized gambling and to
encourage state and local governments to form their own gambling study
commissions. Any such recommendations, if enacted into law, could adversely
affect the gaming industry and have a material adverse effect on Leisure Time
Technology and on Leisure Time's business, financial condition and operating
results.
SPECIFIC STATE LAWS AND REGULATIONS. Leisure Time Technology is
licensed to sell video gaming machines in Kansas, Michigan, Minnesota, New
Mexico (Native American reservations), New York, North Carolina and Wisconsin.
Although not required to be licensed to sell video gaming machines in South
Carolina, Leisure Time Technology's video gaming machines are in compliance with
all regulations relating to video gaming machines that have been adopted in
South Carolina. Leisure Time Technology has applied to become licensed to sell
video gaming machines in Mississippi, Montana and Ontario, Canada. Leisure Time
intends to apply to become licensed to sell video gaming machines in Arizona,
New Mexico (for charities and fraternal organizations) and Nevada.
Once licensed in Mississippi, Leisure Time may not make a public
offering of its securities without the approval of the Mississippi Gaming
Commission if the securities or proceeds therefrom are intended to be used to
construct, acquire or finance gaming facilities in Mississippi or to retire or
extend obligations incurred for such purposes.
SOUTH CAROLINA REGULATION OF VIDEO GAMING MACHINES. In 1993, South
Carolina passed the Video Games Machine Act which provides a statutory and
regulatory framework for the operation of video poker under certain limitations.
These limitations include a limit of five machines in a single place or
premises; the prohibition of advertising for the playing of these games; the
prohibition of the offering or giving of anything free to encourage people to
play the games; the prohibition of the playing of games on Sunday; and the
prohibition of paying off for the playing of the machines to anyone under 21
years of age.
All video gaming machines in South Carolina are required to connect to
the Department of Revenue central computer monitoring system by May 31, 1999, or
face the possibility of fines and confiscation of the video gaming machines. By
May 31, 1999, operators must have minimum pay out of 80% and each video gaming
machine must have only one payout percentage. Video gaming machines that are not
able to be connected to a computer monitoring system may not be licensed.
A license fee of $4,000 per video gaming machine must be paid every two
years in South Carolina. The license is sold on a biannual basis.
BRAZIL REGULATORY MATTERS. Only video gaming machines that have bingo
or keno are legal in Brazil. Each video gaming machine must be tested and
qualified prior to use in Brazil. The Pot O Gold Super Pick Keno game has been
tested and qualified for use in Brazil.
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NORWAY REGULATORY MATTERS. Leisure Time Technology is required to have
its hardware and software approved by the Norwegian Department of Justice before
Leisure Time Technology's video gaming machines can be sold in Norway. To date,
the hardware and software for three of Leisure Time Technology's video gaming
machines have been approved for sale in Norway.
OHIO REGULATION OF VIDEO PULLTAB MACHINES. Leisure Time is not required
to be licensed to sell the Pulltab Gold machines in Ohio. The Pulltab Gold
machines in Ohio must be operated by a charity that is a 501(c)(3) organization
as defined in the Internal Revenue Code of 1986. The Attorney General of Ohio
takes the position that the charity must be a religious, educational, veteran's,
fraternal, service, nonprofit medical, volunteer rescue service, volunteer fire
fighter's, senior citizen's, youth athletic, amateur athletic, or youth athletic
park organization. Further, the charity must receive all proceeds, except for
prizes paid out, from the operation of the machines.
ONTARIO REGULATORY MATTERS. The manufacture, sale and distribution of
gaming devices for use or play in the Canadian Province of Ontario are subject
to the administrative rules of the Ontario Gaming Commission. Such activities
are subject to licensing and regulatory control of the Ontario Commission. The
Ontario gaming regulations are very similar to state gaming regulations
previously described.
REGULATION OF OFFSHORE GAMING CRUISES. In 1992, the Federal Government
enacted an amendment to the Ship Gambling Act. This amendment was designed to
make the laws pertaining to gaming activities on United States flagged cruise
vessels and foreign flagged vessels essentially the same. Prior to being
amended, the Ship Gambling Act forbid gaming on United States flagged vessels
but allowed foreign flagged vessels to carry gaming equipment into United States
ports. The 1992 amendment gave United States flagged vessels the same right,
preempting state laws. However, states may elect to "opt out" of the Ship
Gambling Act and prevent "cruise-to-nowhere" operations.
In March 1996, a bill was introduced into the Florida State House of
Representatives to ban all "cruises-to-nowhere" originating from Florida. This
bill was not reported out of committee. However, there can be no assurances that
at some time in the future a bill "opting out" will not be introduced by Florida
or another state's legislating body.
A bill has been introduced into the current session of Congress
entitled the "Cruises-to-Nowhere Act of 1999" which would change existing
federal maritime law. This bill, if passed and signed into law, would make
"cruises-to-nowhere" illegal unless an individual state enacts a law to permit
such activity. This bill could have a material negative impact on Leisure Time's
"cruises-to-nowhere" operations if Massachusetts or nearby states did not enact
laws permitting these cruises.
The Ship Gambling Act prohibits any citizen, resident of the United
States or any other person within the jurisdiction of the United States from
establishing, operating or owning an interest in a gambling ship on the high
seas or otherwise within the jurisdiction of the United
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States. The Ship Gambling Act defines a gambling ship as "a vessel used
principally for the operation of one or more gambling establishments." Any
person who violates the Ship Gambling Act is subject to a fine of up to $10,000
or imprisonment of not more than two years and the vessels used in violation of
the Ship Gambling Act could be forfeited to the United States government. There
are no formal or informal regulations or legal or administrative opinions as to
the application of the Ship Gambling Act to business operations such as those
conducted by Leisure Time's gaming cruise vessels.
If Leisure Time's offshore gaming cruises were found by a court to
violate the Ship Gambling Act, the vessels owned and/or chartered by Leisure
Time could be forfeited to the United States without compensation, or Leisure
Time would be required to change its operations. A material change in Leisure
Time operations, such as the removal of gaming equipment from vessels, could
result in a material decrease in revenue.
PROPRIETARY RIGHTS
Leisure Time's success depends in part on its proprietary technology.
Leisure Time relies on a combination of:
o copyrights;
o trade secret and trademark law;
o nondisclosure agreements; and
o technical safeguards
to protect its software, documentation and other written materials.
As a part of its confidentiality procedure, Leisure Time generally
enters into nondisclosure agreements with its employees and consultants and
limits access to its software, documentation and other written materials.
Despite Leisure Time's efforts to protect its proprietary rights,
unauthorized third parties may be able to copy its products or to reverse
engineer or obtain and use information that Leisure Time regards as proprietary.
Leisure Time cannot provide assurances that competitors will not independently
develop technology that is substantially equivalent or superior to Leisure
Time's technology. Policing unauthorized use of Leisure Time's products is
difficult. Leisure Time is unable to determine the extent to which software
piracy of its products exists. Software piracy may be a continuing and
persistent problem.
Leisure Time has no patents and has one patent application pending for
a type of keno game that is not currently being offered by Leisure Time. In
addition, Leisure Time plans to file an additional patent application in the
near future. Leisure Time may not be issued any patents
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and any patents issued may not provide Leisure Time with coverage that will be
useful to protect Leisure Time against infringement by others.
Leisure Time has obtained trademark registration from the United States
Patent and Trademark Office for the names of certain video gaming machine games.
The registrations terminate at various times in 2008. Leisure Time has also
applied to the United States Patent and Trademark Office to register the names
Leisure Time Casinos & Resorts, Leisure Time Gaming, Leisure Time Technology and
Leisure Time Cruise.
Leisure Time believes that, due to the rapid pace of innovation within
its industry, factors such as the technological and creative skills of its
personnel are more important to establishing and maintaining a technological
leadership position within the industry than are the various legal protections.
HISTORY OF LEISURE TIME'S ACQUISITIONS
ACQUISITION OF LEISURE TIME TECHNOLOGY. In September 1996, Leisure Time
acquired Leisure Time Technology (which was then known as U.S. Games, Inc.) in a
transaction in which a wholly-owned subsidiary of Leisure Time merged into
Leisure Time Technology. The total consideration that was to be paid by Leisure
Time was approximately $1.7 million in cash at closing, contingent payments
which totaled $2.5 million and $4.1 million in notes payable. The agreements
pertaining to the contingent payments had a provision which entitled Leisure
Time to an early payment discount. Leisure Time exercised the provision and paid
a total of $2.9 million during the year ended June 30, 1997, to extinguish any
further obligations remaining under the contingent payment agreements.
As a part of the transaction, Leisure Time also entered into $1.6
million of deferred compensation contracts with certain individuals. These
contracts provided for the payment of defined amounts, generally for a period of
up to six years, commencing on a monthly basis in November 1996. As of December
31, 1998, Leisure Time had paid a total of $1.1 million pursuant to the deferred
compensation agreements.
Also, in connection with the acquisition, Leisure Time entered into a
noncompete agreement with the former stockholder of Leisure Time Technology. The
agreement is payable through September 2006 in 10 annual installments of
$730,000 which includes interest imputed at 6.64%. As of December 31, 1998,
Leisure Time had paid a total of $1.5 million pursuant to the noncompete
agreement.
In order to generate a portion of the cash necessary for the
acquisition, Leisure Time borrowed $1.6 million pursuant to two different series
of 11% convertible promissory notes. The first series of notes aggregating
$210,000 was convertible into units consisting of one share of common stock and
a warrant to purchase one share of common stock at a conversion rate of $2.50
per share. Through March 31, 1999, these notes were converted into 76,978 shares
of common stock and warrants to purchase 76,978 shares of common stock at $2.50
per share. The second series of notes aggregating $1.4 million was convertible
into units, at a price of $1.25 per
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unit, consisting of one share of common stock and a warrant to purchase shares
of Leisure Time's common stock at prices of $1.75 and 120% of the offering price
of an initial public offering of common stock by Leisure Time. The second series
of notes contained an anti-dilution provision that required the issuance of
additional warrants upon certain circumstances after shares and shares issuable
on exercise of outstanding options and warrants exceeded a total of 10,000,000
shares of common stock exclusive of the 120% warrants. After a default in
payment on the original principal amount of the second series of notes, $1.2
million of the notes in default were called for acceleration and Leisure Time
paid the remaining interest and principal due in January, 1999.
ACQUISITION OF VESSELS. Leisure Time owns the Leisure Lady and the
Biloxi Belle. The Leisure Lady was acquired by Leisure Time in February 1997 for
a total consideration of approximately $2.6 million in cash and 150,000 shares
of Leisure Time's common stock. The Biloxi Belle was acquired in December 1998
for approximately $1.5 million in cash.
In May 1999, Leisure Time purchased the outstanding stock of the
corporation that owns the Vegas Express. The total consideration was $2.1
million in cash, 80,000 shares of common stock and three year warrants to
purchase 80,000 shares of common stock at $10.00 per share. Leisure Time and the
previous owner also agreed that the previous owner would pay 50% of any of the
disclosed liabilities of the corporation that exceed $1.45 million. Prior to the
acquisition of the Vegas Express, Leisure Time had a bareboat charter agreement
for the use of the Vegas Express. The agreement commenced on April 22, 1998 and
was extended through April 21, 1999. Charter payments were $100,000 per month
until January 1999, at which time they decreased to $50,000 per month. In
addition to the charter payments, beginning in January 1999, Leisure Time paid
the owner of the Vegas Express a set fee per passenger per month in excess of
12,000 passengers. In addition to the monthly charter payments payable under the
bareboat charter agreement, Leisure Time advanced approximately $50,000 to the
owner of the Vegas Express in December 1998. Leisure Time had a third mortgage
of approximately $1.7 million on the Vegas Express which was released when
Leisure Time acquired the corporation. Leisure Time also entered into a three
month consulting agreement with the sole stockholder of the owner of the Vegas
Express pursuant to which Leisure Time paid the sole stockholder $55,000 per
month for the months of February and March 1999.
ACQUISITION OF GAMING ROUTE OPERATION. In February 1999, Leisure Time
acquired a gaming route consisting of 12 locations containing 47 video gaming
machines in South Carolina from Phillip C. Caldwell, the Vice President and
Chief Operating Officer of Leisure Time Gaming. Mr. Caldwell had acquired these
locations and video gaming machines in October 1998, for $70,000. Leisure Time
paid Mr. Caldwell $39,000 for the gaming route operation by forgiving debt owed
by Mr. Caldwell to Leisure Time.
Leisure Time has received unaudited revenue of approximately $35,000
and $7,000 from its gaming route operations for the months of February and March
1999.
ACQUISITION OF HOTEL. Leisure Time acquired the hotel property for
approximately $1,020,000, of which approximately $500,000 has been paid. The
balance was paid by the
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execution of a promissory note in the amount of $545,000 that bears interest at
10% per annum and is due in September 2003.
ACQUISITION OF FINANCE COMPANY. In April 1999, Leisure Time acquired
all of the outstanding stock of RP Capital from David M. Pote in exchange for
100,000 shares of Leisure Time's common stock and an option to purchase 100,000
shares of common stock at $6.00 per share. The option vests as to 20,000 shares
on each of the first through fifth anniversaries of the grant date and expires
ten years after each respective vesting date. The option terminates as to any
unvested portion if Mr. Pote ceases to be either a director, officer or employee
of Leisure Time or one if its subsidiaries. In addition, Leisure Time provided
additional funding to RP Capital and RP Capital paid Mr. Pote approximately
$153,000 due on a loan from Mr. Pote to RP Capital. RP Capital and Mr. Pote
entered into a three-year employment agreement in April 1999 under which Mr.
Pote serves as the Senior Vice President of RP Capital. Mr. Pote receives a base
salary of $125,000 per year plus benefits. The employment agreement contains a
non-competition clause prohibiting Mr. Pote from competing with Leisure Time
during the term of the employment agreement and for a period of six months
thereafter.
FACILITIES
The following chart provides information pertaining to the facilities
currently leased by Leisure Time:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION USE SQUARE FOOTAGE MONTHLY RENTAL LEASE EXPIRATION
- -------- --- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Norcross, GA Executive offices and 57,000 $20,663 1/2005
manufacturing facility
Norcross, GA Offices 7,200 $ 3,900 4/2000
Tulsa, OK Offices and research and 2,500 $ 3,125 2/2002
development
Spartanburg, SC Offices and warehouse 9,000 $ 3,600 12/1999
Gloucester, MA Dock and parking N/A $10,300 12/2000
Hyannis, MA Restaurant and apartments 5,000 $16,667 4/2000
Marina N/A plus passenger
fees
Hyannis, MA Office 1,860 $ 2,248 4/2000
</TABLE>
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<TABLE>
<CAPTION>
APPROXIMATE
LOCATION USE SQUARE FOOTAGE MONTHLY RENTAL LEASE EXPIRATION
- -------- --- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Hyannis, MA Employee housing 5,000 $ 2,500 4/2000
Dania, FL Dock, ticket booth and N/A $ 6,500 plus 5/2000
boarding area rent based upon
number of
passengers
Edina, MN Office 1,533 $ 2,107 5/2002
Avon, OH Office 1,250 $ 1,500 Month to month
New Orleans, LA Condominium/office 4,200 $ 2,500 10/2002
</TABLE>
Leisure Time also owns a hotel property in Cleveland, Ohio, that is
encumbered by a mortgage of approximately $545,000.
EMPLOYEES
As of March 31, 1999, Leisure Time employed 234 persons, 181 of whom
were employed on a full time basis. The approximate number of employees in each
operation follows:
o 48 in manufacturing;
o 17 in engineering and research and development;
o 115 in offshore gaming;
o 7 in gaming routes;
o 15 in renovating the hotel;
o 1 in equipment financing; and
o 9 in sales and marketing.
The balance are management employees and staff that are involved in executive
management and administration of Leisure Time. There are no union or collective
bargaining agreements between Leisure Time and its employees and employee
relations are considered by Leisure Time to be excellent.
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LITIGATION
On October 30, 1996, Drews Distributing, Inc. filed a complaint against
Leisure Time Technology, Inc. in the United States District Court for the
District of South Carolina (Case No.: 7 96 3307 13) in which Drews alleged,
among other things, that Leisure Time Technology breached the Exclusive
Distribution Agreement dated November 27, 1995, that was entered into between
Leisure Time Technology (which was then known as U.S. Games, Inc.) and Drews.
After a trial to the Court, the Court found that Leisure Time Technology
breached the agreement by selling the Pot O Gold video game machines to others
in South Carolina. The Court held that, as a direct and proximate result of such
breach, Drews suffered actual damages in the amount of approximately $3.1
million. Leisure Time Technology appealed the decision to the United States
Court of Appeals for the Fourth Circuit (Record No. 97-2391) which affirmed the
judgment. Leisure Time Technology has filed a petition for rehearing by the
Fourth Circuit.
On October 19, 1998, James J. Oden, the former Vice President, Chief
Operating Officer, Chief Financial Officer, Treasurer and Secretary of Leisure
Time Technology filed a complaint against Leisure Time and Leisure Time
Technology in the United States District Court for the Northern District of
Georgia (Civil Action File No. 1 98-CV-3033) alleging that Leisure Time and
Leisure Time Technology had breached an alleged employment agreement with Mr.
Oden because Leisure Time granted incentive stock options to Mr. Oden for
200,000 shares exercisable at $2.50 per share rather than nonqualified stock
options for 200,000 shares exercisable at $1.00 per share. Further, Mr. Oden
alleges that the stock options he should have received should have been
exercisable without being conditioned upon a particular schedule and should not
have expired upon the termination of his employment. Mr. Oden alleges that he
has been damaged in an undetermined amount. Leisure Time and Leisure Time
Technology have filed an answer denying Mr. Oden's claims and intend to
vigorously defend the lawsuit.
On June 10, 1998, Collins Entertainment Corp. filed a complaint against
Leisure Time Technology in the Court of Common Pleas for the Fifth Judicial
Circuit, Richland County, State of South Carolina. Collins alleges, among other
things, that Leisure Time Technology breached the Sales Distribution Agreement
dated May 13, 1992 that was entered into between Leisure Time Technology (which
was then known as U.S. Games, Inc.) and Collins by not supplying Collins with
Pot O Gold machines for resale in South Carolina. Collins further alleges that
Leisure Time Technology used unfair and/or deceptive means of restraining trade
in violation of the South Carolina Unfair Trade Practices Act by limiting the
supply of Pot O Gold machines in South Carolina. Collins requests that it be
granted damages in an amount to be determined at trial and that the damages be
trebled. In interrogatory responses, Collins alleges that its actual damages are
approximately $1.3 million. Collins also requested that it be granted a
temporary restraining order and preliminary injunction against Leisure Time
Technology.
Leisure Time Technology had the Collins action removed to the United
States District Court for the District of South Carolina, Anderson Division
(Civil Action No.: 3-98-1887-17). In September 1998, the Court denied Collins'
request for a temporary restraining order and preliminary injunction. Leisure
Time Technology has filed an Answer and Counterclaim in which Leisure Time
Technology denies various allegations, asserts various affirmative defenses
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and counterclaims that Collins sold new Pot O Gold games as used games thereby
constituting an unfair and deceptive act in trade or commerce in South Carolina
in violation of the South Carolina Unfair Trade Practices Act. Leisure Time
further alleges that Collins' actions in selling Pot O Gold games in violation
of the terms of the Agreement resulted in a judgment being entered against
Leisure Time in favor of Drews in the amount of approximately $3.1 million and
constituted tortious interference with contract. Leisure Time requests that it
be granted damages to be determined at trial and that the damages be trebled.
On March 24, 1999, the Court struck various of Leisure Time
Technology's answers as being res judicata or collaterally estopped because of
the 1996 Drews litigation and dismissed Leisure Time Technology's counterclaims
mentioned above. Leisure Time Technology has filed a motion for reconsideration
or in the alternative, for immediate appeal.
On December 14, 1998, Leisure Time Technology filed a lawsuit against
Drews in the Superior Court of Gwinnett County, State of Georgia (Civil Action
No.: 98-A-97614) in which Leisure Time Technology alleges that Drews breached
the Exclusive Distribution Agreement dated November 27, 1995, by failing to pay
Leisure Time Technology $2.7 million for a portion of the memory board upgrade
kits for Pot O Gold machines that Drews had ordered from Leisure Time Technology
and by failing to pay Leisure Time Technology $5 million for a portion of the
Pot O Gold machines Drews had ordered from Leisure Time Technology. Leisure Time
Technology also alleges that Drews misappropriated "trade secrets" of Leisure
Time Technology. Leisure Time Technology requests that Leisure Time Technology
be granted damages to be proved at trial, interest and attorneys' fees, specific
performance and an order enjoining the misappropriation.
Drews has filed an answer and counterclaim in this action in which
Drews alleges that Leisure Time Technology has continued to breach the
agreement, that Leisure Time Technology's breach was accompanied by a fraudulent
act and that Leisure Time Technology committed fraudulent nondisclosure of
material facts in connection with the agreement. Drews is claiming actual
damages in an amount to be proved at trial for the loss of sales, for the
diminution of the price of games sold by Drews due to a loss of exclusivity, for
the refusal of Leisure Time Technology to sell games at the contract price and
due to the sales by Collins and other in violation of the agreement. Drews is
also requesting punitive damages. Drews' counterclaims are similar to the claims
by Drews in the case in which Drews recovered a judgment in the amount of
approximately $3.1 million. In that case, the Court made no finding of any
fraudulent acts by Leisure Time Technology.
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MANAGEMENT
The directors, executive officers, other officers and key employees of
Leisure Time and its subsidiaries are as follows:
<TABLE>
<CAPTION>
DIRECTORS AND
EXECUTIVE OFFICERS
OF LEISURE TIME AGE POSITION
- ------------------ --- --------
<S> <C> <C>
Alan N. Johnson 58 Chairman of the Board, President and Chief Executive Officer
Elden W. Rance 61 Executive Vice President, Chief Financial Officer, Treasurer,
Assistant Secretary and Director
R. Thomas Klingel 52 Executive Vice President of Engineering, Research and Development and
Director
Gerald J. Boyle 67 Vice President, Secretary and Director
Richard D. Sly 64 Assistant Secretary and Director
Lester E. Bullock 45 Director
</TABLE>
<TABLE>
<CAPTION>
OTHER OFFICERS
AND KEY EMPLOYEES AGE POSITION
- ----------------- --- --------
<S> <C> <C>
Phillip C. Caldwell 36 Vice President and Chief Operating Officer of Leisure Time Gaming
Anne M. Ellison 41 Vice President of Human Resources of Leisure Time
Joseph C. Grunda 47 Vice President of Licensing and Compliance/ General Counsel of Leisure
Time
Keko Mottes 48 Vice President of Sales and Marketing of Leisure Time
Mary J. Olszewski 41 Controller of Leisure Time
John J. Pasierb 52 Vice President of Engineering and Research and Development of Leisure
Time
David M. Pote 55 Senior Vice President of RP Capital
John W. Salter 44 Vice President of Operations of Leisure Time Technology
Gary W. Watkins 45 President and Director of Solutia Gaming Systems
</TABLE>
Leisure Time is amending its Articles of Incorporation so that the
directors will be elected for a three-year term, with approximately one-third of
the board of directors standing for
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election each year. Each director holds office until the expiration of the
director's term, until the director's successor has been duly elected and
qualified or until the earlier of their resignation, removal or death. All of
Leisure Time's officers and key employees, except Richard D. Sly, spend
substantially all of their time on Leisure Time's business and affairs.
ALAN N. JOHNSON has been the Chairman of the Board and President of
Leisure Time since 1993 and the Chief Executive Officer of Leisure Time since
1997. Mr. Johnson is also a director and an officer of Leisure Time's operating
subsidiaries. Mr. Johnson studied transportation law at Fenn College,
Engineering at Case Western Reserve and hazardous materials removal and control
at Georgia Institute of Technology.
ELDEN W. RANCE has been the Executive Vice President, Chief Financial
Officer, Treasurer and a director of Leisure Time since 1998 and an Assistant
Secretary of Leisure Time since 1999. Mr. Rance is also a director and an
officer of Leisure Time's operating subsidiaries. From 1988 to 1998, Mr. Rance
was employed as the President of Rance & Associates, a financial consulting firm
that specialized in expert evaluations for banking litigation, finance
acquisition and reorganizations. From 1989 to 1994, Mr. Rance was the Chairman
and Chief Executive Officer of RP Capital Corporation, a full service regional
leasing company that Leisure Time acquired in April 1999. Mr. Rance graduated
from the Graduate School of Commercial Lending of the University of Oklahoma and
the Graduate School of Banking of the University of Colorado.
R. THOMAS KLINGEL has been the Executive Vice President of Engineering,
Research and Development since 1999 and a director of Leisure Time since 1997.
From 1997 to 1999, Mr. Klingel was Executive Vice President of Marketing, Sales,
Compliance and Licensing of Leisure Time. From 1992 to 1996, Mr. Klingel was
Executive Vice President of U.S. Games, Inc. which is now Leisure Time
Technology, Inc. Mr. Klingel attended Western Michigan University and received a
master of business administration degree in management and international studies
from Georgia State University.
GERALD J. BOYLE has been the Vice President and the Secretary of
Leisure Time since 1997 and a director of Leisure Time since 1994. From 1987 to
the present, Mr. Boyle has been an independent accountant with a concentration
in consulting for small emerging companies. Mr. Boyle graduated with a bachelor
of commerce degree in accounting from Sir George William University.
RICHARD D. SLY has been an Assistant Secretary of Leisure Time since
1997 and a director of Leisure Time since 1993. Mr. Sly was a Vice President of
Leisure Time from 1993 to 1997 and the Secretary of Leisure Time from 1993 to
1997. Mr. Sly has been employed by Richard Sly Architect, Inc., an architectural
firm owned by him, since 1970. Mr. Sly graduated with a bachelor of architecture
degree from Ohio State University. In addition to providing architectural
services for the hotel for which Mr. Sly is compensated separately, Mr. Sly
provides services as a part time employee of Leisure Time.
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<PAGE> 84
LESTER E. BULLOCK has been a director of Leisure Time since 1998 and
has been a Vice President and the Chief Operating Officer of Leisure Time Cruise
Corporation since 1998. From 1994 to 1998, Mr. Bullock was the President and
Chief Executive Officer and a director of Europa Cruise Corporation, a day
cruise operator. From 1992 to 1994, Mr. Bullock was the General Manager and then
the Vice President of Operations of Europa Cruise Corporation. Mr. Bullock
received a bachelor of science degree in business administration from Arizona
State University.
PHILLIP C. CALDWELL has been the Vice President and Chief Operating
Officer of Leisure Time Gaming, Inc. and an employee of Leisure Time since 1998.
From 1995 to 1998, Mr. Caldwell was the Vice President and COO of Thunderbird
Carolina Inc., a distributor of gaming machines. From 1982 to 1995, he was the
Vice President of Operations of Drews Distributing Company, a distributor of
gaming machines. Mr. Caldwell attended Richmond Technical Center and Spartanburg
Technical College.
ANNE M. ELLISON has been the Vice President of Human Resources of
Leisure Time since 1998. From 1997 to 1998, Ms. Ellison was the Human Resources
Manager for Intellisourse, an outsourcing service provider. From 1988 to 1997,
Ms. Ellison was the Human Resources Manager for Oglethorpe Power, a private
electric utility. Ms. Ellison graduated from Georgia State University with a
bachelor of science in office administration.
JOSEPH C. GRUNDA has been the Vice President of Licensing and
Compliance/General Counsel of Leisure Time since 1999. From 1981 to 1999, Mr.
Grunda was a partner in the law firm of Grunda & Grunda. Mr. Grunda graduated
from the College of Wooster with a bachelor of arts degree and from Ohio
Northern University with a doctor of jurisprudence degree.
KEKO MOTTES has been the Vice President of Sales and Marketing of
Leisure Time since 1999. From 1998 to 1999, Mr. Mottes was the Vice President of
International Sales and New Market Development of Leisure Time Technology, Inc.
From 1987 to 1998, Mr. Mottes was the Director of International Sales at Bally
Gaming, Inc., a gaming machine manufacturer. Mr. Mottes attended The High
Technical Institute of San Michele, Italy and also holds a Slot and
Coin-Operated Electro Technician Certification from Bally Continental, Ltd. in
Belgium.
MARY J. OLSZEWSKI has been the Corporate Controller of Leisure Time
since 1998 and was the Controller of Leisure Time Technology from 1994 to 1998.
Ms. Olszewski graduated from Michigan Technological University with a bachelor
of science in business administration.
JOHN J. PASIERB has been the Vice President of Engineering and Research
and Development of Leisure Time since 1999. From 1998 to 1999, Mr. Pasierb was
the Vice President of Engineering and Research and Development of Leisure Time
Technology. From 1994 to 1998, Mr. Pasierb was the President of Acclaim
Coin-Operated Amusement, a wholly-owned subsidiary of Acclaim Entertainment.
From 1992 to 1994, Mr. Pasierb was Vice President of Engineering of American
Laser Games. Mr. Pasierb graduated with a master of science degree in
engineering from Western Michigan University.
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<PAGE> 85
DAVID M. POTE has been the Senior Vice President of RP Capital
Corporation since 1999. Mr. Pote was the President, a director and the majority
owner of RP Capital Corporation for over the past five years.
JOHN W. SALTER has been the Vice President of Operations of Leisure
Time Technology since 1999. From 1997 to 1998, when he became employed by
Leisure Time Technology, Mr. Salter was the plant manager for ACCO, NA, a
manufacturer of office storage boxes. Prior to 1996, Mr. Salter was an
operations manager for the Simmons Company, a mattress manufacturer. Mr. Salter
graduated with a bachelor of science degree in administrative management from
Clemson University.
GARY W. WATKINS has been the President and a director of Solutia Gaming
Systems, Inc. since 1998. From 1996 to 1998, Mr. Watkins was the President of
Worldlink Gaming, Inc., a Class II electronic game developer. From 1994 to 1996,
Mr. Watkins was the Vice President of Research and Development of Multimedia
Games, Inc., a Class II electronic game developer. Mr. Watkins graduated with a
degree in business management from the University of Tulsa.
COMMITTEES OF THE BOARD OF DIRECTORS
Leisure Time plans to add at least two non-employee directors. The
board of directors will then create and maintain a compensation committee and an
audit committee. The compensation committee and the audit committee will be
composed of at least the two non-employee directors. The primary functions of
the compensation committee will be to review and make recommendations to the
board of directors with respect to the compensation, including bonuses, of
Leisure Time's officers and to administer the grants under Leisure Time's stock
option plan. The functions of the audit committee will be to review the scope of
the audit procedures employed by Leisure Time's independent auditors, to review
with the independent auditors Leisure Time's accounting practices and policies
and recommend to whom reports should be submitted within Leisure Time, to review
with the independent auditors their final audit reports, to review with Leisure
Time's internal and independent auditors Leisure Time's overall accounting and
financial controls, to be available to the independent auditors during the year
for consultation, to approve the audit fee charged by the independent auditors,
to report to the board of directors with respect to such matters and to
recommend the selection of the independent auditors.
COMPENSATION OF DIRECTORS
Leisure Time does not currently pay its directors any cash compensation
for their services as directors. Leisure Time expects to compensate directors in
the future with cash and options to purchase Leisure Time's common stock.
Directors are reimbursed for expenses incurred in connection with meetings of
the board of directors or committees thereof.
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<PAGE> 86
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to this offering, Leisure Time had no compensation committee and
all of the directors of Leisure Time who were officers of Leisure Time during
the fiscal year ended June 30, 1998, participated in deliberations of Leisure
Time's board of directors concerning executive officer compensation.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid by Leisure Time for services rendered in all capacities to
Leisure Time and its subsidiaries for the fiscal years ended June 30, 1998,
1997, and 1996 to those persons who were (i) the chief executive officer of
Leisure Time during the fiscal year ended June 30, 1998, and (ii) the other most
highly compensated executive officers of Leisure Time whose annual salary and
bonus paid by Leisure Time exceeded $100,000 for the fiscal year ended June 30,
1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
YEAR ANNUAL COMPENSATION ------------------
NAME AND PRINCIPAL POSITIONS ENDED ------------------------ SECURITIES
AT JUNE 30, 1998 JUNE 30, SALARY BONUS UNDERLYING OPTIONS
- ---------------------------- -------- -------- -------- ------------------
<S> <C> <C> <C> <C>
Alan N. Johnson 1998 $357,544 $ 3,847 --
Chairman of the Board, President and Chief 1997 483,881 -- 206,400
Executive Officer 1996 94,180 -- 41,556
R. Thomas Klingel 1998 $177,024 $ 2,597 --
Executive Vice President of Marketing, Sales, 1997 370,865 -- 204,300
Compliance and Licensing 1996 155,950 25,713 --
Gerald J. Boyle 1998 $157,500 $ -0- --
Vice President and Secretary 1997 145,317 -- --
1996 53,950 -- 110,292
Anthony J. Siciliano 1998 $117,519 $ -0- --
Executive Vice President until March, 1998 1997 75,000 -- --
1996 -- 115,000
James J. Oden 1998 $186,948 $ 3,462 --
Vice President, Chief Operating Officer, Chief 1997 256,157 -- 205,800
Financial Officer, Treasurer and Secretary of 1996 29,200 -- --
Leisure Time Technology, Inc. until June 1998
</TABLE>
Leisure Time provides Alan N. Johnson and R. Thomas Klingel with
automobiles and pays related insurance and maintenance therefor. Leisure Time
also provided James J. Oden with an automobile and paid the insurance and
maintenance thereon until his position as an
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<PAGE> 87
executive officer with Leisure Time terminated. The total amounts paid by
Leisure Time for the automobiles, insurance and maintenance for the fiscal years
ended June 30, 1997 and 1996 for each individual did not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus paid to each individual.
The options granted to Messrs. Johnson, Boyle and Siciliano during the
fiscal year ended June 30, 1996, were granted in April 1997 at the time that
they contributed $103,890, $275,730 and $287,500, respectively, of salaries
accrued from January 1993 to December 31, 1996 to the capital of Leisure Time.
Each of the options is exercisable at $2.50 per share until April 1, 2007.
<TABLE>
<CAPTION>
FISCAL YEAR END OPTION VALUES
--------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------------------------- ------------------------------
<S> <C> <C> <C> <C>
Alan N. Johnson 1,060,456 / 0 $ 11,291,162 /$ 0
R. Thomas Klingel 84,300 /120,000 $ 799,560 /$ 1,140,000
Gerald J. Boyle 50,292 / 0 $ 477,774 /$ 0
Anthony J. Siciliano 75,000 / 0 $ 712,500 /$ 0
James J. Oden 85,800 /120,000 $ 813,000 /$ 1,140,000
</TABLE>
The value of options is based on an assumed initial public offering
price of $12.00 per share of the common stock less the exercise prices of the
options.
No options to purchase Leisure Time's common stock were exercised by
Messrs. Johnson, Klingel, Boyle, Siciliano or Oden during Leisure Time's fiscal
year ended June 30, 1998.
OPTION GRANTS IN THE LAST FISCAL YEAR
No options were granted by Leisure Time to Alan N. Johnson, R. Thomas
Klingel, Gerald J. Boyle, Anthony J. Siciliano or James J. Oden during Leisure
Time's fiscal year ended June 30, 1998.
EMPLOYMENT AGREEMENTS
Alan N. Johnson has an employment agreement with Leisure Time that
terminates on June 30, 2003. Elden W. Rance, R. Thomas Klingel, Gerald J. Boyle
and Richard D. Sly have employment agreements with Leisure Time that terminate
on June 30, 2001. Under the
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employment agreements, the current annual base salaries of Alan N. Johnson,
Elden W. Rance, R. Thomas Klingel, Gerald J. Boyle and Richard D. Sly are
$600,000, $300,000, $150,000, $165,000 and $41,250, respectively. Each of the
employment agreements is renewed automatically after its termination date for
succeeding one year periods unless Leisure Time or the employee gives written
notice of nonrenewal at least 180 days prior to the expiration of any such
renewal date. Each of the employment agreements contains provisions that the
employee will not disclose confidential information and will not compete with
Leisure Time for various periods after termination or expiration of their
employment agreements.
Each of the employment agreements contains a provision that, at any
time after a "change in control" of Leisure Time, the employee has the option to
cause Leisure Time to repurchase all or any portion of the common stock of
Leisure Time then owned by the employee at the higher of (i) the book value
thereof as of the last day of the month prior to the date of notice, or (ii) the
last sale price of a share of Leisure Time's common stock or the last price at
which the common stock was sold by Leisure Time or by a stockholder of Leisure
Time to any person (other than the employee). Also, upon a change of control of
Leisure Time, each employee is automatically granted options to purchase the
same number of shares of Leisure Time's common stock as are issuable upon
exercise of options to purchase Leisure Time's common stock then owned by the
employee. Such new options will have a ten year exercise period and an exercise
price of $0.01 per share.
A "change in control" is deemed to have occurred if:
o at any time any one person, or more than one person acting as
a group, acquires beneficial ownership of the voting
securities of Leisure Time that together with the voting
securities beneficially owned by such person or group,
constitute more than 20% of the total voting power of Leisure
Time's outstanding voting securities;
o the appointment or election of a majority of the members of
Leisure Time's board of directors who are appointed or elected
during any 24 month period but are not endorsed in writing by
a majority of those members of Leisure Time's board of
directors who were directors prior to the date of the
appointment or election of the first such new directors
comprising a majority of the board of directors; or
o one person or more than one person acting as a group, acquires
(or has acquired during the 12 month period ending on the date
of the most recent acquisition by such person or persons)
assets from Leisure Time that have a total fair market value
equal to or greater than one-third of the total fair market
value of all of Leisure Time's assets immediately before the
acquisition or acquisitions.
Joseph C. Grunda has an employment agreement with Leisure Time that
terminates on February 28, 2002. Keko Mottes and John J. Pasierb have employment
agreements with Leisure Time that terminate on January 31, 2002. John W. Salter
has an employment agreement with
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Leisure Time that terminates on December 7, 2001. David M. Pote, Jr. has an
employment agreement with Leisure Time that terminates on April 1, 2002. Each of
these employment agreements contains provisions that the employee will not
disclose confidential information and will not compete with Leisure Time for
various periods after termination or expiration of their employment agreements.
CONSULTING AGREEMENT
Effective March 31, 1998, Leisure Time entered into a consulting
agreement with Anthony J. Siciliano, the former Executive Vice President and a
former director of Leisure Time. Pursuant to the consulting agreement, Mr.
Siciliano is required to provide a maximum of ten hours of management consulting
per week for Leisure Time and its subsidiaries. Mr. Siciliano is paid an amount
of $5,000 per month, together with the amount he pays to maintain his current
health insurance, and any out-of-pocket expenses incurred by him in performing
his consulting duties. The consulting agreement automatically terminates on
December 31, 2008.
STOCK OPTION PLAN
Leisure Time has an incentive and nonstatutory stock option plan that
authorizes Leisure Time to grant incentive stock options within the meaning of
Section 422A of the Internal Revenue Code of 1986, as amended, and to grant
nonstatutory stock options. The stock option plan currently relates to a total
of 1,000,000 shares of common stock. The board of directors has approved
increasing to 4,500,000 the shares available under the plan. The increase is
subject to the approval of the stockholders. Leisure Time has agreed with the
representative that all options granted under the plan after the date of this
prospectus until options to purchase a total of 3,000,000 shares have been
granted will be granted at no less than fair market value. Thereafter and until
the next meeting of Leisure Time's stockholders, any options granted relating to
the next 1,500,000 shares only may be granted at no less than the greater of the
fair market value of the common stock on the date of grant or 120% of the public
offering price of the common stock.
Options to purchase 2,197,300 shares of common stock have been granted
under the plan and are outstanding. The options are exercisable at between $2.50
and $10.00 per share, vest over various periods of time and terminate between
2003 and 2008. Of the outstanding options granted under the stock option plan,
executive officers of Leisure Time have been granted options to purchase 773,200
shares of common stock and other employees have been granted options to purchase
1,424,100 shares of common stock. The outstanding options have a weighted
average exercise price of approximately $6.71 per share.
The stock option plan is administered by Leisure Time's board of
directors or a committee thereof which determines the terms of options granted,
including the exercise price, the number of shares of common stock subject to
the option, and the terms and conditions of exercise. No option granted under
the stock option plan is transferable by the optionee other than by will or the
laws of descent and distribution and each option is exercisable during the
lifetime of the optionee only by such optionee. The board of directors currently
administers the stock option plan.
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Leisure Time has also granted nonqualified options to purchase
2,487,348 shares of Leisure Time's common stock outside of the stock option
plan. Of these options, executive officers of Leisure Time have been granted
options to purchase 1,147,348 shares of common stock that are exercisable at
between $1.00 to $2.50 per share, are fully vested and terminate between 2005
and 2013. These options have a weighted average exercise price of approximately
$1.44 per share.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to the provisions of the Colorado Business Corporation Act,
Leisure Time has adopted provisions in its articles of incorporation which
provide that its directors will not be personally liable to Leisure Time or its
stockholders for monetary damages for a breach of fiduciary duty as a director,
except that the provisions will not eliminate or limit the directors' liability
as a result of:
o a breach of the director's duty of loyalty to Leisure Time or
its stockholders;
o acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
o voting for or assenting to a distribution, which, after giving
effect to the distribution, would result in (a) Leisure Time
not being able to pay its debts as they become due in the
usual course of business, or (b) Leisure Time's total assets
being less than the sum of its total liabilities plus amounts
needed to satisfy preferential rights upon dissolution of
Leisure Time; or
o any transaction from which the director directly or indirectly
derives any improper personal benefit.
Leisure Time's articles of incorporation state that Leisure Time shall
indemnify, to the maximum extent permitted by law, any person who is or was a
director, officer, agent, fiduciary or employee of Leisure Time against any
claim, liability or expense arising against or incurred by such person made
party to a proceeding because such person served in any of such capacities or
because the person is or was serving another entity as a director, officer,
partner, trustee, employee, fiduciary or agent at Leisure Time's request. The
articles of incorporation also permit Leisure Time to purchase and maintain
insurance providing such indemnification. Leisure Time's bylaws also provide for
indemnification of such persons and for the advancement of expenses to such
persons.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and control persons of
Leisure Time pursuant to the foregoing provisions, or otherwise, Leisure Time
has been advised that in the opinion of the SEC, such
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<PAGE> 91
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
CERTAIN TRANSACTIONS
Effective November 1, 1997, Leisure Time entered into a lease with Alan
N. Johnson relating to a condominium/office for Leisure Time located in the New
Orleans, Louisiana area. The lease expires on October 31, 2002, and Leisure Time
pays Alan N. Johnson rent of $2,500 per month plus all association fees related
to the condominium/office. Prior to November 1, 1997, Leisure Time had been
reimbursing Mr. Johnson $1,600 per month for the lease payments and association
fees he paid for another condominium/office located in the New Orleans,
Louisiana area.
Leisure Time leases approximately 1,250 square feet of office space on
a month to month basis from Alan N. Johnson in Avon, Ohio, where the offices of
Alan N. Johnson and Gerald J. Boyle are located. Leisure Time pays $1,500 per
month for the office space pursuant to a lease that will terminate in March
2000.
Leisure Time leases 11 automobiles from J-Way Leasing, Ltd., a company
owned by Alan N. Johnson. The leases are for either 36 months or 48 months and
have various dates of expiration. Leisure Time reimburses J-Way Leasing, Ltd.
for the down payments J-Way Leasing, Ltd. pays on each of the automobiles and
pays J-Way Leasing, Ltd. a monthly payment equivalent to the monthly payments
that J-Way Leasing, Ltd. pays for each automobile. Leisure Time did not pay any
amount to J-Way Leasing, Ltd. during the fiscal year ended June 30, 1998. The
total amount paid by Leisure Time to J-Way Leasing, Ltd. for the six months
ended December 31, 1998, was $63,000.
In June 1998, Leisure Time became a party to a purchase agreement and
amendment in place of Alan N. Johnson to purchase Leisure Time's hotel property
located in the Cleveland, Ohio, area. In connection with the transaction,
Leisure Time reimbursed Alan N. Johnson $40,000 for the deposits he had made in
connection with the purchase agreement and amendment. At the time the hotel
property was purchased by Leisure Time, Alan N. Johnson was required to
guarantee the obligations of Leisure Time to the seller. Mr. Johnson received no
compensation for guaranteeing such obligations.
In September 1997, Leisure Time advanced $300,000 to Alan N. Johnson.
After the advance, Alan N. Johnson owed Leisure Time a total of $371,000 which
included the $300,000 advance, a note for $55,000 and $16,000 of expenses owed
by Mr. Johnson to Leisure Time. In 1998, Leisure Time credited against the
$371,000:
o $40,000 of rentals that were owed to Alan N. Johnson for the
condominium/office in New Orleans, Louisiana that Leisure Time
leases from Alan N. Johnson;
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o a deposit of $18,000 that Alan N. Johnson had paid on behalf
of Leisure Time to a potential acquisition candidate of
Leisure Time;
o $40,000 that Alan N. Johnson had deposited in connection with
the purchase of Leisure Time's hotel in the Cleveland, Ohio
area;
o $135,000 that Alan N. Johnson had paid on an invoice of
Leisure Time;
o $84,000 that offset accrued wages payable to Alan N. Johnson;
o $35,000 that offset rent that was payable to Alan N. Johnson;
o $6,000 that was paid as advances toward car rentals payable to
J-Way Leasing, Ltd.; and
o $13,000 for accrued interest payable to Alan N. Johnson.
In October 1998, Leisure Time Cruise Corporation borrowed $3 million
from Foothill Capital Corporation. The loan is secured by the assets of Leisure
Time Cruise Corporation, including the Leisure Lady, and is guaranteed by
Leisure Time Technology, Leisure Time and Alan N. Johnson. Mr. Johnson received
no compensation for guaranteeing the loan.
Mr. Johnson has also guaranteed a $1 million line of credit that
Leisure Time has with Merrill Lynch Business Financial Services, Inc. The line
of credit is secured by substantially all of the assets of Leisure Time and is
guaranteed by Leisure Time Technology, Leisure Time Cruise Corporation and Alan
N. Johnson. Mr. Johnson received no compensation for guaranteeing the line of
credit.
In May 1999, Leisure Express Cruise, LLC and Florida Casino Cruises,
Inc. borrowed a total of $5 million from Foothill Capital Corporation. The loans
are secured by the assets of Leisure Express Cruise, LLC and Florida Casino
Cruises, Inc., including the Vegas Express, and are guaranteed by Leisure Time,
Leisure Time Technology, Leisure Time Cruise Corporation and Alan N. Johnson.
Mr. Johnson received no compensation for guaranteeing the loans.
Alan N. Johnson owns 51% of Leisure Time Europe Ltd. which was formed
in February 1998 and acts as the distributor of Leisure Time's video gaming
machines to charities in Norway. Leisure Time sells the video gaming machines to
Leisure Time Europe, which adds a markup to the price and resells the video
gaming machines to the charities. The markup ranges from $400 to $1,200 per
video gaming machine depending on the number of video gaming machines sold to
the particular charity. Leisure Time Europe also services the video gaming
machines. From its inception through March 31, 1999, Leisure Time Europe has
realized a gross amount of approximately $$40,000 from markups on the video
gaming machines sold in Norway. The remaining 49% of Leisure Time Europe is
owned by unaffiliated parties.
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Commencing in July 1998, Leisure Time began to use the services of
Richard Sly Architect, Inc. to perform architectural services in connection with
Leisure Time's hotel property. Richard D. Sly is the Assistant Secretary and a
director of Leisure Time and owns Richard Sly Architect, Inc. Richard Sly
Architect, Inc. charges Leisure Time its standard fees for architectural
services rendered. The total amount paid by Leisure Time to Richard Sly
Architect, Inc. during the six months ended December 31, 1998 was approximately
$24,000.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of Leisure Time's common stock, as of the date of this
prospectus, and as adjusted to reflect the sale of 1,100,000 shares of common
stock offered by this prospectus, by:
o each person who is known by Leisure Time to own beneficially
more than 5% of Leisure Time's outstanding shares of common
stock;
o each of Leisure Time's executive officers and directors; and
o all executive officers and directors of Leisure Time as a
group.
Shares of common stock not outstanding but deemed beneficially owned by
virtue of the right of an individual to acquire the shares of common stock
within 60 days are treated as outstanding only when determining the amount and
percentage of common stock owned by such individual. Except as noted, each
person has sole voting and investment power with respect to the shares of common
stock shown.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK BENEFICIALLY
OWNED PRIOR TO THE OFFERING
------------------------------------
NAME AND ADDRESS PERCENTAGE OWNED
OF BENEFICIAL OWNER NUMBER PERCENT OF CLASS AFTER THE OFFERING
- ------------------- --------- ---------------- ------------------
<S> <C> <C> <C>
Alan N. Johnson 3,202,456 53.8% 45.4%
Elden W. Rance 562,500 10.3 8.6
R. Thomas Klingel 124,300 2.3 2.0
Gerald J. Boyle 350,292 7.1 5.8
Richard D. Sly 325,500 6.7 5.4
Lester E. Bullock 20,000 * *
Directors and Executive Officers as a
group (6 persons) 4,585,048 67.9 58.4
Anthony J. Siciliano 357,500 7.2 5.9
James J. Oden 100 *% *%
</TABLE>
*Less than 1%.
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<PAGE> 95
In the foregoing table the common stock beneficially owned by:
o Alan N. Johnson includes 1,060,456 shares of common stock
underlying presently exercisable options. Alan N. Johnson's
address is 1284 Miller Road, Avon, Ohio 44011.
o Elden W. Rance represents 562,500 shares of common stock
underlying a presently exercisable option. Elden W. Rance's
address is 4258 Communications Drive, Norcross, Georgia 30093.
o R. Thomas Klingel represents 124,300 shares of common stock
underlying presently exercisable options.
o Gerald J. Boyle includes 50,292 shares of common stock
underlying a presently exercisable option. Gerald J. Boyle's
address is 1284 Miller Road, Avon, Ohio 44011.
o Richard D. Sly includes 43,000 shares of common stock
underlying a presently exercisable option. Richard D. Sly's
address is 13920 West Lake Road, Vermillion, Ohio 44089.
o Lester E. Bullock represents 20,000 shares of common stock
underlying a presently exercisable option.
o The directors and executive officers includes the shares set
forth above.
o Anthony J. Siciliano includes 75,000 shares of common stock
underlying a presently exercisable option and includes 141,250
shares owned by Mr. Siciliano's wife, Mary E. Siciliano. Mr.
Siciliano's address is 18 Neil Drive, Smithtown, New York
11787.
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DESCRIPTION OF SECURITIES
The following summary description of Leisure Time's capital stock is
not complete and is qualified in its entirety by reference to Leisure Time's
articles of incorporation, as amended, and bylaws.
Leisure Time's authorized capital stock consists of 45,000,000 shares
of common stock and 5,000,000 shares of preferred stock, which Leisure Time may
issue in one or more series as determined by the board of directors. There are
currently 4,918,334 shares of common stock issued and outstanding that are held
of record by 152 stockholders.
COMMON STOCK
Each holder of record of common stock is entitled to one vote for each
share held on all matters properly submitted to the stockholders for their vote.
Cumulative voting in the election of directors is not authorized.
Holders of outstanding shares of common stock are entitled to those
dividends declared by the board of directors out of legally available funds,
and, in the event of liquidation, dissolution or winding up of the affairs of
Leisure Time, holders are entitled to receive ratably the net assets of Leisure
Time available to the stockholders. Holders of outstanding shares of common
stock have no preemptive, conversion or redemption rights. All of the issued and
outstanding shares of common stock are, and all unissued common stock, when
offered and sold will be, duly authorized, validly issued, fully paid and
nonassessable. To the extent that additional common stock of Leisure Time may be
issued in the future, the relative interests of the then existing stockholders
may be diluted.
PREFERRED STOCK
Leisure Time's board of directors is authorized to issue from time to
time, without stockholder authorization, in one or more designated series, any
or all of the authorized but unissued shares of preferred stock with such
dividend, redemption, conversion, and exchange provisions as may be provided by
the board of directors with regard to such particular series. Any series of
preferred stock may possess voting, dividend, liquidation and redemption rights
superior to those of the common stock. The rights of the holders of common stock
will be subject to and may be adversely affected by the rights of the holders of
any preferred stock that may be issued in the future. Issuance of a new series
of preferred stock, or providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could make it more difficult
for a third party to acquire, or discourage a third party from acquiring, the
outstanding common stock of Leisure Time and make removal of the board of
directors more difficult. No series of preferred stock has been designated, no
shares of preferred stock are currently issued and outstanding and Leisure Time
has no present plans to issue any shares of preferred stock.
90
<PAGE> 97
ANTI-TAKEOVER PROVISIONS
Leisure Time's articles of incorporation and bylaws contain provisions
that may make it more difficult for a third party to acquire, or may discourage
acquisition bids for, Leisure Time. The board of directors of Leisure Time is
authorized, without action of its stockholders, to issue authorized but
undesignated and unissued preferred stock and authorized but unissued common
stock. The existence of authorized but undesignated and unissued preferred stock
and authorized but unissued common stock might enable Leisure Time to discourage
or make it more difficult to obtain control of Leisure Time by means of a
merger, tender offer, proxy contest or otherwise. The documents provide further
that:
o directors may be elected for three-year terms, with
approximately one-third of the board of directors standing for
election each year;
o to alter or repeal the staggered board provision or other
measures in the articles of incorporation relating to the
matters listed in this paragraph, the affirmative vote of the
holders of not less than two-thirds of the votes cast by the
holders of all stock entitled to vote in the election of
directors is required;
o directors may not be removed without cause; and
o directors may be removed for cause only by holders of not less
than two-thirds of the common stock.
Leisure Time has employment agreements with certain of its executive
officers under which the officers may require Leisure Time to repurchase their
common stock upon the occurrence of a change in control of Leisure Time. In
addition, Leisure Time will issue low priced options to replace the officers'
current options upon the occurrence of a change in control of Leisure Time. If
enforceable, these provisions will likely inhibit a third party from acquiring
Leisure Time without the consent of these executive officers.
TRANSFER AGENT AND REGISTRAR
Leisure Time has retained American Securities Transfer & Trust, Inc. to
serve as the transfer agent and registrar for the common stock.
91
<PAGE> 98
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, Leisure Time will have 5,998,334
shares of common stock outstanding. If the underwriters' over-allotment option
is exercised in full, 6,163,334 shares of common stock will be outstanding. Of
these shares, the 1,100,000 shares of common stock sold in this offering (and
any shares sold by Leisure Time upon exercise of the underwriters'
over-allotment option) will be freely transferable by persons other than
"affiliates" of Leisure Time without restriction or registration under the
Securities Act of 1933.
The remaining 4,918,334 outstanding shares of common stock are
"restricted securities" within the meaning of Rule 144 under the Securities Act
of 1933 and may not be sold in the absence of registration unless an exemption
from registration is available, including the exemption contained in Rule 144.
Of such shares, 4,538,744 shares become eligible for sale under Rule 144
commencing 90 days after the date of this prospectus. Pursuant to the terms of
the underwriting agreement, the representatives have required that the shares of
common stock owned by officers, directors and the current stockholders may not
be sold until at least 180 days after the date of this prospectus without the
prior written consent of the representatives. After 180 days, the current
stockholders of Leisure Time, who are not officers or directors, have the right
to sell up to 20% of the shares of common stock owned by them, up to a maximum
aggregate amount of 150,000 shares. All contractual restrictions on sales of
Leisure Time's common stock lapse 12 months after the date of this prospectus.
In the absence of agreements with the representatives, the outstanding
restricted common stock could be sold in accordance with Rule 144.
In general, under Rule 144 as currently in effect, a stockholder who
has beneficially owned shares of common stock for at least one year is entitled
to sell, within any three-month period, a number of "restricted" shares that
does not exceed the greater of 1% of the then outstanding shares of common stock
or the average weekly trading volume during the four calendar weeks preceding
such sale. Sales under Rule 144 are also subject to certain manner of sale
limitations, notice requirements and the availability of current public
information about Leisure Time. Rule 144(k) provides that a stockholder who is
not deemed to be an "affiliate" and who has beneficially owned shares of common
stock for at least two years is entitled to sell such shares at any time under
Rule 144(k) without regard to the limitations described above.
In addition to the shares of common stock that are currently
outstanding, a total of 5,536,751 shares of common stock have been reserved for
issuance upon exercise of outstanding options and warrants to purchase shares of
common stock at exercise prices of between $1.00 and $10.00 per share and upon
conversion of outstanding convertible notes into common stock and warrants and
upon the exercise of the warrants. Within approximately 90 days after the date
of this prospectus, Leisure Time plans to file a registration statement on Form
S-8 to register the shares of common stock that have been reserved for issuance
upon exercise of certain of the outstanding options. Once registered, the shares
of common stock issued upon exercise of such options will be freely tradeable
without restriction under the Securities Act of 1933 except for shares held by
an "affiliate" of Leisure Time, which shares will remain subject to certain
restrictions.
92
<PAGE> 99
Upon conclusion of this offering, Leisure Time will also issue the
representative warrants to purchase 110,000 shares of common stock at $_____
per share.
Leisure Time is unable to estimate the number of shares that may be
sold in the future by the holders of Leisure Time's common stock or holders of
options or warrants that are outstanding or the effect, if any, that sales of
shares of common stock by such persons will have on the market price of the
common stock prevailing from time to time. Sales of substantial amounts of
common stock by such persons could adversely affect prevailing market prices.
93
<PAGE> 100
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, for which Schneider Securities, Inc. is acting as the
underwriters' representative, have severally agreed to purchase from Leisure
Time the shares of common stock set forth opposite their names and will purchase
the shares of common stock at the price to public less underwriting discount set
forth on the cover page of this prospectus.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Schneider Securities, Inc.................................
--------
Total..................................................... 1,100,000
=========
</TABLE>
The underwriting agreement provides that the underwriters' obligations
are subject to certain conditions precedent and that the underwriters are
committed to purchase all shares of common stock offered in this prospectus
(other than those covered by the over-allotment option described below) if the
underwriters purchase any shares of common stock.
The representative has advised Leisure Time that the underwriters
propose to offer the shares of common stock directly to the public at the price
to public set forth on the cover page of this prospectus, and that they may
allow to certain dealers that are members of the National Association of
Securities Dealers, Inc., concessions not in excess of $____. After the initial
public distribution of the common stock is completed, the price of the common
stock may change as a result of market conditions. No change in such terms will
change the amount of proceeds to be received by Leisure Time as set forth on the
cover page of this prospectus. The representative has further advised Leisure
Time that the underwriters do not intend to confirm sales to any accounts over
which any of them exercises discretionary authority.
Leisure Time has agreed to pay the representative a nonaccountable
expense allowance of 3% of the aggregate public offering price of the shares of
common stock offered by this prospectus, including shares of common stock sold
on exercise of the over-allotment option. Leisure Time has paid $50,000 against
the non-accountable expense allowance to the representative. Leisure Time has
also agreed to pay all expenses in connection with qualifying the shares of
common stock offered hereby for sale under the laws of such states as the
representative may designate.
Leisure Time has granted the underwriters an option, exercisable for 45
days after the date of this prospectus, to purchase up to 165,000 additional
shares of common stock at the same price as the initial shares of common stock
offered. The underwriters may purchase the shares of common stock solely to
cover over-allotments, if any, in connection with the sale of the shares of
common stock offered by this prospectus. If the over-allotment option is
exercised in full, the
94
<PAGE> 101
total public offering price, underwriting discounts and proceeds to Leisure Time
will be $________ , $_________ and $_________, respectively.
The underwriters may engage in over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids in accordance
with Regulation M under the Securities Exchange Act of 1934. Over-allotment
involves syndicate sales in excess of the offering size, which create a
syndicate short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the shares of
common stock in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the underwriters
to reclaim a selling concession from a syndicate member when the shares of
common stock originally sold by such syndicate member are purchased in a
syndicate covering transaction to cover syndicate short positions. Such
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the common stock to be higher than it would otherwise be in
the absence of such transactions.
Neither Leisure Time nor the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
Leisure Time nor any of the underwriters makes any representation that the
underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The representative has required that the shares of common stock owned
by officers, directors and the current stockholders may not be sold until at
least 180 days after the date of this prospectus without the prior written
consent of the representative. After such 180 day period, the current
stockholders of Leisure Time, who are not officers or directors, have the right
to sell up to 20% of the shares of common stock owned by them, up to a maximum
aggregate amount of 150,000 shares. Officers or directors may not sell any of
the common stock they own without the prior written consent of the
representative until 12 months after the date of this prospectus. Collectively,
these periods in which the common stock of Leisure Time cannot be offered, sold
or otherwise disposed of, are referred to in this prospectus as the "lock-up
period." The representative has no present intention to waive or shorten the
lock-up period.
In connection with this offering, Leisure Time will sell to the
representative for a total purchase price of $100, the representative's warrants
for the purchase of common stock entitling the representative or its assigns to
purchase 110,000 shares of common stock at an exercise price of 120% of the
public offering price listed on the cover of this prospectus for five years from
the date of this prospectus. The representative's warrants will contain
customary anti-dilution provisions and provide for the cashless exercise of the
representative's warrants utilizing securities of Leisure Time, which may
include the implicit value of the representative's warrants being surrendered.
Leisure Time will set aside and at all times have available a sufficient number
of shares of common stock to be issued upon exercise of the representative's
warrants. The representative's warrants and underlying shares of common stock
will be restricted from sale, transfer, assignment or hypothecation for a period
of one year after the date of this prospectus, except to officers of the
representative, co-underwriters, selling group members and their
95
<PAGE> 102
officers, employees or partners. Thereafter, the representative's warrants and
underlying shares of common stock will be transferable provided such transfer is
in accordance with the provisions of the Securities Act of 1933. Subject to
certain limitations and exclusions, Leisure Time has agreed, at the request of
the representative, to register the shares of common stock issuable upon
exercise of the representative's warrants under the Securities Act of 1933.
Leisure Time and the representative have entered into an agreement
which provides that for a period of three years from the date of this
prospectus, all public sales of Leisure Time's common stock owned by
stockholders of Leisure Time prior to the date of this prospectus shall be
effected through or with the representative on an exclusive basis, provided that
the representative offers the best price reasonably available.
For a period of five years after the date hereof, the representative
has the right to have an observer attend meetings of Leisure Time's board of
directors and receive the compensation (excluding grants of options) and
expenses paid to Leisure Time's directors.
Prior to this offering, there has not been a public market for Leisure
Time's common stock. The public offering price of the common stock has been
determined by arms-length negotiation between Leisure Time and the
representative. There is no direct relation between the offering price of the
common stock and the assets, book value or net worth of Leisure Time. Among the
factors considered by Leisure Time and the representative in pricing the common
stock were the results of operations, the current financial condition and future
prospects of Leisure Time, the experience of management, the amount of ownership
to be retained by present stockholders, the general condition of the economy and
the securities markets and the demand for securities of companies considered
comparable to Leisure Time.
In connection with this offering, Leisure Time and the underwriters
have agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act of 1933, and if such indemnification is
unavailable or insufficient, Leisure Time and the underwriters have agreed to
damage contribution arrangements based upon relative benefits received from this
offering and relative fault resulting in such damage.
96
<PAGE> 103
LEGAL MATTERS
The validity of the common stock being offered by this prospectus has
been passed upon for Leisure Time by Smith McCullough, P.C., Denver, Colorado.
Thomas S. Smith, a stockholder and director of Smith McCullough, P.C.,
beneficially owns 50,000 shares of Leisure Time's common stock and an option to
purchase 125,000 shares of Leisure Time's common stock. Certain legal matters
will be passed upon for the representative by Berliner Zisser Walter & Gallegos,
P.C.
EXPERTS
The consolidated balance sheets of Leisure Time Casinos & Resorts, Inc.
and subsidiaries at June 30, 1997 and 1998 and the consolidated statements of
operations, stockholders' equity and cash flows for the years ended June 30,
1996, 1997 and 1998 included in this prospectus have been included herein in
reliance on the report of Ehrhardt Keefe Steiner & Hottman PC, independent
certified public accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated balance sheets of Leisure Time Technology, Inc. (f/k/a
U.S. Games, Inc.) at June 30, 1996 and 1997 and the consolidated statements of
operations, stockholders' equity and cash flows for the years ended June 30,
1996 and 1997 included in this prospectus have been included herein in reliance
on the report of Ehrhardt Keefe Steiner & Hottman PC, independent certified
public accountants, given on the authority of that firm as experts in accounting
and auditing.
The consolidated balance sheets of Florida Casino Cruises, Inc. at
December 31, 1997 and 1998 and the consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1997 and
1998 included in this prospectus have been included herein in reliance on the
report of Ehrhardt Keefe Steiner & Hottman PC, independent certified public
accountants, given on the authority of that firm as experts in accounting and
auditing.
With respect to the unaudited interim consolidated financial
information for the six months ended December 31, 1997 and 1998, the independent
certified public accountants have not audited or reviewed such consolidated
financial information and have not expressed an opinion or any other form of
assurance with respect to such consolidated financial information.
The pro forma combined statements of income (loss) for the years ended
June 30, 1994, 1995, 1996, 1997 and 1998 and the pro forma combined balance
sheet as of December 31, 1998 have not been audited or reviewed by the
independent certified public accountants and they do not express an opinion or
purport to give any other form of assurance on them.
97
<PAGE> 104
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
LEISURE TIME CASINOS & RESORTS, INC. AND SUBSIDIARIES
Independent Auditors' Report.........................................................................................F - 3
Consolidated Financial Statements
Consolidated Balance Sheets................................................................................. F - 4
Consolidated Statements of Operations........................................................................F - 5
Consolidated Statement of Stockholders' Equity...............................................................F - 6
Consolidated Statements of Cash Flows .......................................................................F - 7
Notes to Consolidated Financial Statements...........................................................................F - 9
LEISURE TIME TECHNOLOGY, INC. (F/K/A U.S. GAMES, INC.)
Independent Auditors' Report.........................................................................................F - 39
Financial Statements
Balance Sheets.................................................................................................F - 40
Statements of Operations.......................................................................................F - 41
Statement of Stockholder's Equity..............................................................................F - 42
Statements of Cash Flows.......................................................................................F - 43
Notes to Financial Statements........................................................................................F - 44
</TABLE>
F-1
<PAGE> 105
<TABLE>
FLORIDA CASINO CRUISES, INC.
<S> <C>
Independent Auditors' Report.........................................................................................F - 55
Financial Statements
Balance Sheets................................................................................................F - 56
Statements of Operations......................................................................................F - 57
Statement of Stockholder's Equity.............................................................................F - 58
Statements of Cash Flows......................................................................................F - 59
Notes to Financial Statements........................................................................................F - 60
UNAUDITED PRO FORMA INFORMATION
Unaudited Pro Forma Combined Statement of Income (Loss) For the
Year Ended June 30, 1994............................................................................................F - 67
Unaudited Pro Forma Combined Statement of Income (Loss) For the
Year Ended June 30, 1995............................................................................................F - 68
Unaudited Pro Forma Combined Statement of Income (Loss) For the
Year Ended June 30, 1996............................................................................................F - 69
Unaudited Pro Forma Combined Statement of Income (Loss) For the
Year Ended June 30, 1997............................................................................................F - 70
Unaudited Pro Forma Combined Statement of Income (Loss) For the
Year Ended June 30, 1998............................................................................................F - 71
Unaudited Pro Forma Combined Balance Sheet As of the Year
Ended December 31, 1998.............................................................................................F - 72
Notes to Unaudited Pro Forma Combined Financial Statements...........................................................F - 73
</TABLE>
F-2
<PAGE> 106
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Leisure Time Casinos &
Resorts, Inc. and Subsidiaries
Norcross, Georgia
We have audited the accompanying consolidated balance sheets of Leisure Time
Casinos & Resorts, Inc. and Subsidiaries as of June 30, 1997 and 1998, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended June 30, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Leisure
Time Casinos & Resorts, Inc. and Subsidiaries at June 30, 1997 and 1998, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended June 30, 1998 in conformity with generally accepted
accounting principles.
Ehrhardt Keefe Steiner & Hottman P.C.
August 19, 1998
Denver, Colorado
F-3
<PAGE> 107
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
<TABLE>
<CAPTION>
June 30,
--------------------------- December 31,
1997 1998 1998
------------ ------------ -------------
(Unaudited)
ASSETS
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 1,089 $ 888 $ 3,543
Current portion of notes receivable (Note 5) -- 26 47
Trade accounts receivable, less allowance of $31 868 1,747 2,576
Receivable - other -- 250 3
Inventories, net (Note 2) 2,873 2,445 2,481
Prepaid expenses and other 124 207 124
Deferred tax asset - current (Note 8) 88 67 61
Officer advances (Note 5) 55 -- --
------------ ------------ ------------
Total current assets 5,097 5,630 8,835
------------ ------------ ------------
Property and equipment, net (Notes 3 and 6) 3,837 4,216 7,280
------------ ------------ ------------
Long-term portion of notes receivable (Note 5) -- 53 80
Deferred tax asset - long term (Note 8) -- 571 881
Goodwill, net of accumulated amortization of $535 and $1,145 at June 30, 1997
and 1998, respectively, and $1,450 (unaudited) at December 31, 1998 5,563 4,953 4,648
Other assets, net (Note 3) 5,026 6,990 7,681
------------ ------------ ------------
Total assets $ 19,523 $ 22,413 $ 29,405
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term notes payable (Note 6) $ 1,766 $ 2,127 $ 1,587
Current portion of capital leases (Note 5) 18 39 54
Current portion of other long-term liabilities (Note 7) 509 539 188
Note payable - officer (Note 5) 3 -- --
Accounts payable 961 1,510 3,016
Accrued expenses (Note 4) 1,392 4,844 3,842
Income taxes payable 504 462 2,306
------------ ------------ ------------
Total current liabilities 5,153 9,521 10,993
------------ ------------ ------------
Long-term liabilities
Long-term portion of notes payable (Note 6) 4,092 4,243 6,197
Long-term portion of capital leases (Note 5) 41 53 281
Deferred income taxes payable (Note 8) 507 -- --
Other long-term liabilities (Note 7) 5,457 4,890 4,677
------------ ------------ ------------
Total long-term liabilities 10,097 9,186 11,155
------------ ------------ ------------
Total liabilities 15,250 18,707 22,148
------------ ------------ ------------
Commitments and contingencies (Notes 5, 6, 7, 9, 10, 12 and 16)
Stockholders' equity (Note 13)
Preferred stock, no par value; 5,000,000 shares authorized; none issued -- -- --
Common stock, $.001 par value; 45,000,000 shares authorized; 4,505,380
(June 30, 1997), 4,639,154 (June 30, 1998) and 4,660,248 (December 31,
1998 (unaudited)) issued and outstanding 4 5 5
Additional paid-in capital 3,118 3,479 4,292
Retained earnings 1,151 222 2,960
------------ ------------ ------------
Total stockholders' equity 4,273 3,706 7,257
------------ ------------ ------------
Total liabilities and stockholders' equity $ 19,523 $ 22,413 $ 29,405
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 108
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended
For the Years Ended June 30, December 31,
-------------------------------------------- ----------------------------
1996 1997 1998 1997 1998
------------ ------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue
Manufacturing $ -- $ 29,838 $ 28,643 $ 19,405 $ 25,632
Gaming -- -- -- -- 3,100
Other -- -- -- -- 276
------------ ------------ ------------ ------------ ------------
Total revenue -- 29,838 28,643 19,405 29,008
------------ ------------ ------------ ------------ ------------
Cost of goods sold
Manufacturing -- 16,616 16,517 10,451 13,423
Gaming -- -- -- -- 326
Other -- -- -- -- 277
------------ ------------ ------------ ------------ ------------
Total cost of goods sold -- 16,616 16,517 10,451 14,026
------------ ------------ ------------ ------------ ------------
Gross profit
Manufacturing -- 13,222 12,126 8,954 12,209
Gaming -- -- -- -- 2,774
Other -- -- -- -- (1)
------------ ------------ ------------ ------------ ------------
Total gross profit -- 13,222 12,126 8,954 14,982
------------ ------------ ------------ ------------ ------------
Selling, general and administrative expenses (Note 14) 1,343 5,615 8,727 2,878 8,919
Research and development costs -- 469 642 305 391
Stock based compensation (Note 12) -- -- -- -- 760
Interest expense, net 54 712 840 544 565
------------ ------------ ------------ ------------ ------------
Total operating expenses 1,397 6,796 10,209 3,727 10,635
------------ ------------ ------------ ------------ ------------
Net income (loss) before unusual item and income taxes (1,397) 6,426 1,917 5,227 4,347
Unusual item - litigation (Note 10) -- -- (3,043) (2,969) --
------------ ------------ ------------ ------------ ------------
Net income (loss) before income tax benefit (expense) (1,397) 6,426 (1,126) 2,258 4,347
Income tax benefit (expense) (Note 8) -- (1,738) 197 (887) (1,609)
------------ ------------ ------------ ------------ ------------
Net income (loss) $ (1,397) $ 4,688 $ (929) $ 1,371 $ 2,738
============ ============ ============ ============ ============
Earnings (loss) per common share - basic $ (.35) $ 1.08 $ (.21) $ .30 $ .59
============ ============ ============ ============ ============
Earnings (loss) per common share -diluted $ (.35) $ .65 $ (.21) $ .15 $ .27
============ ============ ============ ============ ============
Weighted average number of common shares
outstanding - basic 4,010,650 4,343,397 4,516,528 4,505,380 4,642,753
============ ============ ============ ============ ============
Weighted average number of common shares
outstanding - diluted 4,010,650 7,664,903 4,516,528 9,839,303 10,169,266
============ ============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 109
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Deficit/
------------------------------ Paid-in Retained
Shares Amount Capital Earnings Total
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance - June 30, 1995 3,738,208 $ 4 $ 479 $ (1,940) $ (1,457)
Common stock issued for cash at $1.00 a share
(July 1995 to September 1995) 100,000 -- 100 -- 100
Common stock issued for cash at $1.50 a share
(September 1995) 38,000 -- 57 -- 57
Common stock issued for cash at $2.25 a share
(July 1995 to November 1995) 32,000 -- 72 -- 72
Common stock issued for cash at $2.50 a share
(August 1995 to June 1996) 256,400 -- 641 -- 641
Net loss for the year -- -- -- (1,397) (1,397)
------------- ------------- ------------- ------------- -------------
Balance - June 30, 1996 4,164,608 4 1,349 (3,337) (1,984)
Common stock issued upon conversion of debt
and as extensions on notes payable at rates
ranging from $1.00 - $2.80 per share
(Note 13) 85,292 -- 176 -- 176
Common stock issued for cash at rates ranging
from $.50 - $2.50 a share (Note 13) 167,400 -- 163 -- 163
Stock issued for services valued at $2.50 a
share (Note 13) 38,080 -- 95 -- 95
Repurchase of common stock at $2.00 a share
(Note 13) (100,000) -- -- (200) (200)
Issuance of options and warrants with imputed
values of $.45 - $.78 per share (Note 12) -- -- 85 -- 85
Shares issued for acquisition of vessel
valued at $2.50 a share (Note 10) 150,000 -- 375 -- 375
Forgiveness of accrued officer wages payable
(Note 13) -- -- 875 -- 875
Net income for the year ended June 30, 1997 -- -- -- 4,688 4,688
------------- ------------- ------------- ------------- -------------
Balance - June 30, 1997 4,505,380 4 3,118 1,151 4,273
Common stock issued for cash at $2.80 a share
(Note 13) 33,900 1 94 -- 95
Conversion of debt at $2.80 a share (Note 13) 57,886 -- 162 -- 162
Conversion of debt at $2.50 a share (Note 13) 41,988 -- 105 -- 105
Net loss for the year ended June 30, 1998 -- -- -- (929) (929)
------------- ------------- ------------- ------------- -------------
Balance - June 30, 1998 4,639,154 5 3,479 222 3,706
Common stock issued upon exercise of options
(Note 13) (unaudited) 100 -- -- -- --
Conversion of debt at $2.50 a share (Note 13)
(unaudited) 20,994 -- 53 -- 53
Issuance of options with a value of $4.00 per
share (Note 12) (unaudited) -- -- 760 -- 760
Net income for the six months ended
December 31, 1998 (unaudited) -- -- -- 2,738 2,738
------------- ------------- ------------- ------------- -------------
Balance at December 31, 1998 (unaudited) 4,660,248 $ 5 $ 4,292 $ 2,960 7,257
============= ============= ============= ============= =============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 110
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended
For the Years Ended June 30, December 31,
----------------------------------------- --------------------------
1996 1997 1998 1997 1998
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ (1,397) $ 4,688 $ (929) $ 1,371 $ 2,738
----------- ----------- ----------- ----------- -----------
Adjustments to reconcile net income
(loss) to cash provided by operating
activities
Write off of acquisition costs 32 -- -- -- --
Net loss on disposal of assets -- 49 96 -- --
Note issued for interest payment -- 33 -- -- --
Issuance of stock options -- 85 -- -- 760
Deferred taxes -- 1,046 (1,057) (1,018) (304)
Common stock issued for note
extensions -- 31 -- -- --
Common stock issued for services -- 95 -- -- --
Depreciation and amortization 14 1,385 1,864 774 884
Changes in certain assets and
liabilities -
Accounts receivable -- (496) (879) 625 (582)
Inventories -- (1,082) 389 (391) (35)
Prepaids and other assets -- 348 (2,732) (221) 83
Employee advances (18) 18 (4) -- --
Officer advances (37) -- 55 4 --
Accounts payable 246 256 549 (404) 1,506
Accrued expenses 531 419 3,452 2,581 (1,003)
Income taxes payable -- 504 (42) 1,267 1,844
Notes receivable -- -- (79) -- (47)
----------- ----------- ----------- ----------- -----------
768 2,691 1,612 3,217 3,106
----------- ----------- ----------- ----------- -----------
Net cash (used by) provided by
operating activities (629) 7,379 683 4,588 5,844
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities
Acquisition of business net of cash
acquired -- (1,329) -- -- --
Purchase of equipment (23) (120) (1,188) (570) (580)
Purchase of vessel -- (2,873) -- -- (1,500)
Purchase of hotel -- -- -- -- (1,020)
Acquisition costs paid (162) -- -- -- --
Deposits paid (107) (45) -- (2,032) (929)
Contingent payments -- (2,495) -- -- --
----------- ----------- ----------- ----------- -----------
Net cash used by investing
activities (292) (6,862) (1,188) (2,602) (4,029)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities
Proceeds from issuance of common stock 870 164 94 -- --
Repurchase of common stock -- (200) -- -- --
Proceeds from long-term debt 40 1,700 3,000 3,000 5,327
Loan fees -- -- -- -- (29)
Payment on long-term debt (6) (1,017) (2,758) (2,201) (4,425)
Payments on capital leases -- -- (29) (5) (33)
Payments on note payable - officer -- (77) (3) (3) --
----------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities 904 570 304 791 840
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash (17) 1,087 (201) 2,777 2,655
Cash and cash equivalents- beginning of
year or period 19 2 1,089 1,089 888
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents- end of year or
period $ 2 $ 1,089 $ 888 $ 3,866 $ 3,543
=========== =========== =========== =========== ===========
</TABLE>
Continued on next page.
See notes to consolidated financial statements.
F-7
<PAGE> 111
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
Continued from previous page.
Schedule of non-cash investing and financing activities:
During the year ended June 30, 1996, the Company acquired $19 of certain
property by obtaining a loan from the selling company. The asset is
included in vehicles.
During the year ended June 30, 1997, the Company incurred various noncash
transactions related to the acquisition completed in September 1996.
During the year ended June 30, 1997, the Company issued stock toward the
purchase of a vessel ($375) and related to the conversion of debt ($145)
(Note 13). Additionally, the Company issued notes payable to reduce
current liabilities in the amount of $56 and incurred long-term debt to
finance the acquisition of vehicles for $82.
During the year ended June 30, 1997, officers of the Company forgave $875
of accrued wages related to prior years.
During the years ended June 30, 1997 and 1998, and the period ended
December 31, 1998, the Company acquired fixed assets by incurring capital
lease obligations in the amount of $67, $63 and $277 (unaudited),
respectively.
During the year ended June 30, 1998, the Company recorded a $250
receivable for an insurance claim on damaged property with a net book
value of $250.
During the year ended June 30, 1998, and the period ended December 31,
1998, the Company converted $267 and $53 (unaudited), respectively, of
debt to equity by issuing capital stock to the debt holders.
Supplemental disclosure of cash flow information:
Cash paid for interest for the years ended June 30, 1996, 1997 and 1998
and for the six months ended December 31, 1997 and 1998 was approximately
$28, $551, $1,084, $533 (unaudited) and $497 (unaudited), respectively.
Cash paid for income taxes for the years ended June 30, 1996, 1997 and
1998 and for the six months ended December 31, 1997 and 1998 was $1,311,
$189, $982, $0 (unaudited) and $69 (unaudited), respectively.
See notes to consolidated financial statements.
F-8
<PAGE> 112
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Leisure Time Casinos & Resorts, Inc. ("Casinos") was incorporated on February 4,
1993, and was a development stage enterprise until September 1996.
In September 1996, Casinos acquired U.S. Games, Inc. Leisure Time Technology,
Inc. (f/k/a U.S. Games, Inc.) ("Technology") is incorporated in Georgia and
develops, manufactures and sells video gaming machines. Technology is licensed
to sell video gaming machines in Kansas, Michigan, Minnesota, New Mexico (for
gaming on Native American reservations), New York, North Carolina, Wisconsin and
is in compliance with South Carolina regulations regarding the sale of gaming
machines. The Company has applied to become licensed in Mississippi, Montana and
Ontario, Canada and intends to apply to become licensed in Arizona, New Mexico
(for charities and fraternal organizations) and Nevada.
Leisure Time Cruise Corporation ("Cruises") was incorporated on October 17,
1997, in the state of Colorado and conducts offshore gaming cruises on the
"Vegas Express" gaming vessel. In July 1998, Cruises began operating cruise to
nowhere gaming excursions (Notes 9 and 10). In April 1999, Leisure Express
Cruise, LLC, a Colorado limited liability company, acquired Florida Casino
Cruises, Inc., the corporation that owns the Vegas Express. Leisure Belle
Cruise, LLC is a Colorado limited liability company that owns and is
refurbishing a gaming vessel. Leisure Lady Cruise, LLC is Colorado limited
liability company and currently has no operations.
Leisure Time Hospitality, Inc. is incorporated in Ohio and owns a hotel property
that is being redeveloped in the Cleveland metropolitan area.
Leisure Time Gaming, Inc. is incorporated in South Carolina and began operating
a gaming route through a subsidiary during March 1999.
Leisure Time International, Ltd. is incorporated in Barbados and currently
operates as a Foreign International Sales Corp. (FISC).
Casinos acquired RP Capital, Inc. in April 1999.
Solutia Gaming Systems, Inc. is incorporated in Oklahoma and is developing new
gaming machines.
F-9
<PAGE> 113
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Interim Information
The accompanying unaudited consolidated financial statements as of December 31,
1997 and 1998 have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for financial statements.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
consolidated operations for the six month periods ended December 31, 1997 and
1998, (b) the consolidated financial position at December 31, 1998, (c) the
consolidated statements of cash flows for the six month periods ended December
31, 1997 and 1998 and (d) the consolidated changes in stockholders' equity for
the six month period ended December 31, 1998 have been made.
The results for the six month period ended December 31, 1998 are not necessarily
indicative of the results for the entire fiscal year ending June 30, 1999.
Principals of Consolidation
The consolidated financial statements include the accounts of Casinos and its
wholly owned subsidiaries, collectively referred to as the Company. All
significant intercompany transactions and balances have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash, receivables,
prepaid expenses, accounts payable and accrued expenses approximate the fair
values as of June 30, 1997 and 1998 and December 31, 1998 (unaudited) because of
the relatively short maturity of these instruments.
The carrying amounts of notes payable and debt outstanding also approximate
their fair values as of June 30, 1997 and 1998 and December 31, 1998 (unaudited)
because interest rates on these instruments approximate the interest rate on
debt with similar terms available to the Company.
F-10
<PAGE> 114
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Inventories
Inventories are stated at the lower of cost or market and consist primarily of
raw material, parts manufactured by others, work in process and finished goods.
Work-in-process and finished goods include raw materials, direct labor and
manufacturing overhead. Cost is determined using the first-in, first-out method
for all inventories.
Property and Equipment
Property and equipment are stated at cost. Depreciation on equipment, vehicles
and furniture is calculated using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are amortized on a
straight-line basis over the shorter of the lease term or estimated useful life
of the asset.
Product Software Development Costs
The Company capitalizes product software development costs when product
technological feasibility is established and concluding when the product is
ready for its intended use. Software development costs are amortized on the
straight-line method over an expected useful life of three years. As of December
31, 1998, the Company had not incurred any significant software development
costs, as such no amounts had been capitalized.
Organizational Costs
Organizational costs and other start-up related expenditures are expensed as
incurred.
Non-Compete Agreement
The Company has a non-compete agreement with the former stockholder of
Technology. The amount shown on the balance sheet represents the present value
of amounts to be paid. The cost is being amortized using the straight-line
method over 10 years, the life of the agreement.
Goodwill
Goodwill, resulting from the acquisition of Technology, is being amortized using
the straight-line method over 10 years.
F-11
<PAGE> 115
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company uses the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Valuation of Long-Lived Assets
The Company assesses valuation of long-lived assets in accordance with Statement
of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be disposed of. The Company
periodically evaluates the carrying value of long-lived assets to be held and
used, including goodwill and other intangible assets, when events and
circumstances warrant such a review. The carrying value of a long-lived asset is
considered impaired when the anticipated undiscounted cash flow from such asset
is separately identifiable and is less than its carrying value. In that event, a
loss is recognized based on the amount by which the carrying value exceeds the
fair market value of the long-lived asset. Fair market value is determined
primarily using the anticipated cash flows discounted at a rate commensurate
with the risk involved.
Revenue Recognition
Manufacturing and other revenue is recognized as the product is shipped.
Gaming revenue is the net win from gaming activities, which is the difference
between gaming wins and losses. Gaming revenue also includes ticket sales and
food and beverage revenue generated from each cruise. Gaming revenue does not
include the retail amount of tickets or food and beverages provided gratuitously
to customers.
Research and Development
All research and development costs are expensed as incurred.
F-12
<PAGE> 116
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings (Loss) Per Share
In accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share", basic earnings per share is computed by
dividing net income by the number of weighted average common shares outstanding
during the year. Diluted earnings per share is computed by dividing net income
by the number of weighted average common shares outstanding during the year,
including potential common shares, which for the years ended June 30, 1996, 1997
and 1998, and the periods ended December 31, 1997 and 1998, consisted solely of
convertible debt, stock options and warrants outstanding (Notes 12 and 15).
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration of
credit risk consist primarily of temporary cash investments. The Company places
its cash investments with high credit quality financial institutions and, by
policy, limits the amount of credit exposure to any one institution. The Company
does, however, on occasion exceed the Federal Deposit Insurance Corporation
federally insured limits and the Securities Investors Protection Corporation
insured limits and exceeded these amounts by approximately $1,691 and $1,251 at
June 30, 1997 and 1998 and $2,213 at December 31, 1998 (unaudited),
respectively.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising expenses for the
years ended June 30, 1996, 1997 and 1998, were $37, $173 and $69, respectively,
and for the periods ended December 31, 1997 and 1998 were $56 (unaudited) and
$360 (unaudited), respectively.
F-13
<PAGE> 117
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Pronouncements
In February 1998, the FASB issued Statement of Financial Accounting Standards
No. 132, "Employers' Disclosure about Pensions and Other Postretirement
Benefits" ("Statement 132"), which revises employers' disclosures about pension
and other postretirement benefit plans. Statement 132 does not change the
measurement or recognition of those plans, but requires additional information
on changes in benefit obligations and fair values of plan assets and eliminated
certain disclosures previously required by SFAS Nos. 87, 88 and 106. Statement
132 is effective for financial statements with fiscal years beginning after
December 15, 1997.
During June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities". Statement 133 establishes new standards by
which derivative financial instruments must be recognized in any entity's
financial statements. Besides requiring derivatives to be included on balance
sheets at fair value, Statement 133 generally requires that gains and losses
from later changes in a derivative's fair value be recognized currently in
earnings. Statement 133 also unifies qualifying criteria for hedges involving
all kinds of derivatives, requiring that a company document, designate and
assess the effectiveness of its hedges. Statement 133 is required to be adopted
by the Company in 2000. Management, however, does not expect the impact from
this statement to have a material impact on the financial statement
presentation, financial position or results of operations.
The Company has not determined what additional disclosures, if any, may be
required by the provisions of Statement 132 and 133 but does not expect adoption
of these statements to have a material effect on its results of operations.
During April 1998, Statement of Position 98-5, "Reporting in the Costs of
Start-Up Activities" was issued. SOP 98-5 requires costs of start-up activities
and organization costs to be expensed as incurred. SOP 98-5 is required to be
adopted by the Company in 1999. Upon adoption, the Company does not anticipate
this will have a material impact on the financial statement presentation,
financial position or results of operations.
Reclassifications
Certain reclassifications have been made to the June 30, 1996, 1997 and 1998
financial statements in order to conform to the December 31, 1997 (unaudited)
and 1998 (unaudited) presentation.
F-14
<PAGE> 118
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30,
------------------------------------- December 31,
1997 1998 1998
---------------- ---------------- ----------------
(Unaudited)
<S> <C> <C> <C>
Raw materials and parts made by others $ 1,827 $ 2,181 $ 1,985
Work-in-process 110 - 153
Finished goods 1,046 374 453
---------------- ---------------- ----------------
Total 2,983 2,555 2,591
Inventory reserve (110) (110) (110)
---------------- ---------------- ----------------
$ 2,873 $ 2,445 $ 2,481
================ ================ ================
</TABLE>
NOTE 3 - PROPERTY AND EQUIPMENT AND OTHER ASSETS
Property and equipment consist of the following:
<TABLE>
<CAPTION>
June 30,
------------------------------------- December 31,
1997 1998 1998
---------------- ---------------- ----------------
(Unaudited)
<S> <C> <C> <C>
Property and equipment
Vehicles $ 120 $ 182 $ 291
Hotel property and land - - 1,020
Construction in progress - - 77
Vessels 3,457 3,901 5,597
Office furniture and equipment 170 82 137
Machinery and equipment 603 507 888
Leasehold improvements 41 268 307
---------------- ---------------- ----------------
4,391 4,940 8,317
Less accumulated depreciation (554) (724) (1,037)
---------------- ---------------- ----------------
$ 3,837 $ 4,216 $ 7,280
================ ================ ================
</TABLE>
F-15
<PAGE> 119
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 3 - PROPERTY AND EQUIPMENT AND OTHER ASSETS (CONTINUED)
<TABLE>
<CAPTION>
June 30,
------------------------------------- December 31,
1997 1998 1998
---------------- ---------------- ----------------
(Unaudited)
<S> <C> <C> <C>
Other assets consist of the following:
Deposits and other $ 52 $ 1,961 $ 3,537
Purchased software 173 - -
Non-compete agreement, net of accumulated
amortization of $413 and $935 at June 30, 1997
and 1998, respectively, and $1,195 (unaudited)
at December 31, 1998 (Note 7) 4,801 4,279 4,019
Compensating balance (Note 6) - 750 125
---------------- ---------------- ----------------
$ 5,026 $ 6,990 $ 7,681
================ ================ ================
</TABLE>
NOTE 4 - ACCRUED EXPENSES
<TABLE>
<CAPTION>
June 30,
------------------------------------- December 31,
1997 1998 1998
---------------- ---------------- ----------------
(Unaudited)
<S> <C> <C> <C> <C>
Litigation (Note 10) $ 421 $ 3,200 $ 3,200
Advanced deposits - 666 -
Accrued interest 394 270 95
Accrued wages, benefits and payroll taxes 365 596 210
Accrued rent 76 - -
Miscellaneous taxes 70 88 150
Other accruals 66 24 187
---------------- ---------------- ----------------
$ 1,392 $ 4,844 $ 3,842
================ ================ ================
</TABLE>
F-16
<PAGE> 120
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 5 - RELATED PARTY
<TABLE>
<CAPTION>
June 30,
--------------------------------------- December 31,
1997 1998 1998
---------------- ---------------- ---------------
(Unaudited)
<S> <C> <C> <C>
Note payable - officer. Fully repaid during the year
ended June 30, 1998. $ 3 $ - $ -
================ ================ ===============
Officer Advances
Officer advances. Fully repaid during the year
ended June 30, 1998. $ 55 $ - $ -
================ ================ ===============
Notes Receivable
Notes receivable - related parties, interest from 8%
to 9% per annum with monthly payments from $2 to $3
commencing from July and October 1998 through
September 2000 and July 2001 when all remaining
balances are payable in full; without collateral;
including accrued interest of $2 at June 30, 1998
and $0 (unaudited) at December 31, 1998.
$ - $ 77 $ 117
Note receivable - related party - 2 10
---------------- ---------------- ----------------
- 79 127
Less current portion - (26) (47)
---------------- ---------------- ----------------
Long-term portion $ - $ 53 $ 80
================ ================ ================
</TABLE>
F-17
<PAGE> 121
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 5 - RELATED PARTY (CONTINUED)
Capital Leases
The Company leases vehicles under capital leases with a related company. The
future minimum lease payments due under capital leases are as follows:
<TABLE>
<CAPTION>
Year Ending June 30,
<S> <C>
1999 $ 39
2000 33
2001 24
2002 4
--------------
100
Less amount representing interest (8)
Present value of future net minimum lease payments under --------------
capital leases 92
Less current portion (39)
--------------
$ 53
==============
</TABLE>
As of June 30, 1997 and 1998, the net book value of equipment under capital
leases was $58 and $87, respectively.
Other Transactions
The Company leases a condominium/office from the Company's president. The lease
expires on October 31, 2002 and requires rental payments of $25 per month
net/net/net plus all association fees related to the condominium/office.
The Company leases office space on a month-to-month basis in Ohio from the
Company's president at a rate of $15 per month. Rent expense for the years ended
June 30, 1997 and 1998, were $18 and $18, respectively. Accrued rent related to
this lease was $76 and $0 at June 30, 1997 and 1998, respectively.
F-18
<PAGE> 122
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 5 - RELATED PARTY (CONTINUED)
Other Transactions (continued)
The Company leases 11 automobiles from J-Way Leasing, Ltd., a company owned by
the Company's president. The leases are for 36 months to 48 months and have
various dates of expiration through November 2001. The Company reimburses J-Way
Leasing, Ltd. for the down payments J-Way Leasing, Ltd. pays on each of the
automobiles and pays J-Way Leasing, Ltd. a monthly payment equivalent to the
monthly payments (plus 5%) that J-Way Leasing, Ltd. pays for each automobile. No
amounts were paid by the Company to J-Way Leasing, Ltd. for the years ended June
30, 1996, 1997, 1998 but for the six months ended December 31, 1998, $65 was
paid.
In September 1997, the Company advanced $300 to the Company's president. After
the advance, he owed the Company a total of $371 which included the $300
advance, a note for $55 and $16 of expenses owed by him to the Company. During
the year ended June 30, 1998, the Company credited against the $371 (i) $40 of
rentals that were owed to the president for the condominium/office, (ii) a
deposit of $18 that he had made on behalf of the Company to a potential
acquisition candidate of the Company, (iii) $40 that he had deposited in
connection with the purchase of the Company's hotel in the Cleveland, Ohio area,
(iv) $135 that he had paid on an invoice of the Company, (v) $84 that offset
accrued wages payable to the president, (vi) $34 that offset rent that was
payable to him, (vii) $7 that was paid as advances toward car rentals payable to
J-Way Leasing, Ltd., and (viii) $13 for accrued interest payable to the
president.
In October 1998, Cruises borrowed $3,000 from Foothill Capital Corporation. The
loan is secured by the assets of Cruises, including the Leisure Lady, and is
guaranteed by Technology, Casinos and the Company's president, none of which
received any compensation for guaranteeing the loan.
The Company's president has also guaranteed a $1,000 line-of-credit that the
Company has with a finance company. The line-of-credit is secured by
substantially all of the assets of Leisure Time and is guaranteed by Technology,
Cruises and the Company's president, none of which received any compensation for
guaranteeing the line-of-credit.
The Company's president owns 51% of Leisure Time Europe Ltd. which was formed in
February 1998 and acts as the distributor of Technology's video gaming machines
to charities in Norway. Technology sells the video gaming machines to Leisure
Time Europe which resells the video gaming machines to the charities. Leisure
Time Europe also services the video gaming machines. The remaining 49% is owned
by unaffiliated third parties.
F-19
<PAGE> 123
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 6 - LONG-TERM DEBT
<TABLE>
<CAPTION>
June 30,
----------------------------------- December 31,
1997 1998 1998
------------ ------------ ---------------
(Unaudited)
<S> <C> <C> <C>
Notes payable - individuals and law firms. Paid in
full during the year ended June 30, 1998. $ 392 $ - $ -
10% note payable - stockholder. Paid in full during
the period ended December 31, 1998 40 40 -
7.80% to 9.99% notes payable - monthly payments
including interest totaling $3, due from January
2000 through November 2001, collateralized by
automobiles.
36 27 23
11% convertible promissory notes payable to individuals,
principal and interest payable in 24 equal monthly payments
commencing June and September 1997; due May and September
1999. Notes are convertible into units, at $1.25 and $2.50 per
unit, consisting of one share of common stock and warrants allowing
the holder to purchase shares of the Company's stock at prices of
$1.75, $2.50 and 120% of the offering price of an initial public
offering by the Company. A majority of these notes contain an
anti-dilutive provision that requires the issuance of additional
warrants upon conversion under certain circumstances after shares,
options and warrants exceed 10,000,000 shares of common stock
outstanding exclusive of the 120% warrants. $383 of the December
31, 1998 outstanding balance was paid in full in January 1999. 1,526 869 485
</TABLE>
F-20
<PAGE> 124
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 6 - LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
June 30,
------------------------------------ December 31,
1997 1998 1998
--------------- --------------- --------------
(Unaudited)
<S> <C> <C> <C>
6.64% promissory notes payable to individuals in
connection with the purchase of U.S. Games, monthly
payments computed based on a percentage of the previous
month's gross sales. Payment is applied against accrued
interest first and then as a reduction of unpaid principal.
Annual payments must at least equal the accrued and unpaid
interest on the remaining outstanding principal balance. The
Company's obligation is satisfied on the earliest to occur; (i)
the date all accrued and unpaid interest and principal are paid,
(ii) or October 10, 2002. 3,864 2,874 2,072
Note payable to a finance company. Paid in full
during the period ended December 31, 1998. - 2,560 -
Note payable to a finance company, the first six monthly
installments are for accrued and unpaid interest only. The next
forty-eight monthly installments of $37 include principal and
interest at a fixed rate of 8.90%, unpaid principal and interest
due June 2003. Collateralized by a first preferred mortgage on a
vessel, a first priority security interest in all non-gaming equipment
and other property used in connection with the operation of the vessel,
all earnings, insurances and requisition compensation of the vessel
and a $125 compensating balance at December 31, 1998. - - 1,500
Note payable to a finance company with variable interest at a rate
equal to one (1.0) percentage point above the reference rate (9%
combined rate at December 31, 1998). Principal and interest under
this note is due and payable in sixty installments of $50 commencing
December 1, 1998 and continuing until November 1, 2003 when all
remaining principal and interest are due. Collateralized by certain
equipment. - - 2,900
</TABLE>
F-21
<PAGE> 125
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 6 - LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
June 30,
------------------------------------- December 31,
1997 1998 1998
---------------- ---------------- ---------------
(Unaudited)
<S> <C> <C> <C>
Note payable to a finance company, payable in monthly
installments of $1 including interest at a fixed rate of
11.73%, due May 2001. Collateralized by a security interest in
certain equipment. - - 36
Note payable to a finance company, payable in monthly installments
of $5 including interest at a fixed rate of 10.25%, due July 2003.
Collateralized by a security interest in certain equipment. - - 223
Note payable to a company collateralized by a mortgage deed on a hotel
with interest at the rate of 10% per annum. The interest rate is
adjusted quarterly beginning September 15, 1999 to four and 75/100
percentage points (4.75%) above the weekly average yield on US Treasury
securities adjusted to a constant of one year as made available by the
Federal Reserve Board. This note is payable in one payment of $100
plus interest on September 15, 1999 and quarterly payments of principal
and interest beginning December 15, 1999 and amortized over a four
(4) year period ending on September 15, 2003. However, subject to the
options set forth, the Company may pay this note in full by paying
$500 to the holder on or before March 14, 1999. In the event the option
set forth above is not exercised, the Company may pay this note in full
by paying $525 plus interest on the principal sum due on or before
September 14, 1999. The Company must also pay such additional charges
as are set forth in a certain mortgage deed. - - 545
---------------- ---------------- ---------------
5,858 6,370 7,784
Less current portion (1,766) (2,127) (1,587)
---------------- ---------------- ---------------
Total long-term debt $ 4,092 $ 4,243 $ 6,197
================ ================ ==============
</TABLE>
F-22
<PAGE> 126
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 7 - LONG-TERM LIABILITIES
Deferred Compensation Contracts
The Company has entered into $1,644 (undiscounted) of deferred compensation
contracts with certain individuals related to the acquisition of Technology.
These contracts provide for the payment of defined amounts, generally for up to
a period of six years on a monthly basis. The amounts are computed by taking a
percentage of the previous month's gross sales. The present value of the future
amounts estimated to be payable is being accrued for financial reporting
purposes at an imputed interest rate of 6.64%, and originally amounted to $1,354
(discounted). As of December 31, 1998 (unaudited), approximately $1,142 of
deferred compensation payments have been made. Of these payments, $909 has been
recorded as a reduction to the liability. The remaining $233 has been recorded
as interest expense.
Noncompete Agreement
In connection with the acquisition of Technology, the Company entered into a
noncompete agreement with the former stockholder of Technology in the amount of
$7,300 (undiscounted). The agreement is payable through September 2006 in 10
annual installments of $730 which include interest imputed at 6.64%. The present
value of the future amounts to be payable is accrued for financial reporting
purposes at the imputed interest rate of 6.64% and originally amounted to
$5,214. The corresponding asset is being amortized over the life of the
agreement, which is 10 years.
A summary of long-term liabilities at June 30, 1997 and 1998 and December 31,
1998 is as follows:
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------------------------------------------------
1997 1998
-------------------------------------------- -------------------------------------------
Current Long-term Current Long-term
Total Portion Portion Total Portion Portion
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Deferred compensation contracts $ 752 $ 125 $ 627 $ 599 $ 130 $ 469
Noncompete agreement 5,214 384 4,830 4,830 409 4,421
------------ ------------ ------------ ------------ ------------ ------------
$ 5,966 $ 509 $ 5,457 $ 5,429 $ 539 $ 4,890
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998 (unaudited)
--------------------------------------------
Current Long-term
Total Portion Portion
------------ ------------ ------------
<S> <C> <C> <C>
Deferred compensation contracts $ 444 $ 188 $ 256
Noncompete agreement 4,421 - 4,421
------------ ------------ ------------
$ 4,865 $ 188 $ 4,677
============ ============ ============
</TABLE>
F-23
<PAGE> 127
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 7 - LONG-TERM LIABILITIES (CONTINUED)
Noncompete Agreement (continued)
The annual aggregate maturities of long-term debt and long-term liabilities at
June 30, 1998, are as follows:
<TABLE>
<CAPTION>
Long-Term Long-Term
Year Ending June 30, Debt Liabilities Total
-------------------- -------------- -------------- --------------
<S> <C> <C> <C>
1999 $ 2,127 $ 539 $ 2,666
2000 1,450 573 2,023
2001 1,505 612 2,117
2002 1,038 652 1,690
2003 250 560 810
Thereafter - 2,493 2,493
-------------- -------------- --------------
$ 6,370 $ 5,429 $ 11,799
============== ============== ==============
</TABLE>
NOTE 8 - INCOME TAXES
The Company files a consolidated tax return that includes the operations of
Technology and Cruises.
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
Year Ended Six Months Ended
June 30, December 31,
---------------------------------------------------- ---------------------------------
1996 1997 1998 1997 1998
-------------- -------------- -------------- -------------- --------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Current
U.S. Federal $ - $ 517 $ 821 $ 1,771 $ 1,779
State and local - 176 80 134 134
-------------- -------------- -------------- -------------- --------------
- 693 901 1,905 1,913
-------------- -------------- -------------- -------------- --------------
Deferred
U.S. Federal (484) 927 (974) (903) (288)
State and local (26) 118 (124) (115) (16)
Valuation allowance 510 - - - -
-------------- -------------- -------------- -------------- -------------
- 1,045 (1,098) (1,018) (304)
-------------- -------------- -------------- -------------- --------------
$ - $ 1,738 $ (197) $ 887 $ 1,609
============== ============== ============== ============== ==============
</TABLE>
F-24
<PAGE> 128
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 8 - INCOME TAXES (CONTINUED)
Rate Reconciliation
The reconciliation of income tax expense (benefit) by applying the Federal
statutory tax rates to the Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
-------------------------------------------------- -----------------------------
1996 1997 1998 1997 1998
----------- ------------ ------------ ------------ -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Federal statutory rate (34.0)% 34.0% (34.0)% 34.0% 34.0%
State income taxes, net of federal
income tax benefit
- 1.8 4.7 3.9 1.7
Nondeductible expenses including
nondeductible goodwill
.5 1.5 12.9 3.2 1.4
Deferred expenses including
litigation and stock based
compensation
(3.0) (10.2) (1.1) (1.8) (.1)
Valuation allowance 36.5 - - - -
----------- ------------ ------------ ------------ -----------
- % 27.1% (17.5)% 39.3% 37.0%
=========== ============ ============ ============ ===========
</TABLE>
The net current deferred tax asset and the net long-term deferred tax
(liability) asset in the accompanying consolidated balance sheets consists of
the following:
<TABLE>
<CAPTION>
June 30,
------------------------------------- December 31,
1997 1998 1998
---------------- ---------------- ----------------
(Unaudited)
<S> <C> <C> <C>
Current deferred taxes
Current deferred tax asset $ 88 $ 67 $ 61
Current deferred tax liability - - -
---------------- ---------------- ----------------
Net current deferred tax asset 88 67 61
Long-term deferred taxes
Long-term deferred tax asset 415 1,398 1,655
Long-term deferred tax liability (922) (827) (774)
---------------- ---------------- ----------------
Net long-term deferred tax (liability) asset (507) 571 881
---------------- ---------------- ----------------
$ (419) $ 638 $ 942
================ ================ ================
</TABLE>
F-25
<PAGE> 129
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 8 - INCOME TAXES (CONTINUED)
Rate Reconciliation (continued)
The principal temporary differences that result in the above deferred tax assets
and liabilities are differences in the methods for calculating depreciation,
amortization and certain expenses accrued for financial reporting purposes not
deductible for tax purposes until paid.
NOTE 9 - LEASES
The Company has a noncancellable operating lease for its office space in
Norcross, Georgia that expires January 2005 and requires monthly payments of
$21. Rental expenses for this operating lease were approximately $254 and $252
during the years ended June 30, 1997 and 1998, respectively.
The Company had a Bareboat Charter Agreement for the use of the Vegas Express.
The original agreement commenced on April 22, 1998 and was to expire in April
1999, as amended. Charter payments were $100 per month until January 22, 1999 at
which time they became $50 per month. Additionally, beginning on January 22,
1999, the Company paid the owner of the Vegas Express $3.00 per passenger per
month in excess of 12,000 passengers. Lease expenses for this Charter were
approximately $0, $0 and $100 during the years ended June 30, 1996, 1997 and
1998, respectively, and $0 and $600 (unaudited) for the six months ended
December 31, 1997 and 1998, respectively. The Company purchased the corporation
that owned the boat in May 1999. (See accompanying pro forma financial
statement.)
In addition, the Company has operating leases that expire through May 2002 for
various office equipment, office facilities, dock and parking. These leases
require monthly payments totaling $28.
F-26
<PAGE> 130
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 9 - LEASES (CONTINUED)
Future minimum lease payments pursuant to these leases are approximately as
follows:
<TABLE>
<CAPTION>
Related
Non-Related Party
Year Ending June 30, Party (Note 5) Total
-------------------- ---------------- ---------------- --------------
<S> <C> <C> <C>
1999 $ 1,104 $ 30 $ 1,134
2000 487 30 517
2001 356 30 386
2002 263 30 293
2003 264 10 274
Thereafter 431 - 431
-------------- -------------- --------------
$ 2,905 $ 130 $ 3,035
============== ============== ==============
</TABLE>
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Litigation
The Company had an agreement with the first distributor which allowed the
Company to sell machines to a second company for their own use. There is a
disagreement between the Company and the first distributor as to whether or not
the agreement set up an exclusive relationship. During the year ended June 30,
1997, the first distributor filed suit against the Company alleging breach of
contract. During the year ended June 30, 1998, the United States District Court
of South Carolina awarded a $3,065 judgement in favor of the first distributor.
As such, the Company has increased the corresponding accrual to that amount plus
interest by recording a charge to income in the amount of $2,779. In April 1999,
the judgement was affirmed on appeal. The Company has filed a petition for a
rehearing.
F-27
<PAGE> 131
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 10 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Litigation (continued)
On October 19, 1998, the former Vice President, Chief Operating Officer, Chief
Financial Officer, Treasurer and Secretary ("Individual") of Technology filed a
complaint against the Company in the United States District Court for the
Northern District of Georgia alleging that the Company had breached an alleged
employment agreement with the Individual because the Company granted incentive
stock options to the Individual for 200,000 shares exercisable at $2.50 per
share rather than nonqualified stock options for 200,000 shares exercisable at
$1.00 per share. Further, the Individual alleges that the stock options he
should have received should have been exercisable without being conditioned upon
a particular schedule and should not have expired upon the termination of his
employment. The Individual alleges that he has been damaged in an undetermined
amount. The Company has filed an answer denying the claims and intends to
vigorously defend the lawsuit.
On June 10, 1998, the second distributor filed a complaint against the Company
in the Court of Common Pleas for the Fifth Judicial Circuit, Richland County,
State of South Carolina in which the second distributor alleges, among other
things, that the Company breached a sales distribution agreement by not
supplying the second distributor with Pot O Gold machines for resale in South
Carolina and further the Company used unfair and/or deceptive means of
restraining trade in violation of the South Carolina Unfair Trade Practices Act
by limiting the supply of Pot O Gold machines in South Carolina. The second
distributer requests that it be granted damages in an amount to be determined at
trial and that the damages be trebled. At the same time it requested that it be
granted a temporary restraining order and preliminary injunction against the
Company.
The Company had the lawsuit removed to the United States District Court for the
District Court of South Carolina, Anderson Division. On September 2, 1998, the
Court denied the second request for temporary restraining order and preliminary
injunction. The Company has filed an Answer and Counterclaim in which it denies
various allegations, asserts various affirmative defenses and counterclaims that
the Company sold new Pot O Gold games as used games thereby constituting an
unfair and deceptive act in trade or commerce in South Carolina in violation of
the Unfair Trade Practices Act and that the second distributer's actions in
selling Pot O Gold games in violation of the terms of the Agreement resulted in
a judgment being entered against the Company in favor of the first distributor
in the amount of $3,065. The Company requests that it be granted damages to be
determined at trial and that the damages be trebled.
F-28
<PAGE> 132
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 10 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Litigation (continued)
On December 14, 1998, the Company filed a lawsuit against the first distributor
in the Superior Court of Gwinnett County, State of Georgia in which the Company
alleges that the first distributor breached Exclusive Distribution Agreement
dated November 27, 1995, by failing to pay the Company $2,667 for a portion of
the memory board upgrade kits for Pot O Gold machines that the first distributor
had ordered from the Company and by failing to pay the Company $5,040 for a
portion of the Pot O Gold machines the first distributor had ordered from the
Company. The Company also alleges that the first distributor misappropriated
"trade secrets" of the Company and requests that it be granted damages to be
proved at trial, interest and attorneys' fees, specific performance and an order
enjoining the misappropriation.
Purchase Agreements
In May 1999, the Company purchased Florida Casino Cruises, Inc, ("Owner") the
corporation that owns the Vegas Express. Total consideration given in exchange
for all the issued and outstanding shares of the Owner's common stock was
$2,100, 80,000 shares of the Company's common stock valued at $ 10 per share and
warrants to purchase an additional 80,000 shares of the Company's common stock
at a price of $ 10 per share with an imputed value of $117. These warrants
expire in three years. Additionally, the Company will assume responsibility for
any disclosed and undisclosed accounts payable relating to the vessel up to
$1,450 plus 50% of any amounts in excess of $1,450 and the assumption of a bank
mortgage in the amount of $ 1,300. As of June 30, 1998 and December 31, 1998,
the Company had advanced $1,700 to the Owner which is represented by a third
mortgage on the vessel. In addition to the monthly charter payments payable
under the Bareboat Charter agreement, the Company has made payments totaling
$156 to a former stockholder of the Owner. In addition, the Company made the
monthly payment for July 1998 related to the second mortgage on the vessel in
the amount of $45.
Guarantees
In 1999 the Company entered into a series of agreements with a third party
financing source to guarantee loans made to unaffiliated purchasers of gaming
machines from the Company. $1,300 of loans have been guaranteed under these
agreements at April 30, 1999.
F-29
<PAGE> 133
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 10 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Purchase Agreements (continued)
In June 1998, the Company entered into a purchase agreement to purchase a hotel
for total consideration of approximately $1,020. As of June 30, 1998, the
Company had $85 on deposit towards the purchase price. The remainder is to be
payable as follows; $50 due July and August 1998, $290 due September 1998 and
the balance by the execution of a promissory note in the amount of $545 bearing
interest at 10% balance due in five years from the closing date.
Employment Agreements
The Company has entered into a five year employment agreement with the Company's
president. The agreement contains an anti-dilutive provision that requires the
issuance of additional options upon a change in control, as defined in the
agreement. Additionally, upon a change in control, the officer has the option to
cause the Company to repurchase all or any portion of the common stock owned by
the officer at a price as defined in the agreement. This agreement is
automatically renewed after the termination date for succeeding one year periods
unless the Company or the officer gives written notice of nonrenewal.
The Company has also entered into three year employment agreements with the
Company's chief financial officer, compliance and licensing director, secretary
and assistant secretary. The agreements contain an anti-dilutive provision that
requires the issuance of additional options upon a change in control, as defined
in the agreement. Additionally, upon a change in control, the officers have the
option to cause the Company to repurchase all or any portion of the common stock
then owned by each officer at a price as defined in the agreement. These
agreements are automatically renewed after the termination date for succeeding
one year periods unless the Company or the officer gives written notice of
nonrenewal.
Nine other employees have employment agreements with the Company or its
subsidiaries that expire at various times through February 2002.
Consulting Agreement
Effective March 1998, the Company entered into a consulting agreement with the
former executive vice president ("Individual") of the Company. Pursuant to the
consulting agreement, the Individual is required to provide a maximum of ten
hours of management consulting per week for the Company and its subsidiaries. He
is to be paid $5 per month, plus an amount to maintain his current health
insurance, and out-of-pocket expenses incurred by him in performing his
consulting duties. This consulting agreement automatically terminates on
December 31, 2008.
F-30
<PAGE> 134
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 11 - BUSINESS AND CREDIT CONCENTRATIONS
For the year ended June 30, 1997, two customers accounted for approximately 18%
and 60% of the Company's total sales. As of June 30, 1997, the Company had
approximately $75, or 8%, of total trade accounts receivable due from these two
customers.
For the year ended June 30, 1998, two customers accounted for approximately 23%
and 47% of the Company's total sales. As of June 30, 1998, the Company had
approximately $39, or 2%, of total trade accounts receivable due from these two
customers.
For the period ended December 31, 1998 (unaudited), Collins Companies, Drews
Distributing, Inc. and Sao Paulo Games Commercial LTDA accounted for
approximately 17%, 48% and 12%, respectively, of the Company's total sales. As
of December 31, 1998, the Company had approximately $753, or 33% of total trade
accounts receivable due from these three customers.
NOTE 12 - STOCK OPTIONS AND WARRANTS
Stock Option Plan
The Company has a 1997 Incentive and Nonstatutory Stock Option Plan ("Plan")
which authorizes the Company to grant incentive stock options within the meaning
of Section 422A of the Internal Revenue Code of 1986, as amended, and to grant
nonstatutory stock options. The Plan allows for a total of 1,000,000 shares of
Common Stock to be granted. The Board of Directors has amended the Plan to
increase the number of shares to 4,500,000. The amendment is subject to
stockholder approval. The Plan is administered by the Company's Board of
Directors or a committee thereof which determines the terms of options granted,
including the exercise price, the number of shares of Common Stock subject to
the option, and the terms and conditions of exercise. No incentive option
granted under the Plan is transferable by the optionee other than by will or the
laws of descent and distribution and each incentive option is exercisable during
the lifetime of the optionee only by such optionee.
Stock Option Activity
During the year ended June 30, 1997, the Company issued 1,100,684 stock options
exercisable at prices ranging from $1.00 to $2.80 per share, which represented
fair market value at the respective dates of grant. These options expire from
April 2002 through June 2007. No expense has been recognized for issuances to
employees. However, for 130,000 options issued to non-employees, $59 of expense
has been recognized at imputed values ranging from $.45 to $.48 per option,
which approximated fair market value at the time of issuance prior to the
acquisition of U.S. Games.
F-31
<PAGE> 135
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 12 - STOCK OPTIONS AND WARRANTS (CONTINUED)
Stock Option Activity (continued)
During the year ended June 30, 1998, the Company issued 562,500 stock options
exercisable at $6.00 per share, which represented fair market value at the date
of grant. These options expire June 2008.
In November 1998 (unaudited), the Company issued 600,000 employee stock options
exercisable at $6.00 per share, which approximated market value. These options
expire through December 2007.
In December 1998 (unaudited), the Company issued 190,000 employee stock options
exercisable at $6.00 per share that expire from November 2003 through December
2007. $760,000 of compensation expense was recorded in connection with these
options using a value of $10 per share.
Stock Warrant Activity
During the year ended June 30, 1997, the Company issued 142,413 common stock
warrants in conjunction with various stock issuances. These warrants have
exercise prices ranging from $1.00 to $2.80 per share and expire from June 1999
through May 2005. $26 of expense has been recognized as a result of issuances of
93,321 of common stock warrants to nonemployees in exchange for services
provided. The imputed value of these warrants ranged from $.46 to $ .78 per
warrant.
During the year ended June 30, 1998, the Company issued 41,988 common stock
warrants in conjunction with various stock issuances. These warrants have
exercise prices of $2.80 per share and expire from July 1999 through June 2000.
During the period ended December 31, 1998 (unaudited), the Company issued 20,994
common stock warrants in conjunction with various debt conversions. These
warrants have exercise prices of $2.50 per share and expire from July 2000
through December 2000.
F-32
<PAGE> 136
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 12 - STOCK OPTIONS AND WARRANTS (CONTINUED)
Stock Option and Warrant Activity (continued)
The following is a summary of options and warrants granted, exercised and
expired:
<TABLE>
<CAPTION>
Currently Exercisable
Exercise Price ----------------------------------
Options Warrants Per Share Options Warrants
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Outstanding, June 30, 1995 1,687,500 275,307 $ 1.00 - 2.80 1,687,500 275,307
Options granted 20,000 - 1.50 20,000 -
Warrants granted - 129,929 2.50 - 3.00 - 129,929
-------------- -------------- -------------- -------------- --------------
Outstanding June 30, 1996 1,707,500 405,236 1.00 - 3.00 1,707,500 405,236
Options granted 1,100,648 - .10 - 2.80 780,648 -
Warrants granted - 142,413 1.00 - 2.80 - 142,413
Warrants exercised - (32,500) 2.80 - (32,500)
-------------- -------------- -------------- --------------- --------------
Outstanding June 30, 1997 2,808,148 515,149 .10 - 3.00 2,488,148 515,149
Options granted 562,500 - 6.00 562,500 -
Warrants granted - 41,988 2.50 - 41,988
Warrants exercised - (91,786) 2.80 - (91,786)
Warrants expired - (36,329) 2.80 - (36,329)
-------------- -------------- -------------- --------------- --------------
Outstanding June 30, 1998 3,370,648 429,022 .10 - 6.00 3,050,648 429,022
Options granted (unaudited) 790,000 - 6.00 250,000 -
Options exercised (unaudited)
(100) - 2.80 (100) -
Options expired (unaudited) (205,700) - 2.50 - 2.80 (205,700) -
Warrants granted (unaudited)
- 20,994 2.50 - 20,994
-------------- -------------- -------------- --------------- --------------
Outstanding December 31, 1998
(unaudited) 3,954,848 450,016 $ .10 - 6.00 3,094,848 450,016
============== ============== ============== =============== ==============
</TABLE>
The weighted average exercise price is $2.54 per share.
The weighted average remaining contractual life is 76 months.
F-33
<PAGE> 137
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 12 - STOCK OPTIONS AND WARRANTS (CONTINUED)
Stock Warrant Activity (continued)
The above table does not include 3,214,990 shares and warrants that may be
required to be issued upon the conversion of the 11% convertible promissory
notes payable to individuals as discussed in Note 6. Upon conversion, 1,060,000
shares and 17,495 shares of common stock would have to be issued at $1.25 and
$2.50 per share, respectively. Additionally, two sets of 1,060,000 common stock
warrants would have to be issued allowing the holders to purchase shares of the
Company's common stock at $1.75 a share and 120% of the offering price of an
initial public offering by the Company. In addition, 17,495 common stock
warrants allowing the holder to purchase shares at $2.50 per share would have to
be issued. In January 1999, the Company paid $383 of the December 31, 1998
outstanding balance of these notes in full. As such, the Company believes that
the conversion features that would have entitled the noteholders the right to
acquire up to 3,042,000 shares of the Company's common stock have expired.
The Company has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, no compensation cost has been recognized for the issuances of stock
options to employees. Had compensation cost for the Company's issuances of stock
options during the year ended June 30, 1997 and 1998 and the six months ended
December 31, 1998 (unaudited) been determined based on the fair value at the
date of grant consistent with the provisions of SFAS No. 123, the Company's net
income (loss) and earnings (loss) per share for those periods would have been
decreased (increased) to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
June 30,
---------------------------------- December 31,
1997 1998 1998
------------- ------------ ------------
(unaudited)
<S> <C> <C> <C>
Net income (loss) - as reported $ 4,688 $ (929) $ 2,738
Net income (loss) - pro forma $ 3,700 $ (1,431) $ 2,527
Earnings (loss) per share - diluted - as reported $ .65 $ (.21) $ .27
Earnings (loss) per share - diluted - pro forma $ .48 $ (.32) $ .25
</TABLE>
The Company utilizes the Black-Scholes option-pricing model to calculate the
fair value of each individual issuance of options or warrants with the following
assumptions used for grants through the six months ended December 31, 1998:
dividend yield of 0.0%; expected average annual volatility of 0.0%; average
annual risk-free interest rate of 5.44%; and expected terms of 3 to 5 years.
F-34
<PAGE> 138
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 13 - STOCKHOLDERS' EQUITY
Preferred Stock
The Company's board of directors is authorized to issue from time to time,
without stockholder authorization, in one or more designated series, any or all
of the authorized but unissued shares of preferred stock with such dividend,
redemption, conversion, and exchange provisions as may be provided by the board
of directors with regard to such particular series. Any series of preferred
stock may possess voting, dividend, liquidation and redemption rights superior
to those of the common stock. The rights of the holders of common stock will be
subject to and may be adversely affected by the rights of the holders of any
preferred stock that may be issued in the future. Issuance of a new series of
preferred stock, or providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could make it more difficult for a
third party to acquire, or discourage a third party from acquiring, the
outstanding common stock of Leisure Time and make removal of the board of
directors more difficult. As of December 31, 1998, no series of preferred stock
has been designated and no shares of preferred stock are currently issued and
outstanding.
Common Stock Activity
During the years ended June 30, 1996, 1997 and 1998, and the period ended
December 31, 1998 (unaudited), the Company sold 426,400, 167,400, 33,900 and 100
shares of common stock, respectively, for cash at prices ranging from $.50 and
$2.80 per share.
During the period ended December 31, 1998 (unaudited), 20,944 shares of common
stock were issued at $2.50 per share in satisfaction of $53 of notes payable and
accrued interest.
During the years ended June 30, 1997 and 1998, the Company issued 85,292 and
99,874 shares of common stock, respectively, as extensions on notes payable and
in conjunction with the conversion of certain notes payable. During the year
ended June 30, 1997, 31,100, shares were issued at a value of $1.00 per share in
connection with the extensions. During the years ended June 30, 1997 and 1998,
54,192 and 99,874 shares, respectively, were issued at rates ranging from $2.50
to $2.80 per share in satisfaction of $145 and $267, respectively, of notes
payable and accrued interest.
During the year ended June 30, 1997, officers of the Company forgave $875 of
accrued officer wages related to prior years.
In October 1996, the Company issued 38,080 shares of common stock in exchange
for services provided. These shares were valued at $2.50 per share.
F-35
<PAGE> 139
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 13 - STOCKHOLDERS' EQUITY (CONTINUED)
Common Stock Activity (continued)
In December 1996, the Company repurchased 100,000 shares of previously issued
common stock at a rate of $2.00 per share.
In June 1997, in connection with the acquisition of a certain vessel as
discussed in Note 10, the Company issued 150,000 shares of common stock valued
at $ 2.50 a share.
NOTE 14 - BUSINESS SEGMENTS
As of the period ending December 31, 1998, the Company has two reportable
segments: manufacturing and offshore gaming cruises. Prior to the period ended
December 31, 1998, the Company had only one operational segment; therefore, only
the period ended December 31, 1998 reportable segment information is being
presented. The manufacturing segment is responsible for the development,
manufacturing and sales of gaming equipment. The offshore gaming cruise segment
operates a gaming cruise ship. The accounting policies of the segments are the
same as those described in the summary of significant accounting policies. The
Company's reportable segments are strategic business units that offer different
products and services. They are managed separately because each business
requires different technology and marketing strategies.
Operating results and other financial data are presented for the two reportable
segments of the Company for the period ended December 31, 1998. Revenue includes
sales to external customers within that segment. Cost of goods sold includes
costs associated with revenue within the segments. Depreciation and amortization
includes expenses related to depreciation and amortization directly allocated to
the segment. Consolidated income tax expense and deferred tax assets are
included with corporate and other.
F-36
<PAGE> 140
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 14 - BUSINESS SEGMENTS (CONTINUED)
Identifiable assets are those assets used in segment, corporate and other
operations, which consist primarily of cash, receivables, inventory, prepaid
expenses, machinery, equipment, deposits and intangibles.
<TABLE>
<CAPTION>
Offshore
Gaming Corporate
Manufacturing Cruises And Other Consolidated
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
December 31, 1998 (unaudited):
Revenue $ 25,632 $ 3,100 $ 276 $ 29,008
Cost of goods sold $ 13,423 $ 326 $ 277 $ 14,026
Depreciation and amortization $ 622 $ 236 $ 27 $ 885
Selling, general and administrative
expenses $ 2,084 $ 4,803 $ 2,032 $ 8,919
Segment profit (loss) $ 10,411 $ (3,139) $ (4,055) $ 3,217
Identifiable assets $ 15,162 $ 10,915 $ 3,328 $ 29,405
</TABLE>
NOTE 15 - EARNINGS (LOSS) PER SHARE
The following table sets forth the computation for basic and diluted earnings
per share:
<TABLE>
<CAPTION>
For the Six Months Ended
Year Ended June 30, December 31,
------------------------------------------------ -------------------------------
1996 1997 1998 1997 1998
------------- ------------- ----------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Numerator
Numerator for basic earnings per share
- net increase (loss) $ (1,397) $ 4,688 $ (929) $ 1,371 $ 2,738
Effect of interest saved on convertible
debt - 298 131 84 36
------------- ------------- ----------- ------------- -------------
Numerator for diluted earnings per
share - adjusted net income (loss) $ (1,397) $ 4,986 $ (798) $ 1,455 $ 2,774
============= ============= =========== ============= =============
</TABLE>
F-37
<PAGE> 141
LEISURE TIME CASINOS & RESORTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1997 AND 1998 IS UNAUDITED)
NOTE 15 - EARNINGS (LOSS) PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
For the Six Months Ended
Year Ended June 30, December 31,
---------------------------------------------------- -------------------------------
1996 1997 1998 1997 1998
-------------- -------------- -------------- -------------- --------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Denominator
Denominator for basic earnings per
share - weighted average shares 4,010,650 4,343,397 4,516,528 4,505,380 4,642,753
Effect of dilutive securities -
convertible debt, options and warrants
-- 3,321,506 -- 5,333,923 5,526,513
-------------- -------------- -------------- -------------- --------------
Denominator for diluted earnings per
share - adjusted weighted average
shares 4,010,650 7,664,903 4,516,528 9,839,303 10,169,266
============== ============== ============== ============== ==============
Basic earnings (loss) per share $ (.35) $ 1.08 $ (.21) $ .30 $ .59
============== ============== ============== ============== ==============
Diluted earnings (loss) per share $ (.35) $ .65(1) $ (.21) $ .15 $ .27
============== ============== ============== ============== ==============
</TABLE>
(1) Where the inclusion of potential common shares is anti-dilutive, such
shares are excluded from the computation.
NOTE 16 - SUBSEQUENT EVENTS
Line-of-Credit
In January 1999, the Company established a $1,000 line-of-credit with a finance
company that expires on January 31, 2000. Interest is variable at a per annum
rate equal to the sum of 3.25% plus the 30-day Commercial Paper Rate (as
published in The Wall Street Journal), based upon actual days elapsed over a 360
day year.
F-38
<PAGE> 142
INDEPENDENT AUDITORS' REPORT
To the Stockholder
Leisure Time Technology, Inc.
(f/k/a U.S. Games, Inc.)
We have audited the accompanying balance sheets of Leisure Time Technology, Inc.
(f/k/a U.S. Games, Inc.) as of June 30, 1996 and 1997, and the related
statements of operations, stockholder's equity, and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Leisure Time Technology, Inc.
(f/k/a U.S. Games, Inc.) at June 30, 1996 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Ehrhardt Keefe Steiner & Hottman PC
August 15, 1997
Denver, Colorado
F-39
<PAGE> 143
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
June 30,
---------------------------------------
1996 1997
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 4,158 $ 1,054
Trade accounts receivable, less allowance for doubtful accounts of
$26 and $31 at June 30, 1996 and 1997, respectively 219 868
Other receivables 116 -
Inventories (Note 2) 1,725 2,873
Income taxes refundable 249 11
Prepaid expenses and other 78 127
Deferred tax asset (Note 5) 188 54
--------------- ---------------
Total current assets 6,733 4,987
--------------- ---------------
Property and equipment
Machinery and equipment 681 741
Leasehold improvements 37 41
--------------- ---------------
718 782
Less accumulated depreciation (391) (516)
--------------- ---------------
Net property and equipment 327 266
Non-compete agreement, less accumulated amortization of $413 - 4,801
Purchased software, less accumulated amortization of $637 and $1,042 at June 30,
1996 and 1997, respectively (Note 4) 576 173
Debt issuance cost, less accumulated amortization of $293 and $342 at June 30,
1996 and 1997, respectively 49 -
Goodwill, less accumulated amortization of $535 (Note 10) - 5,562
Other assets 233 14
--------------- ---------------
$ 7,918 $ 15,803
=============== ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Current installments of long-term debt (Note 6) $ - $ 637
Current installments of long-term liabilities (Note 7) - 509
Trade accounts payable 441 685
Accrued expenses (Note 3) 987 1,049
--------------- ---------------
Total current liabilities 1,428 2,880
Long-term debt (Note 6) - 3,226
Other long-term liabilities (Note 7) - 5,457
Deferred tax liability (Note 5) - 506
--------------- ---------------
Total long-term liabilities - 9,189
--------------- ---------------
Total liabilities 1,428 12,069
--------------- ---------------
Commitments and contingencies (Notes 8 and 10)
Stockholder's equity
Common stock, no par value; 5,000,000 shares authorized; 688,850 shares
issued - -
Paid-in capital (Note 10) 820 -
Retained earnings 5,712 3,734
Treasury stock, 350 common shares, at cost (42) -
--------------- --------------
Total stockholders' equity 6,490 3,734
--------------- ---------------
$ 7,918 $ 15,803
=============== ===============
</TABLE>
See notes to financial statements.
F-40
<PAGE> 144
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the Years Ended
June 30,
------------------------------
1996 1997
------------- -------------
<S> <C> <C>
Revenue $ 28,291 $ 32,532
Cost of goods sold 15,677 17,916
------------- -------------
Gross profit 12,614 14,616
------------- -------------
Selling, general and administrative expenses 8,284 5,903
Deferred compensation (Note 7) -- 1,354
Research and development costs 800 601
Interest expense, net 74 449
------------- -------------
Total operating expenses 9,158 8,307
------------- -------------
Income before income taxes 3,456 6,309
Income tax expense (Note 5) (1,293) (2,533)
------------- -------------
Net income $ 2,163 $ 3,776
============= =============
Earnings per share - basic and diluted $ 3.14 $ 5.48
============= =============
Weighted average number of common shares outstanding - basic and diluted 688,850 688,850
============= =============
</TABLE>
See notes to financial statements.
F-41
<PAGE> 145
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
STATEMENT OF STOCKHOLDER'S EQUITY
YEARS ENDED JUNE 30, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Common Stock Total
-------------------------- Paid-in Retained Treasury Stockholder's
Shares Amount Capital Earnings Stock Equity
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1995 688,850 $ -- $ 343 $ 3,549 $ (42) $ 3,850
Income tax benefit related to the
exercise of non-qualified stock
options -- -- 477 -- -- 477
Net income -- -- -- 2,163 -- 2,163
----------- ----------- ----------- ----------- ----------- -----------
Balances at June 30, 1996 688,850 -- 820 5,712 (42) 6,490
Payments of options and
warrants exercised at June 30,
1996 at rates ranging from
$.01 to $3.60 (Note 10) 343,998 862 -- -- -- 862
Repurchase of common stock recorded
at cost (Note 10) (343,998) (862) (820) (2,415) 42 (4,055)
Allocation of Parent's excess
purchase price -- -- -- (525) -- (525)
Dividends (Note 10) -- -- -- (2,814) -- (2,814)
Net income -- -- -- 3,776 -- 3,776
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1997 688,850 $ -- $ -- $ 3,734 $ -- $ 3,734
=========== =========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-42
<PAGE> 146
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the Years Ended
June 30,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 2,163 $ 3,776
----------- -----------
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortization 502 238
Amortization of non-compete agreement -- 413
Amortization of debt issue costs 170 341
Amortization of goodwill -- 535
Deferred compensation agreement -- 1,354
Deferred tax benefit (113) 188
Deferred tax liability -- 452
Changes in assets and liabilities
Trade accounts receivable 2,236 (649)
Inventories (108) (1,148)
Income taxes refundable 227 238
Prepaid expenses (46) (50)
Other receivables (115) 116
Trade accounts payable (238) 244
Accrued expenses 200 61
Income taxes payable (33) --
----------- -----------
2,682 2,333
----------- -----------
Net cash provided by operating activities 4,845 6,109
----------- -----------
Cash flows from investing activities
Capital expenditures (112) (64)
Other assets (100) 217
Purchase of software (10) --
Paid for contingent payments -- (2,495)
----------- -----------
Net cash used in investing activities (222) (2,342)
----------- -----------
Cash flows from financing activities
Dividends -- (2,814)
Payments on notes payable (500) --
Payments on long-term debt (150) --
Payments on merger notes -- (263)
Repurchase of common stock -- (3,192)
Payments on deferred compensation agreement -- (602)
----------- -----------
Net cash used in financing activities (650) (6,871)
----------- -----------
Net increase (decrease) in cash 3,973 (3,104)
Cash at beginning of year 185 4,158
----------- -----------
Cash at end of year $ 4,158 $ 1,054
=========== ===========
</TABLE>
Continued on the following page.
See notes to financial statements.
F-43
<PAGE> 147
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Continued from previous page.
Supplemental disclosure of cash flow information
Cash paid during the year for interest was $28 and $149 for June 30,
1996 and 1997, respectively.
Cash paid during the year for income taxes was $1,311 and $189 for June
30, 1996 and 1997, respectively.
Supplemental disclosures of non cash financing and investing activities
During the year ended June 30, 1996, the Company recorded a debt
issuance cost of $342 in exchange for warrants with a fair market value
of $342 in connection with obtaining a line-of-credit.
During the year ended June 30, 1996, the Company recorded a credit to
paid-in-capital in the amount of $477 for the income tax benefit
related to stock options.
During the year ended June 30, 1997, in connection with the
acquisition, the Company entered into a non-compete agreement with the
former stockholder (Note 7).
During the year ended June 30, 1997, in connection with the
acquisition, the Company incurred or recognized $4,127 of notes
payable, $3,602 in goodwill, $525 in charges to equity and $267 related
to accounts payable (Note 10).
See notes to financial statements.
F-44
<PAGE> 148
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Leisure Time Technology, Inc. (f/k/a U.S. Games, Inc.) (the "Company"),
develops, manufactures and sells video amusement games and video gaming
machines. The Company is licensed to sell video gaming machines in Michigan,
Minnesota, New York, North Carolina, and Wisconsin and is in compliance with
South Carolina regulations regarding the sale of gaming machines. The Company is
in the process of becoming licensed in Arizona, Mississippi, Montana, Nevada and
Ontario, and has established relationships for international sales in Europe and
South America.
On September 13, 1996, the Company was acquired by Leisure Time Casinos &
Resorts, Inc. (the "Parent") and operates as a wholly owned subsidiary of the
Parent (Note 10).
Inventories
Inventories are stated at the lower of cost or market and consist primarily of
raw material, work in process and finished goods. Work-in-process and finished
goods include raw materials, direct labor and manufacturing overhead. Cost is
determined using the first-in, first-out method for all inventories.
Property and Equipment
Property and equipment are stated at cost. Depreciation on equipment is
calculated using the straight-line method over the estimated lives of the
assets. Leasehold improvements are amortized on a straight-line basis over the
shorter of the lease term or estimated useful life of the asset.
Purchased Software
Purchased software is being amortized over a period of three years.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
F-45
<PAGE> 149
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
Revenue is recognized as products are shipped.
Research and Development
All research and development costs are expensed as incurred.
Non-Compete Agreement
The Company has entered into a non-compete agreement with the former stockholder
of the Company. The amount shown on the balance sheet represents the present
value of amounts to be paid (Note 7). The cost is being amortized using the
straight-line method over 10 years, the life of the agreement.
Goodwill
Goodwill, resulting from the acquisition, is being amortized using the
straight-line method over 10 years.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration of
credit risk consist primarily of temporary cash investments. The Company places
its cash investments with high credit quality financial institutions and, by
policy limits the amount of credit exposure to any one institution. The Company
does, however, on occasion exceed the Federal Deposit Insurance Corporation
federally insured limits and the Securities Investors Protection Corporation
insured limits and at June 30, 1997, exceeded these amounts by approximately
$1,691.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the 1996 financial statements in
order to conform to the 1997 presentation.
F-46
<PAGE> 150
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30,
--------------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
Raw materials $ 1,211 $ 1,827
Work-in-process 98 110
Finished goods 526 1,046
-------------- --------------
Total 1,835 2,983
Inventory reserve (110) (110)
-------------- --------------
$ 1,725 $ 2,873
============== ==============
</TABLE>
NOTE 3 - ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
June 30,
--------------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
Accrued wages and benefits $ 159 $ 205
Accrued interest payable - 288
Deferred compensation 152 -
Advanced deposits 116 -
Other accrued expenses 560 556
-------------- --------------
$ 987 $ 1,049
============== ==============
</TABLE>
NOTE 4 - PURCHASED SOFTWARE
The Company recorded an intangible asset of approximately $1,200 for software
rights and source code. The asset is being amortized over three years and has
net balances of $576 and $173 at June 30, 1996 and 1997, respectively. Prior to
the purchase of the software and source code, the Company paid royalties for the
use of the software.
F-47
<PAGE> 151
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 5 - INCOME TAXES
Due to the acquisition (Note 10), the Company will be included in the
consolidated tax return with the Parent for the period from the date of
acquisition to June 30, 1997. The accompanying tax provision has been computed
assuming that the Company files on a separate return basis. Income tax expense
has been reflected through the reduction of dividends by $2,091 as of June 30,
1997.
Income tax expense (benefit) for the years ended June 30, 1996 and 1997 consists
of:
<TABLE>
<CAPTION>
June 30,
--------------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
Current
U.S. Federal $ 1,176 $ 1,676
State and local 230 329
-------------- --------------
1,406 2,005
-------------- --------------
Deferred
U.S. Federal (106) 496
State and local (7) 32
-------------- --------------
(113) 528
-------------- --------------
$ 1,293 $ 2,533
============== ==============
</TABLE>
Actual income tax expense differs from expected income tax expense (computed by
applying the U.S. Federal statutory income tax rate of 34% to income before
income taxes), as follows:
<TABLE>
<CAPTION>
June 30,
-------------------------------------
1996 1997
------------- -------------
<S> <C> <C>
Computed expected income tax expense 34.0% 34.0%
Increase (decrease) in income tax expense resulting from
State income taxes, net of federal income tax effect 5.2 3.4
Nondeductible expenses .5 1.5
Other (2.3) 1.2
------------- -------------
37.4% 40.1%
============= =============
</TABLE>
F-48
<PAGE> 152
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 5 - INCOME TAXES (CONTINUED)
The net deferred tax asset liability in the accompanying balance sheets includes
the following deferred tax assets and liabilities:
<TABLE>
<CAPTION>
June 30,
--------------------------------------
1996 1997
--------------- --------------
<S> <C> <C>
Current deferred taxes
Current deferred tax asset $ 375 $ 54
Current deferred tax liability (187) -
--------------- --------------
Net current deferred tax asset $ 188 $ 54
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
June 30,
---------------------------------------
1996 1997
--------------- ---------------
<S> <C> <C>
Long-term deferred taxes
Long-term deferred tax asset $ - $ 769
Long-term deferred tax liability - (1,275)
--------------- ---------------
Net long-term deferred tax liability $ - $ (506)
=============== ===============
</TABLE>
The principal temporary differences that result in the above deferred tax assets
and liabilities are differences in the methods for calculating depreciation,
amortization and certain expenses accrued for financial reporting purposes not
deductible for tax purposes until paid.
The Company generated net operating loss carryforwards of $328, based upon
operations from July 1, 1996 through September 13, 1996. These net operating
loss carryforwards were utilized for the period September 14, 1996 to June 30,
1997.
F-49
<PAGE> 153
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 6 - LONG-TERM DEBT
<TABLE>
<CAPTION>
June 30,
---------------------------------------
1996 1997
--------------- ---------------
<S> <C> <C>
6.64% promissory notes payable to individuals, interest
payable annually until all contingent payments (Note 8)
have been made, at which time monthly principal and interest
payments are due, monthly payments computed based on a
percentage of the previous months gross sales of defined
gaming products. Payment is applied against accrued interest
first and then as a reduction of unpaid principal. Annual
payments must at least equal the accrued and unpaid interest
on the remaining outstanding principal balance. The Company's
obligation is satisfied on the earliest to occur; (i) the date
all accrued and unpaid interest and principal is paid, (ii) the
date on which a total of $4,961 has been paid, (iii) or October
10, 2002. $ - $ 3,863
Less current portion - (637)
--------------- ---------------
Total long-term debt $ - $ 3,226
=============== ===============
</TABLE>
The aggregate annual maturities of long-term debt at June 30, 1997, are as
follows:
<TABLE>
<CAPTION>
Year Ending June 30,
---------------------
<S> <C>
1998 $ 637
1999 665
2000 710
2001 759
2002 811
Thereafter 281
-----------
$ 3,863
===========
</TABLE>
F-50
<PAGE> 154
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 7 - LONG-TERM LIABILITIES
Deferred Compensation Contracts
The Company has entered into $1,644 (undiscounted) of deferred compensation
contracts with certain individuals related to the acquisition (Note 10). These
contracts provide for the payment of defined amounts, generally for up to a
period of six years commencing on a monthly basis in November 1996. Initially,
the payments were computed based on the number of Pot-O-Gold(TM) machines sold
each month multiplied by the agreed upon rate for the amount sold. As of March
1, 1997, the amounts are computed by taking a percentage of the previous month's
gross sales. The present value of the future amounts estimated to be payable
were accrued for financial reporting purposes at an imputed interest rate of
6.64%, and originally amounted to $1,354 (discounted). As of June 30, 1997,
approximately $617 of deferred compensation payments have been made. Of those
payments, $602 have been recorded as a reduction to the liability. The remaining
$15 has been recorded as interest expense. The agreements contained certain
early payment discount provisions based on the payments due from September 14,
1996 to March 1, 1997. As of June 30, 1997, $87 of early payment discounts have
been offset against interest expense.
Noncompete Agreement
In connection with the acquisition, the Company entered into a noncompete
agreement with the former stockholder of the Company in the amount of $7,300
(undiscounted). The agreement is payable through September 2006 in 10 annual
installments of $730 which includes interest imputed at 6.64%. The present value
of the future amounts to be payable are accrued for financial reporting purposes
at the imputed interest rate of 6.64% and originally amounted to $5,214. The
corresponding asset is being amortized over the life of the agreement which is
10 years.
A summary of long-term liabilities at June 30, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------------------------------------------------
1996 1997
-------------------------------------------- -------------------------------------------
Current Long-term Current Long-term
Total Portion Portion Total Portion Portion
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Deferred compensation contracts $ - $ - $ - $ 752 $ 125 $ 627
Noncompete agreement - - - 5,214 384 4,830
------------ ------------ ------------ ------------ ------------ ------------
$ - $ - $ - $ 5,966 $ 509 $ 5,457
============ ============ ============ ============ ============ ============
</TABLE>
F-51
<PAGE> 155
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 7 - LONG-TERM LIABILITIES (CONTINUED)
Noncompete Agreement (continued)
The aggregate annual maturities of long-term liabilities and long-term debt at
June 30, 1997 are as follows:
<TABLE>
<CAPTION>
Long-Term Long-Term
Year Ending June 30, Debt Liabilities Total
-------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
1998 $ 637 $ 509 $ 1,146
1999 665 543 1,208
2000 710 579 1,289
2001 759 618 1,377
2002 811 659 1,470
Thereafter 282 3,058 3,340
--------------- --------------- ---------------
$ 3,864 $ 5,966 $ 9,830
=============== =============== ===============
</TABLE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Leases
The Company has a noncancellable operating lease for its office space that
expires January 31, 1998. Rental expenses for this operating lease were
approximately $234 and $254 during the years ended June 30, 1996 and 1997,
respectively.
Future lease payments under the operating lease as of June 30, 1997 are
approximately $154.
Litigation
The Company has an agreement with a distributor which allowed the Company to
sell machines to a second company for their own use. There is a disagreement
between the Company and its distributor as to whether or not the agreement set
up an exclusive relationship. During the year ended June 30, 1997, both entities
filed suit against the Company alleging breach of contract. In the opinion of
counsel and management, neither suit will result in material losses in excess of
amounts provided for in the accompanying financial statements.
F-52
<PAGE> 156
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Profit Sharing
The Company has a profit sharing plan which covers substantially all employees.
Contributions are determined at the sole discretion of management and are
charged to current operations. Contributions were $48 and $77 for the years
ended June 30, 1996 and 1997, respectively.
Additionally, the Company has a 401(k) feature. This feature does not create an
obligation for the Company.
NOTE 9 - BUSINESS AND CREDIT CONCENTRATIONS
In 1996, two customers accounted for approximately 27% and 53% of the Company's
total sales. At June 30, 1996, the Company had approximately $48, or 22%, of
total trade accounts receivable due from these two customers. Additionally, the
Company had approximately $170, or 78%, of total trade accounts receivable due
from one other customer.
In 1997, two customers accounted for approximately 18% and 60% of the Company's
total sales. As of June 30, 1997, the Company had approximately $75, or 8%, of
total trade accounts receivable due from these two customers. Additionally, the
Company had approximately $681, or 76%, of total trade accounts receivable due
from one other customer.
NOTE 10 - STOCKHOLDERS' EQUITY AND BUSINESS ACQUISITION
On September 13, 1996, the Company was acquired by the Parent.
Prior to the acquisition, options and warrants to acquire 343,998 shares of the
Company's common stock were exercised for $862. Subsequently, these shares were
then redeemed for $4,055.
In conjunction with the acquisition, the Company made monthly contingent
payments related to the sale of the Pot-of-Gold(TM) machines. These agreements
required monthly payments based upon the sale of the Pot-of-Gold(TM) machines.
The agreement contained certain early payment discount provisions. The Company
exercised the provisions and paid a total of $2,894 during the year ended June
30, 1997. The Company has no further payment obligation under the agreements.
The acquisition resulted in net goodwill of $6,097, which is being amortized on
the straight-line method over 10 years.
Additionally, the Company entered into deferred compensation and covenant not to
compete agreements as discussed in Note 7.
F-53
<PAGE> 157
LEISURE TIME TECHNOLOGY, INC.
(f/k/a U.S. GAMES, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 10 - STOCKHOLDERS' EQUITY AND BUSINESS ACQUISITION (CONTINUED)
The Company has also guaranteed approximately $1,610 in debt owed by the Parent.
As of June 30, 1997, the outstanding balance related to these debt agreements
was $1,526.
F-54
<PAGE> 158
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Florida Casino Cruises, Inc.
Naples, Florida
We have audited the accompanying balance sheet of Florida Casino Cruises, Inc.
as of December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Florida Casino Cruises, Inc. at
December 31, 1997 and 1998, and the consolidated results of their operations and
their cash flows for the years then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, at December 31, 1998, the Company had a stockholders'
deficit of $5,599 and a net deficiency in working capital that raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are described in Note 2. The financial
statements do not include any adjustments that may result from the outcome of
this uncertainty.
Ehrhardt Keefe Steiner & Hottman P.C.
April 8, 1999
Denver, Colorado
F-55
<PAGE> 159
FLORIDA CASINO CRUISES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1998
--------------- --------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 1 $ -
Cash - restricted - 207
Accounts receivable 2 2
Prepaid expenses 15 -
--------------- --------------
Total current assets 18 209
--------------- ---------------
Property and equipment (Notes 3 and 5) 4,471 4,388
Less accumulated depreciation (1,933) (2,371)
--------------- ---------------
Total property and equipment 2,538 2,017
--------------- ---------------
Other assets
Deposits 10 1
Loan acquisition fee, net of accumulated amortization of $3 (1997) and $6
(1998) 26 16
--------------- ---------------
Total other assets 36 17
--------------- ---------------
Total assets $ 2,592 $ 2,243
=============== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Note payable - stockholder (Note 4) $ 2,341 $ 2,191
Mortgage payable -related party (Note 4) 700 -
Current portion of long-term debt (Note 5) 609 855
Accounts payable 806 646
Accrued expenses 607 834
Accrued interest - stockholder (Note 4) 406 646
--------------- ---------------
Total current liabilities 5,469 5,172
Long-term liabilities
Notes payable (Note 5) 1,621 970
Other liabilities (Note 9) 357 1,700
--------------- ---------------
Total long-term liabilities 1,978 2,670
--------------- ---------------
Total liabilities 7,447 7,842
--------------- ---------------
Commitments and contingencies (Note 8)
Stockholders' deficit
Common stock, $1 par value, 130 shares authorized, 121 (1997) and 79 (1998)
shares issued and outstanding - -
Additional paid-in capital 430 430
Accumulated deficit (5,285) (6,029)
--------------- ---------------
(4,855) (5,599)
--------------- ---------------
Total liabilities and stockholders' deficit $ 2,592 $ 2,243
=============== ===============
</TABLE>
See notes to financial statements.
F-56
<PAGE> 160
FLORIDA CASINO CRUISES, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------------
1997 1998
--------------- ---------------
<S> <C> <C>
Sales revenue $ 2,396 $ -
Cost of sales 1,143 -
--------------- ---------------
Gross profit (loss) 1,253 -
Operating expenses
General and administrative expenses 2,761 793
Litigation expenses (Note 8) 527 225
Loss on abandonment of assets 814 -
Interest expense, net 442 426
--------------- ---------------
Total operating expenses 4,544 1,444
--------------- ---------------
Net loss before other income (3,291) (1,444)
Other revenue
Bareboat charter income (Note 7) - 700
--------------- ---------------
Total other revenue - 700
--------------- ---------------
Net loss $ (3,291) $ (744)
=============== ===============
Loss per share - basic and diluted $ (30.75) $ (9.42)
============== ===============
Weighted average number of common shares outstanding -
basic and diluted
107,000 79,000
============== ===============
</TABLE>
See notes to financial statements.
F-57
<PAGE> 161
FLORIDA CASINO CRUISES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Deficit/
-------------------------- Paid-in Treasury Retained
Shares Amount Capital Stock Earnings Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1996 121 $ -- $ 680 $ -- $ (1,044) $ (364)
Common stock repurchase from
stockholder (Note 9) (42) -- (250) -- (950) (1,200)
Net loss for the year -- -- -- -- (3,291) (3,291)
----------- ----------- ----------- ----------- ----------- -----------
Balance - December 31, 1997 79 -- 430 -- (5,285) (4,855)
Net loss for the year -- -- -- -- (744) (744)
----------- ----------- ----------- ----------- ----------- -----------
Balance - December 31, 1998 79 $ -- $ 430 $ -- $ (6,029) $ (5,599)
=========== =========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-58
<PAGE> 162
FLORIDA CASINO CRUISES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
--------------------------
1997 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net (loss) income $ (3,291) $ (744)
----------- -----------
Adjustments to reconcile net loss to cash (used by) provided by operating
activities
Write off of start-up costs 76 --
Loss on disposition of fixed assets 860 63
Depreciation and amortization 666 464
Changes in certain assets and liabilities -
Accounts receivable 225 --
Inventories 25 --
Prepaids 122 16
Other current assets 10 9
Accounts payable 522 (160)
Other accrued expenses 725 467
----------- -----------
3,231 859
----------- -----------
Net cash (used by) provided by operating activities (60) 115
----------- -----------
Cash flows from investing activities
Purchase of equipment (448) --
Proceeds from fixed asset sale 5 3
----------- -----------
Net cash (used by) provided by investing activities (443) 3
----------- -----------
Cash flows from financing activities
Proceeds from long-term debt - stockholder 465 (150)
Advances received (Note 10) 881 1,343
Payment on long-term debt (525) (405)
Payments on note payable - stockholder (500) (700)
----------- -----------
Net cash provided by financing activities 321 88
----------- -----------
Net (decrease) increase in cash (182) 206
Cash and cash equivalents- beginning of year 183 1
----------- -----------
Cash and cash equivalents- end of year $ 1 $ 207
=========== ===========
</TABLE>
Supplemental disclosures:
Interest paid during December 31, 1997 and 1998 was $50 and $176,
respectively.
Schedule of non-cash investing activities:
During the year ended December 31, 1997, long-term debt was incurred to
finance the acquisition of treasury stock for $1,200.
See notes to financial statements.
F-59
<PAGE> 163
FLORIDA CASINO CRUISES, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Florida Casino Cruises, Inc. (the Company), a Georgia corporation, owns and
operates the ship Vegas Express, which operated out of the port of Dania,
Florida in 1997 and operates out of the port of Gloucester Massachusetts in
1998. The Vegas Express makes daily cruises into international water where it
provides its passengers with various "Las Vegas" style gambling and
entertainment. The corporation began its operations in 1993.
On October 1, 1995, the Company (f/k/a Coastal Investments, Inc. a Georgia
corporation) acquired the assets of the Florida corporation known as Florida
Casino Cruises and assumed the daily operations of the company. The acquiring
Company then changed its name to Florida Casino Cruises, Inc. and the former
operating corporation changed its name to Old FCC, Inc.
Restricted Cash
The Company has restricted cash pursuant to the Charter Hire of the vessel. The
monthly charter payment is being deposited in an account titled Leisure Express
Cruise, LLC and monies are used for vessel mortgage and expenses.
Income Taxes
The Company has elected to be taxed under the provisions of Subchapter S of the
Internal Revenue Code. Accordingly, the financial statements do not include a
provision for income taxes because the earnings and losses are included in the
stockholders' personal income tax returns and are based on their personal tax
strategies.
Property and Equipment
The ship is depreciated over fifteen years using the straight-line method. Ship
improvements, related equipment and other equipment are recorded at cost and are
depreciated over their estimated useful lives, which range from five to ten
years.
Revenue Recognition
Casino revenue consist of net gaming wins. Food and beverage revenue include the
aggregate amounts generated by those departments.
F-60
<PAGE> 164
FLORIDA CASINO CRUISES, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (continued)
Casino promotional allowances consist principally of the retail value of
complimentary food and beverages, admissions and entertainment provided to
casino patrons.
Unearned cruise revenue, which represent customer cruise deposits, are included
in the balance sheet when received and are recognized as passenger fare or food
revenue upon completion of the voyage.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Drydock Costs
The Company uses the deferral method to account for major repairs and
maintenance in drydock whereby costs are capitalized when incurred and amortized
over the period to the next drydock.
NOTE 2 - CONTINUED OPERATIONS
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, as shown in the accompanying financial
statements, the Company has accumulated a deficit of $6,029 and a deficit in
stockholders' equity of $5,599 through December 31, 1998. In addition, total
current liabilities exceed totally current assets by approximately $4,963.
In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying balance
sheet is dependent upon continued operations of the Company, which in turn is
dependent upon the Company's ability to meet its financing requirements on a
continuing basis and to succeed in its future operations. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts and classification of
liabilities that might be necessary should the Company be unable to continue in
existence.
F-61
<PAGE> 165
FLORIDA CASINO CRUISES, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 2 - CONTINUED OPERATIONS (CONTINUED)
The Company has entered into an agreement to lease the vessel through April 1999
and possibly sell the stock of the company at the end of the lease (Notes 7 and
10).
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1997 1998
--------------- ---------------
<S> <C> <C>
Property and equipment
Casino equipment $ 665 $ 595
Ship and related equipment 3,277 3,264
Dock improvements 437 437
Leasehold improvements 92 92
--------------- ---------------
4,471 4,388
Less accumulated depreciation (1,933) (2,371)
--------------- ---------------
$ 2,538 $ 2,017
=============== ===============
</TABLE>
NOTE 4 - RELATED PARTY
<TABLE>
<CAPTION>
Note Payable - Stockholder December 31,
- -------------------------- ---------------------------------------
1997 1998
--------------- ---------------
<S> <C> <C>
Note payable - stockholder, interest at 10% per annum; all
unpaid principal and interest due on demand; without
collateral. Accrued interest of $406 (1997) and $646
(1998). $ 2,341 $ 2,191
Mortgage Payable
Mortgage payable - stockholder, paid in full in 1998. 700 -
--------------- ---------------
$ 3,041 $ 2,191
=============== ===============
</TABLE>
F-62
<PAGE> 166
FLORIDA CASINO CRUISES, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 5 - LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1997 1998
--------------- ---------------
<S> <C> <C>
Note payable - insurance note, paid in full in 1998. $ 10 $ -
Note payable - vendor, paid in full in 1998. 50 -
Note payable - bank, interest at prime plus 2%, (which was
10.5% at December 31, 1998) payable in monthly payments
of interest and principal of $45 due November 2007,
collateralized by ship Vegas Express. 1,735 1,390
Note payable vendor, interest at 10%, monthly payments of
interest and principal of $17, due May 1999, collateralized
by slot machines. 435 435
--------------- ---------------
2,230 1,825
Less current portion (609) (855)
--------------- ---------------
Total long-term debt $ 1,621 $ 970
=============== ===============
</TABLE>
The aggregate annual maturities of long-term debt at December 31, 1998, are as
follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
1999 $ 855
2000 500
2001 470
-----------------
$ 1,825
=================
</TABLE>
NOTE 6 - LEASES
Prior to entering into the Bareboat Charter agreement (Note 7), the Company
conducted its operations from facilities (boat dock, ticket book, and boarding
area) that are leased under a five-year non-cancelable lease expiring on May 31,
2000 with monthly rent payments of $6,500.
F-63
<PAGE> 167
FLORIDA CASINO CRUISES, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 6 - LEASES (CONTINUED)
The minimum rental payments required under the above operating lease as of
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
1999 $ 78
2000 33
-----------
$ 111
===========
</TABLE>
Rental expense totaled approximately $39 and $16 in 1997 and 1998, respectively.
NOTE 7 - BAREBOAT CHARTER
The Company also has a Bareboat Charter agreement that expires April 1999.
Revenue related to this Charter equals $100 a month until December 31, 1998 and
$50 a month until the expiration date. Lease revenue for this Charter was
approximately $700 during the year ended December 31, 1998.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Various lawsuits, claims and proceedings of a nature considered normal to its
business are pending against the Company. The most significant of these are
described below:
The Company is involved in litigation regarding use taxes. The Florida
Department of Revenue and Sales and Use Tax Division suit is for $290 which
includes $188 of tax. This amount has been accrued in the accompanying financial
statements.
The Company is engaged in litigation with vendors for back payment on goods and
services. The Company has accrued for the back payments and those amounts are
reflected in the balance sheet.
The Company has personal injury claims pending and its insurance company is
engaged in litigation on behalf of the Company. Personal injury judgments were
entered against the Company totaling $225 which are recorded in the accompanying
financial statements. The Company is appealing the judgment for $200.
F-64
<PAGE> 168
FLORIDA CASINO CRUISES, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
The state of Georgia has filed a lien against the boat for non-payment of taxes.
The lien was filed in Savannah in the amount of $146 which has been accrued for
and is reflected in the balance sheet.
The state of Florida has brought suit against the Company alleging that the ship
must obtain a watercraft registration permit in the state of Florida to operate
on the state's inner waterways. The Company is vigorously contesting this issue
and a conclusion regarding the outcome has not been reached. The amount of loss,
if any, related to this litigation has not been estimated. Effective July 1998,
the board operates out of the port in Gloucester, Massachusetts.
NOTE 9 - STOCKHOLDERS' EQUITY
During 1997, the Company repurchased 42 shares of common stock for $1,200, the
Company paid $150 into escrow and issued a note for $1,050 payable monthly with
an interest rate of 9%.
NOTE 10 - SUBSEQUENT EVENT - UNAUDITED
In May 1999, the Company sold all its issued and outstanding common stock to the
corporation ("Corporation") that chartered the vessel through the bareboat
charter agreement (Note 7). Total consideration given in exchange for all the
issued and outstanding shares of the Company's common stock was $2,100, 80,000
shares of the Corporation's common stock valued at $ 10 per share and warrants
to purchase an additional 80,000 shares of the Corporation's common stock at a
price of $ 10 per share. These warrants expire in three years. Additionally, the
Corporation will assume responsibility for any disclosed accounts payable
relating to the vessel up to $1,450 plus 50% of any amounts in excess of $1,450
and assume a bank mortgage in the amount of $ 1,300. As of December 31, 1997 and
1998, the Company had received advances of $357 and $1,700, respectively, which
is represented by a third mortgage on the vessel.
F-65
<PAGE> 169
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The unaudited pro forma combined balance sheet as of December 31, 1998 gives
effect to the business combination of Leisure Time Casinos & Resorts, Inc. and
Subsidiaries and Florida Casino Cruises, Inc. effective December 31, 1998.
The unaudited pro forma combined statements of income (loss) for the years ended
June 30, 1994, 1995, 1996, 1997 and 1998 give effect to the business
combinations between Leisure Time Casinos & Resorts, Inc. and Subsidiaries and
U.S. Games, Inc. effective July 1, 1993 and Florida Casino Cruises, Inc.
effective July 1, 1996.
These financial statements include the related pro forma adjustments described
in the notes thereto. The transactions between Leisure Time Casinos & Resorts,
Inc. and Subsidiaries, U.S. Games, Inc. and Florida Casino Cruises, Inc. have
been accounted for as combinations of companies under the purchase method of
accounting. These pro forma statements are not necessarily indicative of the
results of operations as they might have been had the transactions become
effective on the above mentioned dates.
A separate pro forma combined balance sheet for the acquisition of U.S. Games,
Inc. is not included as the acquisition took place September 14, 1996 and is
included in the historical balance sheet of Leisure Time Casinos & Resorts, Inc.
and Subsidiaries as of June 30, 1998.
The unaudited pro forma combined financial statements should be read in
conjunction with the separate historical financial statements and notes thereto
of Leisure Time Casinos & Resorts, Inc. and Subsidiaries, U.S. Games, Inc. and
Florida Casino Cruises, Inc.
F-66
<PAGE> 170
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED JUNE 30, 1994
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Leisure Time
Casinos & Pro Forma Adjustments
Resorts, Inc. Acquisition Adjustments
and U.S. Games ------------------------ Pro Forma
Subsidiaries Inc. Total Debit Credit Combined
------------ ----------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Manufacturing $ - $ 15,494 $ 15,494 $ - $ - $ 15,494
Gaming - - - - - -
Other - - - - - -
----------- ----------- ----------- --------- --------- -----------
Total revenue - 15,494 15,494 - - 15,494
----------- ----------- ----------- --------- --------- -----------
Cost of goods sold
Manufacturing - 8,657 8,657 - - 8,657
Gaming - - - - - -
Other - - - - - -
----------- ----------- ----------- --------- --------- -----------
Total cost of goods sold - 8,657 8,657 - - 8,657
----------- ----------- ----------- --------- --------- -----------
Gross profit
Manufacturing - 6,837 6,837 - - 6,837
Gaming - - - - - -
Other - - - - - -
----------- ----------- ----------- --------- --------- -----------
Total gross profit - 6,837 6,837 - - 6,837
----------- ----------- ----------- --------- --------- -----------
Selling, general and administrative
expenses 579 3,696 4,275 (4) 610 - 4,885
Research and development costs - 778 778 - - 778
Interest expense, net 24 138 162 (5) 666 - 828
----------- ----------- ----------- --------- --------- -----------
Total operating expenses 603 4,612 5,215 1,276 - 6,491
----------- ----------- ----------- --------- --------- -----------
Net income (loss) before unusual item
and income tax (603) 2,225 1,622 (1,276) - 346
Unusual item - litigation - - - - - -
Net income (loss) before income tax
benefit (expense) (603) 2,225 1,622 (1,276) - 346
Income tax benefit (expense) - (811) (811) - (3) 683 (128)
----------- ----------- ----------- --------- --------- -----------
Net income (loss) $ (603) $ 1,414 $ 811 $ (1,276) $ 683 $ 218
=========== =========== =========== ========= ========= ===========
Net income (loss) - diluted $ (603) $ 218
=========== ===========
Net income (loss) per common share -
basic $ (.20) $ .07
=========== ==========
Net income (loss) per common share
- diluted $ (.20) $ .07
=========== ==========
Weighted average number of common
shares outstanding - basic 2,993,206 2,993,206
=========== ===========
Weighted average number of common
shares outstanding - diluted 2,993,206 2,993,206
=========== ===========
</TABLE>
F-67
<PAGE> 171
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED JUNE 30, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Leisure Time
Casinos & Pro Forma Adjustments
Resorts, Inc. Acquisition Adjustments
and U.S. Games ------------------------- Pro Forma
Subsidiaries Inc. Total Debit Credit Combined
------------ ------------ ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Manufacturing $ - $ 22,393 $ 22,393 $ - $ - $ 22,393
Gaming - - - - - -
Other - - - - - -
------------ ------------ ------------ ---------- ---------- -----------
Total revenue - 22,393 22,393 - - 22,393
------------ ------------ ------------ ---------- ---------- ------------
Cost of goods sold
Manufacturing - 12,338 12,338 - - 12,338
Gaming - - - - - -
Other - - - - - -
------------ ------------ ------------ ---------- ---------- -----------
Total cost of goods sold - 12,338 12,338 - - 12,338
------------ ------------ ------------ ---------- ---------- ------------
Gross profit
Manufacturing - 10,055 10,055 - - 10,055
Gaming - - - - - -
Other - - - - - -
------------ ------------ ------------ ---------- ---------- -----------
Total gross profit - 10,055 10,055 - - 10,055
------------ ------------ ------------ ---------- ---------- ------------
Selling, general and administrative
expenses 808 5,114 5,922 (4) 610 - 6,532
Research and development costs - 1,134 1,134 - - 1,134
Interest expense, net 205 165 370 (5) 615 - 985
------------ ------------ ------------ ---------- ---------- ------------
Total operating expenses 1,013 6,413 7,426 1,225 - 8,651
------------ ------------ ------------ ---------- ---------- ------------
Net income (loss) before unusual item
and income taxes (1,013) 3,642 2,629 (1,225) - 1,404
Unusual item - litigation - - - - - -
Net income (loss) before income tax
benefit (expense) (1,013) 3,642 2,629 (1,225) - 1,404
Income tax benefit (expense) - (1,343) (1,343) - (3) 824 (519)
------------ ------------ ------------ ---------- ---------- ------------
Net income (loss) $ (1,013) $ 2,299 $ 1,286 $ (1,225) $ 824 $ 885
============ ============ ============ ========== ========== ============
Net income (loss) - diluted $ (1,013) $ 885
============ ============
Net income (loss) per common share -
basic $ (.33) $ .28
============ ============
Net income (loss) per common share
- diluted $ (.33) $ .28
============ ============
Weighted average number of common
shares outstanding - basic 3,109,273 3,109,273
============ ============
Weighted average number of common
shares outstanding - diluted 3,109,273 3,109,273
============ ============
</TABLE>
F-68
<PAGE> 172
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Leisure Time
Casinos & Pro Forma Adjustments
Resorts, Inc. Acquisition Adjustments
and U.S. Games ------------------------- Pro Forma
Subsidiaries Inc. Total Debit Credit Combined
------------ ------------ ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Manufacturing $ - $ 28,292 $ 28,292 $ - $ - $ 28,292
Gaming - - - - - -
Other - - - - - -
------------ ------------ ------------ ---------- ---------- ------------
Total revenue - 28,292 28,292 - - 28,292
------------ ------------ ------------ ---------- ---------- ------------
Cost of goods sold
Manufacturing - 15,678 15,678 - - 15,678
Gaming - - - - - -
Other - - - - - -
------------ ------------ ------------ ---------- ---------- ------------
Total cost of goods sold - 15,678 15,678 - - 15,678
------------ ------------ ------------ ---------- ---------- ------------
Gross profit
Manufacturing - 12,614 12,614 - - 12,614
Gaming - - - - - -
Other - - - - - -
------------ ------------ ------------ ---------- ---------- ------------
Total gross profit - 12,614 12,614 - - 12,614
------------ ------------ ------------ ---------- ---------- ------------
Selling, general and administrative
expenses 1,343 8,284 9,627 (4) 610 - 10,237
Research and development costs - 800 800 - - 800
Interest expense, net 54 74 128 (5) 513 - 641
------------ ------------ ------------ ---------- ---------- ------------
Total operating expenses 1,397 9,158 10,555 1,123 - 11,678
------------ ------------ ------------ ---------- ---------- ------------
Net income (loss) before unusual item
and income taxes (1,397) 3,456 2,059 (1,123) - 936
Unusual item - litigation - - - - - -
Net income (loss) before income tax
benefit (expense) (1,397) 3,456 2,059 (1,123) - 936
Income tax benefit (expense) - (1,293) (1,293) - (3) 947 (346)
------------ ------------ ------------ ---------- ---------- ------------
Net income (loss) $ (1,397) $ 2,163 $ 766 $ (1,123) $ 947 $ 590
============ ============ ============ ========== ========== ============
Net income (loss) - diluted $ (1,397) $ 590
============ ============
Net income (loss) per common share -
basic $ (.35) $ .15
============ ============
Net income (loss) per common share
- diluted $ (.35) $ .15
============ ============
Weighted average number of common
shares outstanding - basic 4,010,650 4,010,650
============ ============
Weighted average number of common
shares outstanding - diluted 4,010,650 4,010,650
============ ============
</TABLE>
F-69
<PAGE> 173
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Leisure Time
Casinos and Florida Pro Forma Adjustments
Resorts, Inc. Casino Acquisition Adjustments
and U.S. Games Cruises ----------------------- Pro Forma
Subsidiaries Inc. Inc. Total Debit Credit Combined
------------ ---------- ---------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue
Manufacturing $ 29,838 $ 2,694 $ - $ 32,532 $ - $ - $ 32,532
Gaming - - 2,396 2,396 - - 2,396
Other - - - - - - -
---------- ---------- ---------- ---------- -------- -------- ----------
Total revenue 29,838 2,694 2,396 34,928 - - 34,928
---------- ---------- ---------- ---------- -------- -------- ----------
Cost of goods sold
Manufacturing 16,616 1,301 - 17,917 - - 17,917
Gaming - - 1,143 1,143 - - 1,143
Other - - - - - - -
---------- ---------- ---------- ---------- -------- -------- ----------
Total cost of goods sold 16,616 1,301 1,143 19,060 - - 19,060
---------- ---------- ---------- ---------- -------- -------- ----------
Gross profit
Manufacturing 13,222 1,393 - 14,615 - - 14,615
Gaming - - 1,253 1,253 - - 1,253
Other - - - - - - -
---------- ---------- ---------- ---------- -------- -------- ----------
Total gross profit 13,222 1,393 1,253 15,868 - - 15,868
---------- ---------- ---------- ---------- -------- -------- ----------
Selling, general and
administrative expenses 5,615 2,877 3,575 12,067 (6) 140
(4) 127 - 12,334
Research and development
costs 469 132 - 601 - 601
Interest expense, net 712 11 442 1,165 - (5) 226 939
---------- ---------- ---------- ---------- -------- -------- ----------
Total operating expenses 6,796 3,020 4,017 13,833 267 226 13,874
---------- ---------- ---------- ---------- -------- -------- ----------
Net income (loss) before
unusual item and income
taxes 6,426 (1,627) (2,764) 2,035 (267) 226 1,994
Unusual item - litigation - - (527) (527) - - (527)
Net income (loss) before
income tax benefit
(expense) 6,426 (1,627) (3,291) 1,508 (267) 226 1,467
Income tax benefit (expense) (1,738) 554 - (1,184) - (3) 642 (542)
---------- ---------- ---------- ---------- -------- -------- ----------
Net income (loss) $ 4,688 $ (1,073) $ (3,291) $ 324 $ (267) $ 868 $ 925
========== ========== ========== ========== ======== ======== ==========
Net income (loss) - diluted $ 4,986 $ 1,223
========== ==========
Net income (loss) per common
share - basic $ 1.08 $ .21
========== ==========
Net income (loss) per common
share - diluted $ .65 $ .16
========== ==========
Weighted average number of
common shares outstanding
- basic 4,343,397 4,343,397
========== ==========
Weighted average number of
common shares outstanding
- diluted 7,664,902 7,664,902
========== ==========
</TABLE>
F-70
<PAGE> 174
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Leisure Time
Casinos and Pro Forma Adjustments
Resorts, Inc. Florida Casino Acquisition Adjustments
and Cruises ----------------------- Pro Forma
Subsidiaries Inc. Total Debit Credit Combined
------------ ------------ ------------ --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Manufacturing $ 28,643 $ - $ 28,643 $ - $ - $ 28,643
Gaming - - - - - -
Other - - - - - -
------------ ------------ ------------ --------- --------- ------------
Total revenue 28,643 - 28,643 - - 28,643
------------ ------------ ------------ --------- --------- ------------
Cost of goods sold
Manufacturing 16,517 - 16,517 - - 16,517
Gaming - - - - - -
Other - - - - - -
------------ ------------ ------------ --------- --------- ------------
Total cost of goods sold 16,517 - 16,517 - - 16,517
------------ ------------ ------------ --------- --------- ------------
Gross profit
Manufacturing 12,126 - 12,126 - - 12,126
Gaming - - - - - -
Other - - - - - -
------------ ------------ ------------ --------- --------- ------------
Total gross profit (loss) 12,126 - 12,126 - - 12,126
------------ ------------ ------------ --------- --------- ------------
Selling, general and administrative
expenses 8,727 318 9,045 (6) 140 - 9,185
Research and development costs 642 - 642 - - 642
Interest expense, net 840 426 1,266 - (5) 333 933
------------ ------------ ------------ --------- --------- ------------
Total operating (income) expenses 10,209 744 10,953 140 333 10,760
------------ ------------ ------------ --------- --------- ------------
Net income (loss) before unusual item
and income taxes 1,917 (744) 1,173 (140) 333 1,366
Unusual item - litigation (3,043) - (3,043) - - (3,043)
Net income (loss) before income tax
benefit (expense) (1,126) (744) (1,870) (140) 333 (1,677)
Income tax benefit (expense) 197 - 197 - (3) 423 620
------------ ------------ ------------ --------- --------- ------------
Net income (loss) $ (929) $ (744) $ (1,673) $ (140) $ 756 $ (1,057)
============ ============ ============ ========= ========= ============
Net income (loss) - diluted $ (929) $ (1,057)
============ ============
Net income (loss) per common share -
basic $ (.21) $ (.23)
============ ============
Net income (loss) per common share
- diluted $ (.21) $ (.23)
============ ============
Weighted average number of common
shares outstanding - basic 4,516,528 4,516,528
============ ============
Weighted average number of common
shares outstanding - diluted 4,516,528 4,516,528
============ ============
</TABLE>
F-71
<PAGE> 175
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Leisure Time Pro Forma Adjustments for
Casinos & Florida Casino Cruises
Resorts, Inc. Florida Casino Acquisition
and Cruises, ------------------------- Pro Forma
Subsidiaries Inc. Total Debit Credit Combined
------------ -------------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 3,543 $ 207 $ 3,750 $ - (1) $ 2,100 $ 1,650
Current portion of notes receivable 47 - 47 - - 47
Trade accounts receivable 2,576 2 2,578 - - 2,578
Receivable - other 3 - 3 - - 3
Inventories, net 2,481 - 2,481 - - 2,481
Prepaid expenses and other 124 - 124 - - 124
Deferred tax asset - current 61 - 61 - - 61
------------ ------------ ------------ ---------- ---------- ------------
Total current assets 8,835 209 9,044 - 2,100 6,944
------------ ------------ ------------ ---------- ---------- ------------
Property and equipment, net 7,280 2,017 9,297 (1) 5,357 - 14,654
------------ ------------ ------------ ---------- ---------- ------------
Long-term portion of notes receivable 80 - 80 - - 80
Deferred tax asset - long term 881 - 881 - - 881
Goodwill 4,648 - 4,648 - - 4,648
Other assets, net 7,681 17 7,698 - (2) 1,700 5,998
------------ ------------ ------------ ---------- ---------- ------------
Total assets $ 29,405 $ 2,243 $ 31,648 $ 5,357 $ 3,800 $ 33,205
============ ============ ============ ========== ========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term notes
payable $ 1,587 $ 855 $ 2,442 (1) $ 392 $ - $ 2,050
Current portion of capital leases 54 - 54 - - 54
Current portion of other long-term
liabilities 188 - 188 - - 188
Note payable - stockholder - 2,837 2,837 (1) 2,837 - -
Accounts payable 3,016 646 3,662 - (1) 195 3,857
Accrued expenses 3,842 834 4,676 (1) 225 - 4,451
Income taxes payable 2,306 - 2,306 - - 2,306
------------ ------------ ------------ ---------- ---------- ------------
Total current liabilities 10,993 5,172 16,165 3,454 195 12,906
------------ ------------ ------------ ---------- ---------- ------------
Long-term liabilities
Long-term portion of notes payable 6,197 970 7,167 - - 7,167
Long-term portion of capital leases 281 - 281 - - 281
Other long-term liabilities 4,677 1,700 6,377 (2) 1,700 - 4,677
------------ ------------ ------------ ---------- ----------- ------------
Total long-term liabilities 11,155 2,670 13,825 1,700 - 12,125
------------ ------------ ------------ ---------- ---------- ------------
Total liabilities 22,148 7,842 29,990 5,154 195 25,031
------------ ------------ ------------ ---------- ---------- ------------
Commitments and contingencies
Stockholders' equity
Preferred stock, no par value;
5,000,000 shares authorized; none - - - - - -
issued
Common stock, $.001 par value;
45,000,000 shares authorized;
4,505,380 (1997) and 4,639,154
(1998) issued and outstanding 5 - 5 - - 5
Additional paid-in capital 4,292 430 4,722 (1) 430 (1) 917 5,209
Retained earnings (accumulated
deficit) 2,960 (6,029) (3,069) - (1) 6,029 2,960
------------ ------------ ------------ ---------- ---------- ------------
7,257 (5,599) 1,658 430 6,946 8,174
------------ ------------ ------------ ---------- ---------- ------------
Total liabilities and stockholders'
equity $ 29,405 $ 2,243 $ 31,648 $ 5,584 $ 7,141 $ 33,205
============ ============ ============ ========== ========== ============
</TABLE>
F-72
<PAGE> 176
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The acquisition of U.S. Games, Inc. included the following assets and
liabilities as detailed below for a total purchase price of $5,827. Leisure
Time Casinos & Resorts, Inc. and Subsidiaries paid $1,700 in cash and
issued a note payable for $4,127 for the outstanding stock of U.S. Games,
Inc. The purchase price has been allocated as follows:
<TABLE>
<CAPTION>
Asset Category Valuation
- -------------- --------------
<S> <C>
Cash $ 371
Accounts receivable, net 371
Inventory 1,517
Property, plant and equipment, net 314
Non-compete agreement 5,254
Other assets 1,909
Liabilities (7,511)
--------------
Equity at date of purchase 2,225
Total cash paid for stock (5,827)
--------------
Goodwill $ 3,602
==============
</TABLE>
The acquisition of Florida Casino Cruises, Inc. included the following assets
and liabilities as detailed below for a total purchase price of $4,717 Leisure
Time Casinos & Resorts, Inc. and Subsidiaries issued 80,000 shares of common
stock valued at $10.00 per share, warrants to purchase 80,000 shares of common
stock at $10.00 per share with an imputed value of $117 and paid $2,100 in cash
for the outstanding stock of Florida Casino Cruises, Inc. Additionally, the
Company had advanced $1,700 to Florida Casino Cruises, Inc. prior to the
acquisition. The purchase price has been allocated as follows:
<TABLE>
<CAPTION>
Asset Category Valuation
- -------------- --------------
<S> <C>
Cash $ 207
Other assets 19
Property, plant and equipment, net 7,374
Liabilities assumed (2,883)
--------------
Total consideration given $ 4,717
==============
</TABLE>
F-73
<PAGE> 177
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The following adjustments and other information relates to the business
combinations between Leisure Time Casinos & Resorts, Inc. and Subsidiaries, U.S.
Games, Inc. and Florida Casino Cruises, Inc. Such adjustments were made:
1 To record the acquisition of Florida Casino Cruises, Inc. at a total
purchase price of $4,717.
2 To offset the advances made to Florida Casino Cruises, Inc.
3 To recognize pro forma income tax expense (benefit) at a flat 37%
effective rate for fiscal years ending June 30, 1994, 1995, 1996, 1997
and 1998.
4 To recognize 12 months of goodwill amortization for the years ending
June 30, 1994, 1995, and 1996 and 2 1/2 additional months for the year
ended June 30, 1997.
5 To recognize additional interest expense for the fiscal years ending
June 30, 1994, 1995 and 1996 and reduced interest expense for the fiscal
years ending June 30, 1997 and 1998 for the effect of principal payments
during the previous fiscal years. The changes in interest expense are in
connection with the notes payable and other debt agreements entered into
upon the completion of the acquisition of U.S. Games, Inc.
6 To recognize additional depreciation on the vessel acquired in
connection with the acquisition of Florida Casino Cruises, Inc. for the
years ending June 30, 1997 and 1998. The vessel is depreciated using the
straight line method over 15 years.
The fiscal year end for Florida Casino Cruises, Inc. is December 31. As such,
the pro forma combined statements of income (loss) for the fiscal years ending
June 30, 1997 and 1998 include the results of operations for Florida Casino
Cruises, Inc. as of December 31, 1997 and 1998, respectively.
The pro forma results of operation for U.S. Games, Inc. added to the combined
pro forma results of operations for the year ended June 30, 1997 relates to the
period of July 1, 1996 through September 14, 1996 (date of acquisition). The
period September 15, 1996 through June 30, 1997 is already included in Leisure
Time Casinos & Resorts, Inc. and Subsidiaries' results of operations as of June
30, 1997.
F-74
<PAGE> 178
1,100,000 SHARES
[LEISURE TIME CASINOS & RESORTS INC. LOGO]
COMMON STOCK
--------------------
PROSPECTUS
__________, 1999
--------------------
SCHNEIDER SECURITIES, INC.
<PAGE> 179
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses payable by Leisure Time Casinos & Resorts, Inc. ("Leisure
Time") in connection with the issuance and distribution of the securities being
registered hereby are as follows:
<TABLE>
<S> <C>
SEC Registration Fee...................................... $ 5,050
NASD Filing Fee........................................... $ 2,317
Nasdaq National Market Filing Fee......................... $ 66,875
Accounting Fees and Expenses.............................. $120,000*
Legal Fees and Expenses................................... $150,000*
Blue Sky Fees and Expenses................................ $ 10,000*
Representative's Non-Accountable Expense Allowance........ $396,000**
Printing, Freight and Engraving........................... $140,000*
Miscellaneous............................................. $ 5,758*
--------
Total........................................ $896,000*
========
</TABLE>
*Estimated.
**Estimated based on an assumed offering price of $12.00 per share.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Leisure Time has a $5,000,000 directors and officers liability
insurance policy. This insurance policy insures the past, present and future
officers and directors of Leisure Time, with certain exceptions, from claims
arising out of any error, misstatement, misleading statement, act, omission,
neglect, or breach of duty committed or attempted, or allegedly committed or
attempted.
Section 7-109-102 of the Colorado Business Corporation Act permits a
Colorado corporation to indemnify any person made a party to a proceeding
because the person is or was a director against liability incurred in the
proceeding if such person acted in good faith and, in the case of conduct in an
official capacity with the corporation, that the director's conduct was in the
corporation's best interests and, in all other cases, that the director's
conduct was at least not
II-1
<PAGE> 180
opposed to the best interests of the corporation or, with regard to criminal
proceedings, the director had no reasonable cause to believe the director's
conduct was unlawful.
Article Fifth of Leisure Time's Articles of Incorporation, as amended,
filed as Exhibit 3.1 to this registration statement provides that a director of
Leisure Time shall not be personally liable to Leisure Time or its stockholders
for monetary damages for breach of fiduciary duty as a director; except that
the provision does not eliminate or limit the liability of a director to
Leisure Time or its stockholders for monetary damages otherwise existing for:
(i) any breach of the director's duty of loyalty to Leisure Time or its
stockholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law; (iii) acts involving
unlawful distributions as specified in the Colorado Business Corporation Act;
or (iv) any transaction from which the director derived an improper personal
benefit. Further, Article Fifth states that any repeal or modification of the
foregoing by the stockholders of Leisure Time shall not adversely affect any
right or protection of a director of Leisure Time existing at the time of such
repeal or modification.
Article Sixth of Leisure Time's Articles of Incorporation, as amended,
filed as Exhibit 3.1 to this registration statement provides in paragraph 3
that Leisure Time shall indemnify to the maximum extent permitted by law in
effect from time to time, any person who is or was a director, officer, agent,
fiduciary or employee of Leisure Time against any claim, liability or expense
arising against or incurred by such person made party to a proceeding because
such person is or was a director, officer, agent, fiduciary or employee of
Leisure Time or because such person is or was serving another entity as a
director, officer, partner, trustee, employee, fiduciary or agent at Leisure
Time's request. Article Sixth also provides that Leisure Time shall have the
authority to the maximum extent permitted by law to purchase and maintain
insurance providing such indemnification.
Article VI of the Bylaws of Leisure Time, filed as Exhibit 3.2 to this
registration statement includes provisions requiring Leisure Time to indemnify
any person acting on behalf of Leisure Time who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
and whether formal or informal, by reason of the fact that such person is or
was a director, officer, employee, fiduciary or agent of Leisure Time, or is or
was serving at the request of Leisure Time as a director, officer, partner,
trustee, employee, fiduciary or agent of any foreign or domestic profit or
nonprofit corporation or of any partnership, joint venture, trust, profit or
nonprofit unincorporated association, limited liability company, or other
enterprise or an employee benefit plan against reasonably incurred expenses
(including attorneys' fees), judgments, penalties, fines (including any excise
tax assessed with respect to an employee benefit plan) and amounts paid in
settlement reasonably incurred by such person in connection with such action,
suit or proceeding if it is determined by disinterested directors that such
person conducted himself or herself in good faith and that such person
reasonably believed (i) in the case of conduct in such person's official
capacity with Leisure Time, that such person's conduct was in Leisure Time's
best interest, or (ii) in all other cases (except criminal cases) that such
person's conduct was at least not opposed to Leisure Time's best interest, or
(iii) in the case of any criminal proceeding, that such person had no
reasonable cause to believe such person's
II-2
<PAGE> 181
conduct was unlawful. No indemnification shall be made with respect to any
claim, issue or matter in connection with a proceeding by or in the right of
Leisure Time in which the person being indemnified is adjudged liable to
Leisure Time or in connection with any proceeding charging that the person
being indemnified derived an improper personal benefit, whether or not
involving action in an official capacity, in which such person was adjudged
liable on the basis that such person derived an improper personal benefit.
Further, indemnification in connection with a proceeding brought by or in the
right of Leisure Time shall be limited to reasonable expenses, including
attorneys' fees, incurred in connection with the proceeding. Reasonable
expenses (including attorneys' fees) incurred in defending an action, suit or
proceeding may be paid by Leisure Time to any person being indemnified in
advance of the final disposition of the action, suit or proceeding upon receipt
of (i) a written affirmation by the person being indemnified as to such
person's good faith and belief that such person met the standards of conduct
described by the Bylaws, (ii) a written undertaking, executed personally or on
behalf of the person being indemnified, to repay such advances if it is
ultimately determined that such person did not meet the prescribed standards of
conduct, and (iii) a determination is made by a disinterested director of
Leisure Time (as described in the Bylaws) that the facts then known to a
disinterested director would not preclude indemnification. The Bylaws require
that Leisure Time report in writing to stockholders with or before notice of
the next meeting of stockholders of any indemnification of or advance of
expenses to any director under the indemnification provisions of the Bylaws.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following is information as to all securities of Leisure Time sold
by Leisure Time within the past three years which were not registered under the
Securities Act of 1933, as amended ("Securities Act"). Leisure Time does not
consider issuances of options to employees to purchase Leisure Time's common
stock to be sales.
(a) Between August 1995 and April 1996, Leisure Time issued 170,400
shares of its common stock to several persons for $2.50 per share. Leisure Time
issued the shares in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act. Such persons represented to Leisure Time
that they acquired the shares for their own accounts and not with a view to
distribution and that they had available to them all material information
concerning Leisure Time. The certificates evidencing the shares bear a
restrictive legend under the Securities Act. No underwriter was involved in the
transaction.
(b) On May 18, 1996, Leisure Time issued a ten year option to David K.
Vanco to purchase 250,000 shares of Leisure Time's common stock at an exercise
price of $2.50 per share as consideration for David K. Vanco acting as a finder
of financing for Leisure Time. Leisure Time issued the option in reliance on
the exemption from registration under Section 4(2) of the Securities Act. Such
person had available to him all material information concerning Leisure Time.
The certificate evidencing the option bears a restrictive legend under the
Securities Act. No underwriter was involved in the transaction.
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(c) On May 29, 1996, Leisure Time issued to ABCD Associates, Ltd.
("ABCD") a $100,000 11% Convertible Promissory Note Due May 29, 1999, in
consideration for a ABCD making a $100,000 loan to Leisure Time. The note is
convertible into units each consisting of (i) one share of common stock and
(ii) one warrant to purchase one share of common stock for $2.50. The
conversion price for each unit is $2.50. Beginning on June 29, 1997, and
continuing to date, ABCD has converted each monthly payment due on the note
into 1,666 shares of common stock and warrants to purchase 1,666 shares of
common stock at an exercise price of $2.50 per share. Leisure Time issued the
note, the shares of common stock and the warrants in reliance on the exemption
from registration provided by Section 4(2) of the Securities Act. Such company
represented to Leisure Time that it acquired the note and the warrants for its
own account and not with a view to distribution and that it had available to it
all material information concerning Leisure Time. The certificates evidencing
the note and the warrants bear a restrictive legend under the Securities Act.
No underwriter was involved in the transaction.
(d) On July 8, 1996, Leisure Time issued to Eileen Lynch 13,301 shares
of common stock and warrants to purchase 13,301 shares of the common stock
exercisable at a price of $2.50 per share in exchange for the conversion of a
$28,000 promissory note plus $5,252.50 of interest. Leisure Time issued the
shares and warrants in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act. Such person represented to Leisure Time
that she acquired the shares and the warrants for her own account and not with
a view to distribution and that she had available to her all material
information concerning Leisure Time. The certificates evidencing the shares of
common stock and the warrants bear a restrictive legend under the Securities
Act. No underwriter was involved in the transaction.
(e) On July 31, 1996, Leisure Time issued to Paul F. Frymark a
$110,000 11% Convertible Promissory Note Due May 30, 1999 as consideration for
Paul F. Frymark making a $110,000 loan to Leisure Time. The note is convertible
into units each consisting of (i) one share of common stock and (ii) one
warrant to purchase one share of common stock for $2.50. The conversion price
for each unit is $2.50. Beginning on June 24, 1997, and continuing to date,
such person has converted each monthly payment on the note into 1,833 shares of
common stock and warrants to purchase 1,833 shares of common stock at an
exercise price of $2.50 per share. Leisure Time issued the note and warrants in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act. Such person represented to Leisure Time that he acquired the
note, the shares of common stock and the warrants for his own account and not
with a view to distribution and that he had available to him all material
information concerning Leisure Time. The certificates evidencing the note, the
shares of common stock and the warrants each bear a restrictive legend under
the Securities Act. No underwriter was involved in the transaction.
(f) On August 9, 1996, Leisure Time issued 90,000 shares of its common
stock to Jerry E. Russell for $0.50 per share. Leisure Time issued the shares
in reliance upon the exemption from registration provided by Section 4(2) of
the Securities Act. Such person represented to Leisure Time that he acquired
the shares for his own account and not with a view to distribution and that he
had available to him all material information concerning Leisure Time.
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The certificate evidencing the shares bears a restrictive legend under the
Securities Act. No underwriter was involved in the transaction.
(g) On August 22, 1996, Leisure Time issued to various investors
$1,400,000 principal amount of 11% convertible promissory notes due September
1, 1999. The notes are convertible into units, each consisting of (i) one share
of common stock, (ii) one warrant to purchase one share of common stock at an
exercise price of $1.75 per share and (iii) one warrant to purchase one share
of common stock at an exercise price equal to 120% of the initial public
offering price of the common stock. Leisure Time issued the notes in reliance
on the exemption from registration provided by Section 4(2) of the Securities
Act. Such persons represented to Leisure Time that they acquired the notes for
their own accounts and not with a view to distribution and that they had
available to them all material information concerning Leisure Time. The
certificates evidencing the notes bear a restrictive legend under the
Securities Act. No underwriter was involved in the transaction.
(h) On August 26, 1996, Leisure Time issued to Lewis J. Thomas 4,892
shares of Leisure Time's common stock and warrants to purchase 4,892 shares of
Leisure Time's common stock at an exercise price of $2.50 per share in exchange
for the conversion of a $10,080 promissory note plus $2,150 of interest.
Leisure Time issued the shares and warrants in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act. Such person
represented to Leisure Time that he acquired the shares and the warrants for
his own account and not with a view to distribution and that he had available
to him all material information concerning Leisure Time. The certificates
evidencing the shares and the warrants each bear a restrictive legend under the
Securities Act. No underwriter was involved in the transaction.
(i) On August 30, 1996, Leisure Time issued 50,000 shares of its
common stock to T. D. Reese for $1.00 per share. Leisure Time issued the shares
in reliance on the exemption from registration provided by Section 4(2) of the
Securities Act. Such person represented to Leisure Time that he acquired the
shares for his own account and not with a view to distribution and that he had
available to him all material information concerning Leisure Time. The
certificate evidencing the shares bears a restrictive legend under the
Securities Act. No underwriter was involved in the transaction.
(j) In September 1996, Leisure Time issued an option to purchase
90,000 shares of its common stock at an exercise price of $0.10 per share to
Jerry E. Russell in connection with a loan of $40,000 made by Jerry E. Russell
to Leisure Time. Leisure Time issued the option in reliance upon the exemption
from registration provided by Section 4(2) of the Securities Act. Such person
represented to Leisure Time that he acquired the option for his own account and
not with a view to distribution and that he had available to him all material
information concerning Leisure Time. The certificate evidencing the option
bears a restrictive legend under the Securities Act. No underwriter was
involved in the transaction.
(k) On September 12, 1996, Leisure Time issued warrants to Urban
Systems entitling Urban Systems to purchase 8,598 shares of common stock for
$2.50 per share in exchange for the extension of certain accounts payable due
to Urban Systems. Leisure Time issued the
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warrants in reliance on the exemption from registration provided by Section
4(2) of the Securities Act. Such company represented to Leisure Time that it
acquired the warrants for its own account and not with a view to distribution
and that it had available to it all material information concerning Leisure
Time. The certificate evidencing the warrants bears a restrictive legend under
the Securities Act. No underwriter was involved in the transaction.
(l) On October 9, 1996, Leisure Time issued to Mercantile Bank
warrants to purchase 35,000 shares of common stock for $1.00 per share in
exchange for previous services rendered in 1993. Leisure Time issued the
warrants in reliance upon the exemption from registration provided by Section
4(2) of the Securities Act. Such company represented to Leisure Time that it
acquired the warrants for its own account and not with a view to distribution
and that it had available to it all material information concerning Leisure
Time. The certificate evidencing the warrants bears a restrictive legend under
the Securities Act. No underwriter was involved in the transaction.
(m) On November 25, 1996, Leisure Time issued to Stephen J. Hendricks
an option to purchase 40,000 shares of Leisure Time's common stock at an
exercise price of $1.00 per share in exchange for previous services rendered
from 1993 to 1995. Leisure Time issued the option in reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act.
Such person had available to him all material information concerning Leisure
Time. The certificate evidencing the option bears a restrictive legend under
the Securities Act. No underwriter was involved in the transaction.
(n) On December 31, 1996, Leisure Time issued 18,080 shares of Leisure
Time's common stock and warrants to purchase 38,080 shares of Leisure Time's
common stock at $2.50 per share to Kerry Lee Hoffman as consideration for Kerry
Lee Hoffman acting as a finder of financing for Leisure Time. Leisure Time
issued the shares and the warrants in reliance on the exemption from
registration under Section 4(2) of the Securities Act. Such person represented
to Leisure Time that he acquired the shares and the warrants for his own
account and not with a view to distribution and that he had available to him
all material information concerning Leisure Time. The certificates evidencing
the shares and the warrants bear a restrictive legend under the Securities Act.
No underwriter was involved in the transaction.
(o) On December 31, 1996, Leisure Time issued 20,000 shares of its
common stock to Hoffman Midwest Sales, Inc. in consideration for Hoffman
Midwest Sales, Inc. acting as a finder of financing for Leisure Time. Leisure
Time issued the shares in reliance on the exemption from registration under
Section 4(2) of the Securities Act. Such company represented to Leisure Time
that it acquired the shares for its own account and not with a view to
distribution and that it had available to it all material information
concerning Leisure Time. The certificate evidencing the shares bears a
restrictive legend under the Securities Act. No underwriter was involved in the
transaction.
(p) On April 2, 1997, Leisure Time issued to Alan N. Johnson, A. J.
Siciliano, Michael A. Siciliano, Elaine M. Barron, Gerald J. Boyle, Sandra J.
Boepple, Raymond G. Boyle, Howard P. Boyle, Richard D. Sly, Richard E. Sly and
Randi Sly Strittmather options to purchase
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41,556, 75,000, 20,000, 20,000, 50,292, 20,000, 20,000, 20,000, 43,000, 20,000
and 20,000 shares of Leisure Time's common stock, respectively, at an exercise
price of $2.50 per share. Leisure Time issued the options in reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act.
Such persons had available to them all material information concerning Leisure
Time. The certificates evidencing the options bear a restrictive legend under
the Securities Act. No underwriter was involved in the transaction.
(q) On June 26, 1997, Leisure Time extended the expiration dates of
warrants issued to various persons to purchase 128,115 shares of Leisure Time's
common stock at a price of $2.50 per share. Leisure Time issued the warrants in
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act. Such persons represented to Leisure Time that they originally
acquired the warrants for their own account and not with a view to distribution
and that they had available to them all material information concerning Leisure
Time. The certificates evidencing the warrants bear a restrictive legend under
the Securities Act. No underwriter was involved in the transaction.
(r) On June 30, 1997, Leisure Time issued to David K. Vanco warrants
to purchase 11,643 shares of Leisure Time's common stock at an exercise price
of $2.80 per share in exchange for David K. Vanco making a loan to Leisure
Time. Such person had available to him all material information concerning
Leisure Time. The certificate evidencing the warrants bears a restrictive
legend under the Securities Act. No underwriter was involved in the
transaction.
(s) On December 12, 1997, Leisure Time extended the expiration dates
of warrants issued to various persons to purchase 122,907 shares of common
stock from March 31, 1998 to March 31, 1999. The extensions were granted due to
delays by Leisure Time in conducting a public offering. Leisure Time originally
issued the warrants in reliance upon the exemption from registration provided
by Section 4(2) of the Securities Act. Such persons represented to Leisure Time
that they acquired the warrants for their own account and not with a view to
distribution and that they had available to them all material information
concerning Leisure Time. The certificates evidencing the warrants bear a
restrictive legend under the Securities Act. No underwriter was involved in the
transaction.
(t) Between March 1999 and April 1999, Leisure Time issued 4,000 units
consisting of 4,000 shares of its common stock and three year warrants to
purchase 4,000 shares of its common stock to several persons for $10.00 per
unit. Leisure Time issued the units in reliance upon the exemption from
registration provided by Section 4(2) and Regulation D of the Securities Act.
Such persons represented to Leisure Time that they acquired the units for their
own accounts and not with a view to distribution and that they had available to
them all material information concerning Leisure Time. The certificates
evidencing the shares and warrants bear a restrictive legend under the
Securities Act. No underwriter was involved in the transaction.
(u) On April 1, 1999, Leisure Time issued 100,000 shares of its common
stock and an option to purchase 100,000 shares of its common stock at $6.00 per
share to David M. Pote, Jr. in exchange for all of the outstanding stock of RP
Capital Corporation. Leisure Time issued the shares and option in reliance on
the exemption from registration provided by Section 4(2) of the Securities Act.
Such person represented to Leisure Time that he acquired the shares and option
for his own account and not with a view to distribution and that he had
available to him all material information concerning Leisure Time. The
certificates evidencing the shares and option bear a restrictive legend under
the Securities Act. No underwriter was involved in the transaction.
(v) In March 1999, fourteen persons exercised outstanding warrants to
purchase 60,090 shares of Leisure Time's common stock. Leisure Time issued the
shares in reliance upon the exemption from registration provided by Section 4(2)
of the Securities Act. Such persons had available to them all material
information concerning Leisure Time. The certificates evidencing the shares bear
a restrictive legend under the Securities Act. No underwriter was involved in
the transaction.
(w) On May 4, 1999, Leisure Time issued 80,000 shares of its common
stock and a warrant to purchase 80,000 shares of its common stock at $10.00 per
share to J. Kent Manley as part consideration for all of the outstanding stock
of Florida Casino Cruises, Inc. Leisure Time issued the shares in reliance on
the exemption from registration provided by Section 4(2) of the Securities Act.
Such person represented to Leisure Time that he acquired the shares and warrant
for his own account and not with a view to distribution and that he had
available to him all material information concerning Leisure Time. The
certificates evidencing the shares and warrant bear a restrictive legend under
the Securities Act. No underwriter was involved in the transaction.
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following is a list of all exhibits filed as part of this
Registration Statement:
EXHIBIT NO. DESCRIPTION AND METHOD OF FILING
1.0 Form of Underwriting Agreement.
1.1 Form of Selected Dealers Agreement.
2.0 Agreement and Plan of Reorganization dated as of August
30, 1996, among U.S. Games, Inc., Leisure Time Casinos &
Resorts, Inc., Leisure Acquisition, Inc. and Certain
Holders of U.S. Games, Inc. Outstanding Stock, Options
and Warrants together with Exhibits C, D, E, F, G, H and
J thereto. The other schedules and exhibits to the
Agreement and Plan of Reorganization are listed therein
and copies thereof will be furnished supplementally to
the United States Securities and Exchange Commission
upon request.
2.1 Amended and Restated Asset Purchase Agreement dated as
of January 31, 1997, between Leisure Time Casinos &
Resorts, Inc. and Star of Cincinnati, Inc.
2.2 Accord and Satisfaction and Release of Mortgages
Agreement dated as of February 3, 1997, by Leisure Time
Casinos & Resorts, Inc., Star of Cincinnati, Inc. and
Henry E. Davis Trustee.
3.0 Articles of Incorporation of Leisure Time Casinos &
Resorts, Inc. dated February 4, 1993.
3.1 Articles of Amendment to the Articles of Incorporation
of Leisure Time Casinos & Resorts, Inc. filed on April
3, 1997.
3.2 Bylaws of Registrant adopted April 12, 1997.
4.0 Form of Representative Warrant for the Purchase of
Common Stock
4.1 Forms of Lock-Up Agreements.*
5.1 Opinion of Smith McCullough, P.C. on Legality of Common
Stock.*
10.0 1997 Incentive and Nonstatutory Stock Option Plan.
10.1 Amendment No. 1 to 1997 Incentive and Nonstatutory Stock
Option Plan.*
10.2 Form of 11% Convertible Promissory Note Due September 1,
1999.
10.3 11% Convertible Promissory Note Due May 29, 1999.
10.4 11% Convertible Promissory Note Due May 30, 1999.
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EXHIBIT NO. DESCRIPTION AND METHOD OF FILING
10.5 Employment Agreement dated effective July 1, 1998,
between Leisure Time Casinos & Resorts, Inc. and Alan N.
Johnson, Amendment to Employment Agreement dated
effective September 9, 1998, between Leisure Time
Casinos & Resorts, Inc. and Alan N. Johnson and
Amendment to Employment Agreement dated effective
February 22, 1999, between Leisure Time Casinos &
Resorts, Inc. and Alan N. Johnson.
10.6 Employment Agreement dated effective July 1, 1998,
between Leisure Time Casinos & Resorts, Inc. and Gerald
J. Boyle and Amendment to Employment Agreement dated
effective September 9, 1998, between Leisure Time
Casinos & Resorts, Inc. and Gerald J. Boyle.
10.7 Employment Agreement dated effective July 1, 1998,
between Leisure Time Casinos & Resorts, Inc. and Elden
W. Rance, Amendment to Employment Agreement dated
effective September 9, 1998, between Leisure Time
Casinos & Resorts, Inc. and Elden W. Rance and Amendment
to Employment Agreement dated effective February 22,
1999, between Leisure Time Casinos & Resorts, Inc. and
Elden W. Rance.
10.8 Employment Agreement dated effective July 1, 1998,
between Leisure Time Casinos & Resorts, Inc. and R.
Thomas Klingel and Amendment to Employment Agreement
dated effective September 9, 1998, between Leisure Time
Casinos & Resorts, Inc. and R. Thomas Klingel.
10.9 Employment Agreement dated effective July 1, 1998,
between Leisure Time Casinos & Resorts, Inc. and Richard
D. Sly and Amendment to Employment Agreement dated
effective September 9, 1998, between Leisure Time
Casinos & Resorts, Inc. and Richard D. Sly.
10.10 Employment Agreement dated effective March 1, 1999,
between Leisure Time Casinos & Resorts, Inc. and Keko
Mottes.
10.11 Employment Agreement dated effective March 1, 1999,
between Leisure Time Casinos & Resorts, Inc. and John J.
Pasierb.
10.12 Employment Agreement dated effective April 20, 1999,
between Leisure Time Casinos & Resorts, Inc. and Joseph
C. Grunda.
10.13 Lease Agreement dated December 1, 1997, between Leisure
Time Technology, Inc. and Weeks Realty, L.P.
10.14 Lease Agreement dated October 31, 1997, between Alan N.
Johnson and Leisure Time Casinos & Resorts, Inc.
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EXHIBIT NO. DESCRIPTION AND METHOD OF FILING
10.15 Purchase Agreement dated March 23, 1998, between Lisa
Lemon, Inc. and Al Johnson.
10.16 Amendment to Purchase Agreement dated June 26, 1998,
between Lisa Lemon, Inc. and Al Johnson.
10.17 Assignment dated September 11, 1998, from Al Johnson to
Leisure Time Hospitality, inc.
10.18 Promissory Note dated September 15, 1998, from Leisure
Time Hospitality, Inc. to Lisa Lemon, Inc. and Guaranty
of Alan N. Johnson thereof.
10.19 Mortgage Deed dated September 15, 1998, from Leisure
Time Hospitality, Inc. to Lisa Lemon, Inc.
10.20 Bareboat Charter Party dated as of June 22, 1998,
between Florida Casino Cruises, Inc. and Leisure Express
Cruise LLC.
10.21 Addendum to Bareboat Charter Agreement.
10.22 Purchase Option Agreement dated as of June 22, 1998,
between Florida Casino Cruises, Inc. and Leisure Express
Cruise, LLC.
10.23 $3,000,000 Secured Promissory Note dated October 9,
1998, from Leisure Time Cruise Corporation to Foothill
Capital Corporation.
10.24 Security Agreement dated October 9, 1998, between
Foothill Capital Corporation and Leisure Time Cruise
Corporation.
10.25 First Preferred Ship Mortgage dated October 9, 1998,
between Leisure Time Cruise Corporation and Foothill
Capital Corporation.
10.26 Equipment Security Agreement dated October 9, 1998,
between Foothill Capital Corporation and Leisure Time
Technology, Inc.
10.27 Continuing Guaranty dated October 9, 1998, from Leisure
Time Technology, Inc. to Foothill Capital Corporation.
10.28 Continuing Guaranty dated October 9, 1998, from Leisure
Time Casinos & Resorts, Inc. to Foothill Capital
Corporation.
10.29 Continuing Guaranty dated October 9, 1998, from Alan N.
Johnson to Foothill Capital Corporation.
10.30 $1,500,000 Promissory Note dated December 17, 1998, from
Leisure Belle Cruise LLC to General Electric Capital
Corporation.
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EXHIBIT NO. DESCRIPTION AND METHOD OF FILING
10.31 $1,500,000 Loan and Security Agreement dated December
17, 1998, between Leisure Belle Cruise, LLC and General
Electric Capital Corporation.
10.32 Guaranty Agreement dated December 17, 1998, from Leisure
Time Casinos & Resorts, Inc. to General Electric Capital
Corporation.
10.33 Guaranty Agreement dated December 17, 1998, from Leisure
Time Technologies, Inc. to General Electric Capital
Corporation.
10.34 First Preferred Ship Mortgage dated December 17, 1998
from Leisure Belle Cruise, LLC in favor of General
Electric Capital Corporation.
10.35 Consulting Agreement dated March 31, 1998 between
Leisure Time Casinos & Resorts, Inc. and A. J.
Siciliano.
10.36 Bareboat Charter Party dated as of January 22, 1999,
between Florida Casino Cruises, Inc. and Leisure
Express, LLC.
10.37 Purchase Option Agreement dated as of January 22, 1999,
between Florida Casino Cruises, Inc. and Leisure
Express, LLC.
10.38 Consulting Agreement dated as of February 1, 1999,
between and Kent Manley and Leisure Time Cruise
Corporation.
10.39 Dockage Agreement and Lease dated as of June 1, 1998,
between Rowe Square Corporation and Leisure Express
Cruise, LLC.
10.40 Distribution Agreement dated January 23, 1998, between
Leisure Time Technology, Inc. and Sao Paulo Games
Comercial LTDA.
10.41 Amendment to the Contract for Distribution dated January
22, 1998, between Leisure Time Technology, Inc. and Sao
Paulo Games Comercial LTDA.
10.42 Stock Purchase Agreement dated April 22, 1999, between
J. Kent Manley and Leisure Express Cruise, LLC.
10.43 $2,100,000 Secured Promissory Note dated April 22, 1999,
from Leisure Express Cruise, LLC to Foothill Capital
Corporation.
10.44 Security Agreement dated April 22, 1999, between
Foothill Capital Corporation and Leisure Express Cruise,
LLC.
10.45 $3,225,000 Secured Promissory Note dated April 22, 1999,
from Florida Casino Cruises, Inc. to Foothill Capital
Corporation.
10.46 Security Agreement dated April 22, 1999, between
Foothill Capital Corporation and Florida Casino Cruises,
LLC.
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<PAGE> 190
EXHIBIT NO. DESCRIPTION AND METHOD OF FILING
10.47 Continuing Guaranty dated April 22, 1999, from Leisure
Express Cruise, LLC to Foothill Capital Corporation.
10.48 First Preferred Ship Mortgage dated April 22, 1999,
between Florida Casino Cruises, Inc. and Foothill
Capital Corporation.
10.49 Amendment No. 1 to Loan Documents dated April 22, 1999,
between Foothill Capital Corporation and Leisure Time
Cruise Corporation.
10.50 Amendment to and Confirmation of Guaranty dated April
22, 1999, by Leisure Time Technology, Inc. in favor of
Foothill Capital Corporation.
10.51 Amendment to and Confirmation of Guaranty dated April
22, 1999, by Leisure Time Casinos & Resorts, Inc. in
favor of Foothill Capital Corporation.
10.52 Amendment to and Confirmation of Guaranty dated April
22, 1999, by Alan N. Johnson in favor of Foothill
Capital Corporation.
10.53 Second amendment to First Ship Mortgage dated April 22,
1999, between Leisure Time Cruise Corporation and
Foothill Capital Corporation.
10.54 Pledge Agreement dated April 22, 1999, between Leisure
Express Cruise, LLC and Foothill Capital Corporation.
10.55 Continuing Guaranty dated April 22, 1999, from Leisure
Time Cruise Corporation in favor of Foothill Capital
Corporation.
10.56 Continuing Guaranty dated April 22, 1999, from Florida
Casino Cruises, Inc. in favor of Foothill Capital
Corporation.
10.57 Continuing Guaranty dated April 22, 1999, from Alan N.
Johnson in favor of Foothill Capital Corporation.
10.58 Master Agreement and Lease between Leisure Express
Cruise, LLC and Shoestring Properties Limited
Partnership dated April 29, 1999.
10.59 Marina Lease dated Aril 29, 1999 between Shoestring
Properties Limited Partnership and Leisure Time Cruise
Corporation.
10.60 Dockside Lease dated April 29, 1999 between Shoestring
Properties Limited Partnership and Leisure Time Cruise
Corporation.
10.61 First Amendment to Lease Agreement dated April 9, 1999
between Leisure Time Technology Inc. and Weeks Realty,
LP.
21 Subsidiaries of the Registrant.*
23.0 Consent of Ehrhardt Keefe Steiner & Hottman PC.
23.1 Consent of Smith McCullough, P.C. (included in Exhibit
5.1).*
23.2 Consent of Bear Stearns & Co. Inc. dated April 29, 1999.
24.0 Powers of Attorney.
27.0 Financial Data Schedule.
*To be filed by amendment.
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ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1993;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change in such information in the registration
statement.
(2) That for purposes of determining liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Avon,
State of Ohio on May 4, 1999.
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/ Alan N. Johnson
--------------------------------
Alan N. Johnson, President and
Chief Executive Officer
By: /s/ Elden W. Rance
--------------------------------
Elden W. Rance, Chief Financial
Officer and Principal Accounting
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Gerald J. Boyle
- -------------------------------------
Gerald J. Boyle Director May 4, 1999
/s/ Lester E. Bullock *
- -------------------------------------
Lester E. Bullock Director May 4, 1999
/s/ Alan N. Johnson
- -------------------------------------
Alan N. Johnson Director May 4, 1999
/s/ R. Thomas Klingel *
- -------------------------------------
R. Thomas Klingel Director May 4, 1999
/s/ Elden W. Rance
- -------------------------------------
Elden W. Rance Director May 4, 1999
/s/ Richard D. Sly *
- -------------------------------------
Richard D. Sly Director May 4, 1999
*By /s/ Alan N. Johnson May 4, 1999
---------------------------------
Alan N. Johnson, Attorney-in-Fact
</TABLE>
<PAGE> 193
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION AND METHOD OF FILING
- ----------- --------------------------------
<S> <C>
1.0 Form of Underwriting Agreement.
1.1 Form of Selected Dealers Agreement.
2.0 Agreement and Plan of Reorganization dated as of August 30, 1996, among U.S. Games,
Inc., Leisure Time Casinos & Resorts, Inc., Leisure Acquisition, Inc. and Certain
Holders of U.S. Games, Inc. Outstanding Stock, Options and Warrants together with
Exhibits C, D, E, F, G, H and J thereto. The other schedules and exhibits to the
Agreement and Plan of Reorganization are listed therein and copies thereof will be
furnished supplementally to the United States Securities and Exchange Commission upon
request.
2.1 Amended and Restated Asset Purchase Agreement dated as of January 31, 1997, between
Leisure Time Casinos & Resorts, Inc. and Star of Cincinnati, Inc.
2.2 Accord and Satisfaction and Release of Mortgages Agreement dated as of February 3,
1997, by Leisure Time Casinos & Resorts, Inc., Star of Cincinnati, Inc. and Henry E.
Davis Trustee.
3.0 Articles of Incorporation of Leisure Time Casinos & Resorts, Inc. dated February 4,
1993.
3.1 Articles of Amendment to the Articles of Incorporation of Leisure Time Casinos &
Resorts, Inc. filed on April 3, 1997.
3.2 Bylaws of Registrant adopted April 12, 1997.
4.0 Form of Representative Warrant for the Purchase of Common Stock
4.1 Forms of Lock-Up Agreements.*
5.1 Opinion of Smith McCullough, P.C. on Legality of Common Stock.*
10.0 1997 Incentive and Nonstatutory Stock Option Plan.
10.1 Amendment No. 1 to 1997 Incentive and Nonstatutory Stock Option Plan.*
10.2 Form of 11% Convertible Promissory Note Due September 1, 1999.
10.3 11% Convertible Promissory Note Due May 29, 1999.
10.4 11% Convertible Promissory Note Due May 30, 1999.
</TABLE>
<PAGE> 194
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION AND METHOD OF FILING
- ----------- --------------------------------
<S> <C>
10.5 Employment Agreement dated effective July 1, 1998, between Leisure Time Casinos &
Resorts, Inc. and Alan N. Johnson, Amendment to Employment Agreement dated effective
September 9, 1998, between Leisure Time Casinos & Resorts, Inc. and Alan N. Johnson and
Amendment to Employment Agreement dated effective February 22, 1999, between Leisure
Time Casinos & Resorts, Inc. and Alan N. Johnson.
10.6 Employment Agreement dated effective July 1, 1998, between Leisure Time Casinos &
Resorts, Inc. and Gerald J. Boyle and Amendment to Employment Agreement dated effective
September 9, 1998, between Leisure Time Casinos & Resorts, Inc. and Gerald J. Boyle.
10.7 Employment Agreement dated effective July 1, 1998, between Leisure Time Casinos &
Resorts, Inc. and Elden W. Rance, Amendment to Employment Agreement dated effective
September 9, 1998, between Leisure Time Casinos & Resorts, Inc. and Elden W. Rance and
Amendment to Employment Agreement dated effective February 22, 1999, between Leisure
Time Casinos & Resorts, Inc. and Elden W. Rance.
10.8 Employment Agreement dated effective July 1, 1998, between Leisure Time Casinos &
Resorts, Inc. and R. Thomas Klingel and Amendment to Employment Agreement dated
effective September 9, 1998, between Leisure Time Casinos & Resorts, Inc. and R. Thomas
Klingel.
10.9 Employment Agreement dated effective July 1, 1998, between Leisure Time Casinos &
Resorts, Inc. and Richard D. Sly and Amendment to Employment Agreement dated effective
September 9, 1998, between Leisure Time Casinos & Resorts, Inc. and Richard D. Sly.
10.10 Employment Agreement dated effective March 1, 1999, between Leisure Time Casinos &
Resorts, Inc. and Keko Mottes.
10.11 Employment Agreement dated effective March 1, 1999, between Leisure Time Casinos &
Resorts, Inc. and John J. Pasierb.
10.12 Employment Agreement dated effective April 20, 1999, between Leisure Time Casinos &
Resorts, Inc. and Joseph C. Grunda.
10.13 Lease Agreement dated December 1, 1997, between Leisure Time Technology, Inc. and Weeks
Realty, L.P.
10.14 Lease Agreement dated October 31, 1997, between Alan N. Johnson and Leisure Time
Casinos & Resorts, Inc.
</TABLE>
<PAGE> 195
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION AND METHOD OF FILING
- ----------- --------------------------------
<S> <C>
10.15 Purchase Agreement dated March 23, 1998, between Lisa Lemon, Inc. and Al Johnson.
10.16 Amendment to Purchase Agreement dated June 26, 1998, between Lisa Lemon, Inc. and Al
Johnson.
10.17 Assignment dated September 11, 1998, from Al Johnson to Leisure Time Hospitality, inc.
10.18 Promissory Note dated September 15, 1998, from Leisure Time Hospitality, Inc. to Lisa
Lemon, Inc. and Guaranty of Alan N. Johnson thereof.
10.19 Mortgage Deed dated September 15, 1998, from Leisure Time Hospitality, Inc. to Lisa
Lemon, Inc.
10.20 Bareboat Charter Party dated as of June 22, 1998, between Florida Casino Cruises, Inc.
and Leisure Express Cruise LLC.
10.21 Addendum to Bareboat Charter Agreement.
10.22 Purchase Option Agreement dated as of June 22, 1998, between Florida Casino Cruises,
Inc. and Leisure Express Cruise, LLC.
10.23 $3,000,000 Secured Promissory Note dated October 9, 1998, from Leisure Time Cruise
Corporation to Foothill Capital Corporation.
10.24 Security Agreement dated October 9, 1998, between Foothill Capital Corporation and
Leisure Time Cruise Corporation.
10.25 First Preferred Ship Mortgage dated October 9, 1998, between Leisure Time Cruise
Corporation and Foothill Capital Corporation.
10.26 Equipment Security Agreement dated October 9, 1998, between Foothill Capital
Corporation and Leisure Time Technology, Inc.
10.27 Continuing Guaranty dated October 9, 1998, from Leisure Time Technology, Inc. to
Foothill Capital Corporation.
10.28 Continuing Guaranty dated October 9, 1998, from Leisure Time Casinos & Resorts, Inc. to
Foothill Capital Corporation.
10.29 Continuing Guaranty dated October 9, 1998, from Alan N. Johnson to Foothill Capital
Corporation.
10.30 $1,500,000 Promissory Note dated December 17, 1998, from Leisure Belle Cruise LLC to
General Electric Capital Corporation.
</TABLE>
<PAGE> 196
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION AND METHOD OF FILING
- ----------- --------------------------------
<S> <C>
10.31 $1,500,000 Loan and Security Agreement dated December 17, 1998, between Leisure Belle
Cruise, LLC and General Electric Capital Corporation.
10.32 Guaranty Agreement dated December 17, 1998, from Leisure Time Casinos & Resorts, Inc.
to General Electric Capital Corporation.
10.33 Guaranty Agreement dated December 17, 1998, from Leisure Time Technologies, Inc. to
General Electric Capital Corporation.
10.34 First Preferred Ship Mortgage dated December 17, 1998 from Leisure Belle Cruise, LLC
in favor of General Electric Capital Corporation.
10.35 Consulting Agreement dated March 31, 1998 between Leisure Time Casinos & Resorts, Inc.
and A. J. Siciliano.
10.36 Bareboat Charter Party dated as of January 22, 1999, between Florida Casino Cruises,
Inc. and Leisure Express, LLC.
10.37 Purchase Option Agreement dated as of January 22, 1999, between Florida Casino Cruises,
Inc. and Leisure Express, LLC.
10.38 Consulting Agreement dated as of February 1, 1999, between and Kent Manley and Leisure
Time Cruise Corporation.
10.39 Dockage Agreement and Lease dated as of June 1, 1998, between Rowe Square Corporation
and Leisure Express Cruise, LLC.
10.40 Distribution Agreement dated January 23, 1998, between Leisure Time Technology, Inc.
and Sao Paulo Games Comercial LTDA.
10.41 Amendment to the Contract for Distribution dated January 22, 1998, between Leisure Time
Technology, Inc. and Sao Paulo Games Comercial LTDA.
10.42 Stock Purchase Agreement dated April 22, 1999, between J. Kent Manley and Leisure
Express Cruise, LLC.
10.43 $2,100,000 Secured Promissory Note dated April 22, 1999, from Leisure Express Cruise,
LLC to Foothill Capital Corporation.
10.44 Security Agreement dated April 22, 1999, between Foothill Capital Corporation and
Leisure Express Cruise, LLC.
10.45 $3,225,000 Secured Promissory Note dated April 22, 1999, from Florida Casino Cruises,
Inc. to Foothill Capital Corporation.
10.46 Security Agreement dated April 22, 1999, between Foothill Capital Corporation and
Florida Casino Cruises, LLC.
</TABLE>
<PAGE> 197
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION AND METHOD OF FILING
- ----------- --------------------------------
<S> <C>
10.47 Continuing Guaranty dated April 22, 1999, from Leisure Express Cruise, LLC to Foothill
Capital Corporation.
10.48 First Preferred Ship Mortgage dated April 22, 1999, between Florida Casino Cruises,
Inc. and Foothill Capital Corporation.
10.49 Amendment No. 1 to Loan Documents dated April 22, 1999, between Foothill Capital
Corporation and Leisure Time Cruise Corporation.
10.50 Amendment to and Confirmation of Guaranty dated April 22, 1999, by Leisure Time
Technology, Inc. in favor of Foothill Capital Corporation.
10.51 Amendment to and Confirmation of Guaranty dated April 22, 1999, by Leisure Time Casinos
& Resorts, Inc. in favor of Foothill Capital Corporation.
10.52 Amendment to and Confirmation of Guaranty dated April 22, 1999, by Alan N. Johnson in
favor of Foothill Capital Corporation.
10.53 Second amendment to First Ship Mortgage dated April 22, 1999, between Leisure Time
Cruise Corporation and Foothill Capital Corporation.
10.54 Pledge Agreement dated April 22, 1999, between Leisure Express Cruise, LLC and Foothill
Capital Corporation.
10.55 Continuing Guaranty dated April 22, 1999, from Leisure Time Cruise Corporation in favor
of Foothill Capital Corporation.
10.56 Continuing Guaranty dated April 22, 1999, from Florida Casino Cruises, Inc. in favor of
Foothill Capital Corporation.
10.57 Continuing Guaranty dated April 22, 1999, from Alan N. Johnson in favor of Foothill
Capital Corporation.
10.58 Master Agreement and Lease between Leisure Express Cruise, LLC and Shoestring
Properties Limited Partnership dated April 29, 1999.
10.59 Marina Lease dated Aril 29, 1999 between Shoestring Properties Limited Partnership
and Leisure Time Cruise Corporation.
10.60 Dockside Lease dated April 29, 1999 between Shoestring Properties Limited Partnership
and Leisure Time Cruise Corporation.
10.61 First Amendment to Lease Agreement dated April 9, 1999 between Leisure Time Technology Inc.
and Weeks Realty, LP.
21 Subsidiaries of the Registrant.*
23.0 Consent of Ehrhardt Keefe Steiner & Hottman PC.
23.1 Consent of Smith McCullough, P.C. (included in Exhibit 5.1).*
23.2 Consent of Bear Stearns & Co. Inc. dated April 29, 1999.
24.0 Powers of Attorney.
27.0 Financial Data Schedule.
</TABLE>
*To be filed by amendment.
<PAGE> 1
EXHIBIT 1.0
1,100,000 SHARES OF COMMON STOCK
LEISURE TIME CASINOS & RESORTS, INC.
UNDERWRITING AGREEMENT
________, 1999
Schneider Securities, Inc.
1120 Lincoln Street
Suite 900
Denver, Colorado 80203
Dear Sirs:
Leisure Time Casinos & Resorts, Inc., a Colorado corporation (the
"Company") hereby confirms its agreement with you (who are sometimes hereinafter
referred to as the "Representative") and with the other members of the
underwriting group (the "Underwriters") named on Schedule 1 hereto as follows:
1. Introductory. Subject to the terms and conditions herein contained, the
Company proposes to sell to the several Underwriters an aggregate of 1,100,000
shares (the "Firm Shares") of the Company's Common Stock, par value $.001 per
share (the "Common Stock"). The Company also proposes to sell to the several
Underwriters not more than 165,000 additional shares of Common Stock (15% of the
number of shares constituting the Firm Shares) if requested by the
Representatives as provided in Section 3 of this Agreement. Any and all shares
of Common Stock to be purchased by the Underwriters pursuant to such option are
referred to herein as the "Additional Shares." The Firm Shares and any
Additional Shares are collectively referred to herein as the "Shares."
2. Representations and Warranties of the Company. The Company represents and
warrants to, and agrees with, each of the Underwriters that:
a. The Company has filed with the Commission a registration statement, and
may have filed one or more amendments thereto, on Form S-1 (Registration
No. 333-______), including in such registration statement and each such
amendment a facing sheet, the information called for by Part I, audited
consolidated financial statements for the past three fiscal years or such
other period as may be appropriate, the information called for by Part II,
the undertakings to deliver certificates, file reports and file
post-effective amendments, the required signatures, consents of experts,
exhibits, a related preliminary prospectus (a "Preliminary Prospectus") and
any other information or documents which are required for the registration
of the Shares, and the warrants referred to in Section 2(n) (the
"Representative's Warrants") and the shares referred to in Section 2(n) and
Section 5(p) purchasable upon exercise of the Representative's
<PAGE> 2
Warrants (the "Representative's Warrant Shares"), under the Securities Act
of 1933, as amended (the "Act"). As used in this Agreement, the term
"Registration Statement" means such registration statement, including
incorporated documents, all exhibits and consolidated financial statements
and schedules thereto, as amended, when it becomes effective, and shall
include the information with respect to the Shares, the Representative's
Warrants, and the Representative's Warrant Shares and the offering thereof
permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A of the General Rules and Regulations
promulgated under the Act (the "Regulations"), which information is deemed
to be included therein when it becomes effective as provided by Rule 430A;
the term "Preliminary Prospectus" means each prospectus included in the
Registration Statement, or any amendments thereto, before it becomes
effective under the Act and any prospectus filed by the Company with the
consent of the Representative pursuant to Rule 424(a) of the Regulations;
and the term "Prospectus" means the final prospectus included as part of
the Registration Statement, except that if the prospectus relating to the
securities covered by the Registration Statement in the form first filed on
behalf of the Company with the Commission pursuant to Rule 424(b) of the
Regulations shall differ from such final prospectus, the term "Prospectus"
shall mean the prospectus as filed pursuant to Rule 424(b) from and after
the date on which it shall have first been used.
b. When the Registration Statement becomes effective, and at all times
subsequent thereto, to and including the Closing Date (as defined in
Section 3) and each Additional Closing Date (as defined in Section 3), and
during such longer period as the Prospectus may be required to be delivered
in connection with sales by the Representative or any dealer, and during
such longer period until any post-effective amendment thereto shall become
effective, the Registration Statement (and any post-effective amendment
thereto) and the Prospectus (as amended or as supplemented if the Company
shall have filed with the Commission any amendment or supplement to the
Registration Statement or the Prospectus) will contain all statements which
are required to be stated therein in accordance with the Act and the
Regulations, will comply with the Act and the Regulations, and will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and no event will have occurred which
should have been set forth in an amendment or supplement to the
Registration Statement or the Prospectus which has not then been set forth
in such an amendment or supplement; and no Preliminary Prospectus, as of
the date filed with the Commission, included any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; except
that no representation or warranty is made in this Section 2(b) with
respect to statements or omissions made in reliance upon
2
<PAGE> 3
and in conformity with written information furnished to the Company as
stated in Section 8(b) with respect to the Underwriters by or on behalf of
the Underwriters expressly for inclusion in any Preliminary Prospectus, the
Registration Statement, or the Prospectus, or any amendment or supplement
thereto.
c. Neither the Commission nor the "blue sky" or securities authority of any
jurisdiction have issued an order (a "Stop Order") suspending the
effectiveness of the Registration Statement, preventing or suspending the
use of any Preliminary Prospectus, the Prospectus, the Registration
Statement, or any amendment or supplement thereto, refusing to permit the
effectiveness of the Registration Statement, or suspending the registration
or qualification of the Shares, the Representative's Warrants, and the
Representative's Warrant Shares, nor has any of such authorities instituted
or threatened to institute any proceedings with respect to a Stop Order.
d. Any contract, agreement, instrument, lease, or license required to be
described in the Registration Statement or the Prospectus has been properly
described therein. Any contract, agreement, instrument, lease, or license
required to be filed as an exhibit to the Registration Statement has been
filed with the Commission as an exhibit to or has been incorporated as an
exhibit by reference into the Registration Statement.
e. The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Colorado, with full power and
authority, and all necessary consents, authorizations, approvals, orders,
licenses, certificates, and permits of and from, and declarations and
filings with, all federal, state, local, and other governmental authorities
and all courts and other tribunals, to own, lease, license, and use its
properties and assets and to carry on the business in the manner described
in the Prospectus. Each of the Subsidiaries of the Company (the
"Subsidiaries") is a corporation duly organized and validly existing in
good standing under the laws of the jurisdiction of its organization, with
full corporate power and authority to own, lease, and operate its
properties and to conduct its business as described in the Prospectus. The
Company and each Subsidiary is duly qualified to do business and is in good
standing in every jurisdiction in which its ownership, leasing, licensing,
or use of property and assets or the conduct of its business makes such
qualifications necessary. The Company has no Subsidiaries except as
disclosed in the Prospectus.
f. The authorized capital stock of the Company consists of 45,000,000
shares of Common Stock, of which 6,018,334 shares of Common Stock are
issued and outstanding, 5,536,751 shares of Common Stock are reserved for
issuance upon the exercise of currently outstanding options and warrants,
2,302,700 shares of Common Stock are reserved for issuance upon the
exercise of the remaining options authorized under the Company's option
plan; and 5,000,000 shares of Preferred Stock, none of which are issued or
outstanding. Each outstanding share of
3
<PAGE> 4
Common Stock is validly authorized, validly issued, fully paid, and
nonassessable, without any personal liability attaching to the ownership
thereof, and has not been issued and is not owned or held in violation of
any preemptive rights of stockholders. There is no commitment, plan, or
arrangement to issue, and no outstanding option, warrant, or other right
calling for the issuance of, any share of capital stock of the Company or
any security or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for capital stock of the Company, except
as set forth above, and as may be properly described in the Prospectus.
g. The consolidated financial statements of the Company included in the
Registration Statement and the Prospectus fairly present with respect to
the Company the consolidated financial position, the results of operations,
and the other information purported to be shown therein at the respective
dates and for the respective periods to which they apply. Such consolidated
financial statements have been prepared in accordance with generally
accepted accounting principles, except to the extent that certain footnote
disclosures regarding any stub period may have been omitted in accordance
with the applicable rules of the Commission under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), consistently applied
throughout the periods involved, are correct and complete, and are in
accordance with the books and records of the Company. The accountants whose
reports on the audited consolidated financial statements are filed with the
Commission as a part of the Registration Statement are, and during the
periods covered by their reports included in the Registration Statement and
the Prospectus were, independent certified public accountants with respect
to the Company within the meaning of the Act and the Regulations. No other
financial statements are required by Form S-1 or otherwise to be included
in the Registration Statement or the Prospectus. There has at no time been
a material adverse change in the consolidated financial condition, results
of operations, business, properties, assets, liabilities, or future
prospects of the Company from the latest information set forth in the
Registration Statement or the Prospectus, except as may be properly
described in the Prospectus.
h. There is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending, or, to the
knowledge of the Company, threatened, or in prospect with respect to the
Company or any of its Subsidiaries, operations, businesses, properties, or
assets, except as may be properly described in the Prospectus or such as
individually or in the aggregate do not now have and will not in the future
have a material adverse effect upon the operations, business, properties,
or assets of the Company. The Company and each Subsidiary is not in
violation of, or in default with respect to, any law, rule, regulation,
order, judgment, or decree except as may be properly described in the
Prospectus or such as in the aggregate do not now have and will not in the
future have a material adverse
4
<PAGE> 5
effect upon the operations, business, properties, or assets of the Company,
nor is the Company required to take any action in order to avoid any such
violation or default.
i. The Company has good and marketable title in fee simple absolute to all
real properties and good title to all other properties and assets which the
Prospectus indicates are owned by it, free and clear of all liens, security
interests, pledges, charges, encumbrances, and mortgages except as may be
properly described in the Prospectus or such as in the aggregate do not now
have and will not in the future have a material adverse effect upon the
operations, business, properties, or assets of the Company. No real
property owned, leased, licensed, or used by the Company lies in an area
which is, or to the knowledge of the Company will be, subject to zoning,
use, or building code restrictions which would prohibit, and no state of
facts relating to the actions or inaction of another person or entity or
his or its ownership, leasing, licensing, or use of any real or personal
property exists or will exist which would prevent, the continued effective
ownership, leasing, licensing, or use of such real property in the business
of the Company as presently conducted or as the Prospectus indicates it
contemplates conducting, except as may be properly described in the
Prospectus or such as in the aggregate do not now have and will not in the
future have a material adverse effect upon the operations, business,
properties, or assets of the Company.
j. Neither the Company nor any other party is now or is expected by the
Company to be in violation or breach of, or in default with respect to
complying with, any material provision of any contract, agreement,
instrument, lease, license, arrangement, or understanding which is material
to the Company, and each such contract, agreement, instrument, lease,
license, arrangement, and understanding is in full force and is the legal,
valid, and binding obligation of the parties thereto and is enforceable as
to them in accordance with its terms. The Company enjoys peaceful and
undisturbed possession under all leases and licenses under which it is
operating. The Company is not a party to or bound by any contract,
agreement, instrument, lease, license, arrangement, or understanding, or
subject to any charter or other restriction, which has had or may in the
future have a material adverse effect on the financial condition, results
of operations, business, properties, assets, liabilities, or future
prospects of the Company. The Company and each of the Subsidiaries is not
in violation or breach of, or in default with respect to, any term of its
Articles of Incorporation (or other charter document) or by-laws.
k. All patents, patent applications, trademarks, trademark applications,
trade names, service marks, copyrights, franchises, technology, know-how
and other intangible properties and assets (all of the foregoing being
herein called "Intangibles") that the Company owns or has pending, or under
which it is licensed, are in good standing and uncontested. Except as
otherwise disclosed in the Registration Statement, the Intangibles are
owned by the Company,
5
<PAGE> 6
free and clear of all liens, security interests, pledges, and encumbrances.
The Company has filed an application with the United States Patent and
Trademark Office to register "Leisure Time Casinos & Resorts" as a
registered trademark. There is no right under any Intangible necessary to
the business of the Company as presently conducted or as the Prospectus
indicates it contemplates conducting (except as may be so designated in the
Prospectus). The Company has not infringed, is not infringing, and has not
received notice of infringement with respect to asserted Intangibles of
others. To the knowledge of the Company, there is no infringement by others
of Intangibles of the Company. To the knowledge of the Company, there is no
Intangible of others which has had or may in the future have a materially
adverse effect on the financial condition, results of operations, business,
properties, assets, liabilities, or future prospects of the Company.
l. Neither the Company nor any of the Subsidiaries, nor any director,
officer, agent, employee, or other person associated with or acting on
behalf of the Company has, directly or indirectly: used any corporate funds
for unlawful contributions, gifts, entertainment, or other unlawful
expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds; violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended by the
International Anti-Bribery Act of 1998; or made any bribe, rebate, payoff,
influence payment, kickback, or other unlawful payment. Each of the Company
and the Subsidiaries has not accepted any material advertising allowances
or marketing allowances from suppliers to the Company and, to the extent
any advertising allowance has been accepted, the Company has provided
proper documentation to the supplier with respect to advertising as to
which the advertising allowance has been granted.
m. The Company has all requisite power and authority to execute and
deliver, and to perform thereunder each of this Agreement and the
Representative's Warrants. All necessary corporate proceedings of the
Company have been duly taken to authorize the execution and delivery, and
performance thereunder by the Company of this Agreement and the
Representative's Warrants. This Agreement has been duly authorized,
executed, and delivered by the Company, is a legal, valid, and binding
obligation of the Company, and is enforceable as to the Company in
accordance with its terms. The Representative's Warrants have been duly
authorized by the Company and, when executed and delivered by the Company,
will each be a legal, valid, and binding obligation of the Company, and
will be enforceable against the Company in accordance with its respective
terms. No consent, authorization, approval, order, license, certificate, or
permit of or from, or declaration or filing with, any federal, state,
local, or other governmental authority or any court or other tribunal is
required by the Company for the execution and delivery, or performance
thereunder by the Company of this Agreement or
6
<PAGE> 7
the Representative's Warrants except filings under the Act which have been
or will be made before the Closing Date and such consents consisting only
of consents under "blue sky" or securities laws which are required in
connection with the transactions contemplated by this Agreement and which
have been obtained at or prior to the date of this Agreement. No consent of
any party to any contract, agreement, instrument, lease, license,
arrangement, or understanding to which the Company is a party, or to which
any of its properties or assets are subject, is required for the execution
or delivery, or performance thereunder of this Agreement or the
Representative's Warrants; and the execution and delivery, and performance
thereunder of this Agreement and the Representative's Warrants will not
violate, result in a breach of, conflict with, or (with or without the
giving of notice or the passage of time or both) entitle any party to
terminate or call a default under any such contract, agreement, instrument,
lease, license, arrangement, or understanding, or violate or result in a
breach of any term of the Articles of Incorporation or by-laws of the
Company, or violate, result in a breach of, or conflict with any law, rule,
regulation, order, judgment, or decree binding on the Company or to which
any of its operations, businesses, properties, or assets are subject.
n. The Shares, the Representative's Warrants and the Representative's
Warrant Shares are validly authorized and reserved for issuance. The
Shares, when issued and delivered in accordance with this Agreement and the
Representative's Warrant Shares, when issued and delivered upon exercise of
the Representative's Warrants, and upon payment of the exercise price
therefor, will be validly issued, fully paid, and nonassessable, without
any personal liability attaching to the ownership thereof, and will not be
issued in violation of any preemptive rights of stockholders, and the
Underwriters will receive good title to the Shares purchased, the
Representative will receive good title to the Representative's Warrants
purchased and any purchaser of the Representative `s Warrant Shares will
receive good title thereto, all such title free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts.
o. The Shares, the Representative's Warrants and the Representative's
Warrant Shares conform to all statements relating thereto contained in the
Registration Statement and the Prospectus.
p. Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus, and except as may otherwise
be properly described in the Prospectus, the Company has not (i) issued any
securities or incurred any liability or obligation, primary or contingent,
for borrowed money, (ii) entered into any transaction not in the ordinary
course of business, or (iii) declared or paid any dividend on its capital
stock.
q. Neither the Company nor any of its officers, directors, or affiliates
(as defined in the Regulations), has taken or will take, directly or
indirectly, prior to the termination of the
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<PAGE> 8
distribution of securities contemplated by this Agreement, any action
designed to stabilize or manipulate the price of any security of the
Company, or which has caused or resulted in, or which might in the future
reasonably be expected to cause or result in, stabilization or manipulation
of the price of any security of the Company, to facilitate the sale or
resale of the Shares.
r. The Company has not incurred any liability for a fee, commission, or
other compensation on account of the employment of a broker or finder in
connection with the transactions contemplated by this Agreement.
s. The Company has obtained from each officer, director and person or
entity that beneficially owns the Company's capital stock or derivative
securities convertible into shares of the Company's capital stock his, her
or its enforceable written agreement that for a period of 12 months from
the Effective Date, he, she or it will not, without the Representative's
prior written consent, offer, pledge, sell, contract to sell, grant any
option for the sale of, enter into any swap or other arrangement that
transfers all or a portion of the economic consequences associated with the
ownership of the Company's capital stock, or otherwise dispose of, directly
or indirectly, any shares of capital stock or any security or other
instrument which by its terms is convertible into, exercisable for, or
exchangeable for shares of Common Stock (except that, subject to compliance
with applicable securities laws, any such officer, director or stockholder
may transfer his or her stock pursuant to a bona fide gift or gifts,
provided that any such transferee shall agree, as a condition to such
transfer, to be bound by the restrictions set forth in this Agreement and
further provided that the transferor, except in the case of the
transferor's death, shall continue to be deemed the beneficial owner of
such shares in accordance with Regulation 13d-(3) of the Exchange Act).
Notwithstanding the foregoing, commencing 180 days after the Effective
Date, the stockholders of the Company who are not officers or directors of
the Company shall have the right to sell up to 20% of the shares of Common
Stock owned by them, up to a maximum aggregate amount of 150,000 shares of
Common Stock, through and until expiration of the 12 month restriction
provided herein. Any such sales will comply with applicable exemptions from
the registration requirements of the Act. For a period of three (3) years,
commencing (i) six months from the Effective Date, with respect to sales by
stockholders that are not officers or directors of the Company, and (ii) 12
months from the Effective Date with respect to sales by officers or
directors of the Company, all public sales of the Company's securities by
officers, directors and stockholders of the Company shall be effected
through or with the Representative on an exclusive basis, provided that the
Representative offers the best price reasonably available to the selling
holders. Public or private sales of Common Stock by such persons shall not
include gifts, intra-family transfers or transfers for estate planning
purposes, which shall be exempt from the foregoing provisions. The Company,
on behalf of
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<PAGE> 9
itself, and all officers, directors and holders of five percent or more of
the Common Stock of the Company, have provided the Representative their
enforceable written agreements not to sell, transfer, or hypothecate
capital stock or derivative securities of the Company through a "Regulation
S" transaction for a minimum period of five years from the Effective Date
without the prior written consent of the Representative, and the Company
has provided the Representative with the Company's enforceable written
agreement not to sell capital stock or derivative securities of the Company
through a "Regulation D" transaction for a minimum period of 24 months from
the Effective Date.
t. Except as otherwise provided in the Registration Statement, no person or
entity has the right to require registration of shares of Common Stock or
other securities of the Company because of the filing or effectiveness of
the Registration Statement.
u. The Company is eligible to use Form S-1 for registration of the Shares,
the Representative's Warrants and the Representative's Warrant Shares.
v. No unregistered securities of the Company, of an affiliate of the
Company or of a predecessor of the Company have been sold within three
years prior to the date hereof, except as described in the Registration
Statement.
w. Except as set forth in the Registration Statement, there is and at the
Closing Date there will be no action, suit or proceeding before any court,
arbitration tribunal or governmental agency, authority or body pending or,
to the knowledge of the Company, threatened which might result in judgments
against the Company not adequately covered by insurance or which
collectively might result in any material adverse change in the condition
(financial or otherwise), the business or the prospects of the Company or
would materially affect the properties or assets of the Company.
x. The Company has filed all federal and state tax returns which are
required to be filed by it and has paid all taxes shown on such returns and
all assessments received by it to the extent such taxes have become due.
All taxes with respect to which the Company is obligated have been paid or
adequate accruals have been set up to cover any such unpaid taxes.
y. Except as set forth in the Registration Statement:
i. The Company has obtained all permits, licenses and other
authorizations which are required under the Environmental Laws for the
ownership, use and operation of each location operated or leased by the
Company (the "Property"), all such permits, licenses and
authorizations, if any, obtained are in effect, no appeal nor any other
action is pending to revoke any such permit, license or authorization,
and the Company is in full compliance with all terms and conditions of
all such permits, licenses and authorizations, if any, obtained by the
Company.
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<PAGE> 10
ii. To the best knowledge of the Company's executive officers,
the Company and the Property are in compliance with all Environmental
Laws including, without limitation, all restrictions, conditions,
standards, limitations, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or
contained in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or
approved thereunder.
iii. The Company has not, and to the best knowledge of the
Company's executive officers, no other person has, released, placed,
stored, buried or dumped any Hazardous Substances, Oils, Pollutants or
Contaminants or any other wastes produced by, or resulting from, any
business, commercial, or industrial activities, operations, or
processes, on, beneath, or adjacent to the Property or any property
formerly owned, operated or leased by the Company except for
inventories of such substances to be used, and wastes generated
therefrom, in the ordinary course of business of the Company (which
inventories and wastes, if any, were and are stored or disposed of in
accordance with applicable laws and regulations and in a manner such
that there has been no release of any such substances into the
environment).
iv. Except as provided to the Representative, there exists no
written or tangible report, synopsis or summary of any asbestos, toxic
waste or Hazardous Substances, Oils, Pollutants or Contaminants
investigation made with respect to all or any portion of the assets of
the Company (whether or not prepared by experts and whether or not in
the possession of the executive officers of the Company).
v. Definitions: As used herein:
(1) Environmental Laws means all federal, state and local
laws, regulations, rules and ordinances relating to pollution
or protection of the environment, including, without
limitation, laws relating to Releases or threatened Releases
of Hazardous Substances, Oils, Pollutants or Contaminants into
the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, land,
surface and subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, Release, transport or handling of Hazardous
Substances, Oils, Pollutants or Contaminants.
(2) Hazardous Substances, Oils, Pollutants or
Contaminants means all substances defined as such in the
National Oil and Hazardous Substances Pollutant Contingency
Plan, 40 C.F.R. Section 300.6, or defined as such under any
Environmental Law.
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<PAGE> 11
(3) Release means any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or
outdoor environmental (including, without limitation, ambient
air, surface water, groundwater, and surface or subsurface
strata) or into or out of any property, including the movement
of Hazardous Substances, Oils, Pollutants or Contaminants
through or in the air, soil, surface water, groundwater or any
property.
z. No authorization, approval, consent or order of, or filing
with, any Federal, Native American, state or local governmental body,
authority, self regulatory authority, agency or official (collectively
the "Gaming Authorities") including specifically from the Gaming
Authorities in the States of Kansas, Michigan, Minnesota, New Mexico
(with respect to Native American tribes only), New York, North Carolina,
South Carolina and Wisconsin and the Kingdom of Norway and Brazil
(collectively, the "Gaming Jurisdictions") is necessary in connection
with the issuance and sale of the Shares and the consummation of the
transactions contemplated hereby, except such as may be required by the
NASD or have been obtained under the applicable laws, rules and
regulations maintained and enforced by the Gaming Authorities in their
respective jurisdictions (collectively, the "Gaming Laws"), the Act, or
state securities or Blue Sky laws or regulations.
aa. The Company, each of the Subsidiaries and each of the persons
listed under the caption "Management" in the Registration Statement has
all material certificates, consents, exemptions, orders, permits,
licenses, authorizations or other approvals or rights (each, an
"Authorization") of and from, and has made all material declarations and
filings with, all Federal, state, tribal, local and other governmental
authorities, including the Gaming Authorities, all self-regulatory
organizations and all courts and other tribunals, and holds all such
Authorizations with respect to engaging in gaming operations, offshore
gaming cruises and the manufacture of gaming machines in the Gaming
Jurisdictions or that are required to own, lease, license and use its
properties and assets and to conduct its current business in the manner
described in or contemplated by the Prospectus, (ii) all such
Authorizations are valid and in full force and effect, (iii) the Company,
each of the Subsidiaries and each of the persons listed under the caption
"Management" in the Registration Statement is in compliance in all
material respects with the terms and conditions of all such
Authorizations and with the rules and regulations of the Gaming
Authorities and governing bodies having jurisdiction with respect
thereto, and (iv) neither the Company nor any Subsidiary nor any of the
persons listed under the caption "Management" in the Registration
Statement has received any notice of proceedings relating to the
revocation or modification of any such Authorization and no such
Authorization contains any restrictions that are materially burdensome to
any of them. To the best knowledge
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<PAGE> 12
of the Company and each of the persons listed under the caption
"Management" in the Registration Statement, the Company and all such
persons do not have any reason to believe that any Gaming Authority is
considering modifying, limiting, conditioning, suspending, revoking or
not renewing any such Authorization of the Company, any of the
Subsidiaries or any of the persons listed under the caption "Management"
in the Registration Statement or that any Gaming Authority or any other
governmental agency is investigating the Company or any of the
Subsidiaries or related parties (other than normal overseeing reviews of
the Gaming Authorities incident to the gaming activities of the Company
and the Subsidiaries). To the best knowledge of the Company and each of
the persons listed under the caption "Management" in the Registration
Statement, the Company, its Subsidiaries and none of the persons listed
under the caption "Management" in the Registration Statement has any
reason to believe that there is an existing basis for any of the Gaming
Authorities to deny the renewal of current gaming licenses held by any of
them.
bb. The Company, through one of its Subsidiaries, has applied
to the Gaming Authorities for licensing to sell gaming machines and
engage in gaming operations in the States of Mississippi and Montana
and in the Province of Ontario, Canada. The Company has not received
any communication (whether written or oral) threatening or stating that
the Company's or the Subsidiary's application for licensing in any of
such jurisdictions, or the qualification or licensing of those persons
listed under the caption "Management" in the Prospectus, has been or
will be denied. Each license application filed by the Company or any
Subsidiary with such jurisdictions complies as to form with the gaming
laws of each of the respective jurisdictions in which such applications
are filed, are correct in all material respects, present fairly the
information purported to be shown and have not been modified, withdrawn
or abandoned by the Company or a Subsidiary.
cc. To the best of the Company's knowledge, neither the Company
nor any of the Subsidiaries has engaged in any business or operations of
any variety in any state or jurisdiction in which the applicable gaming
laws would require the Company or its Subsidiaries to have been licensed
in order to conduct such business or operations, except as otherwise
permitted by the gaming laws of any such jurisdiction.
dd. The Company's and its Subsidiaries' conduct of offshore gaming
activities in international waters is in accordance with applicable
United States and international laws, rules and regulations, or
exemptions therefrom, and the Company and its Subsidiaries have complied
in all material respects with the jurisdictional and other requirements
imposed on such activities. Neither the Company nor any of the
Subsidiaries has been notified of any violation, breach or conduct that
would constitute a violation of applicable gaming laws within the State
of Massachusetts.
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<PAGE> 13
ee. The Company and each of its Subsidiaries has conducted its
gaming route operations within the State of South Carolina in accordance
with applicable laws, rules and regulations established by the Gaming
Authorities within the State of South Carolina. The Company and each of
its Subsidiaries is in material compliance with each individual revenue
sharing agreement by and between the Company, any of its Subsidiaries and
third parties.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
1. Purchase, Sale, and Delivery of the Shares. On the basis of the
representations, warranties, covenants, and agreements of the Company herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to sell to the Underwriters, severally and not jointly, and the
Underwriters, severally and not jointly, agree to purchase from the Company the
number of Firm Shares set forth opposite the Underwriters' names in Schedule 1
hereto.
2. The purchase price per Firm Share to be paid by the Underwriters shall be
$______. The initial public offering price of the Shares shall be $______.
3. Payment for the Firm Shares by the Underwriters shall be made by certified or
official bank check in clearing house funds, payable to the order of the Company
at the offices of Schneider Securities, Inc., 1120 Lincoln Street, Suite 900,
Denver, Colorado 80203, or at such other place in Denver, Colorado as the
Representative shall determine and advise the Company by at least two full days'
notice in writing, upon delivery of the Shares to the Representative. Such
delivery and payment shall be made at 10:00 a.m., Mountain Time, on the third
business day following the time of the initial public offering, as defined in
Section 10(a) hereof, unless the Commission declares the Registration Statement
effective after 4:30 p.m. Eastern time, in which event delivery and payment
shall be made on the fourth (4th) business day following the time of the initial
public offering. The time and date of such delivery and payment are herein
called the "Closing Date."
4. In addition, the Company hereby grants to the Representative the option to
purchase all or a portion of the Additional Shares as may be necessary to cover
over-allotments, at the same purchase price per Additional Share as the price
per Firm Share provided for in this Section 3. The Representative may purchase
Additional Shares when exercising such option, in its sole discretion. This
option may be exercised by the Representative on the basis of the
representations, warranties, covenants, and agreements of the Company herein
contained, but subject to the terms and conditions herein set forth, at any time
and from time to time on or before the 45th day following the Effective Date of
the Registration Statement, by written notice by the Representative to the
Company. Such notice shall set forth the aggregate number of Additional Shares
as to which the option is being exercised, and the time and date, as determined
by the Representative, when such Additional Shares are to be delivered (such
time and date are herein called an "Additional Closing Date"); provided,
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<PAGE> 14
however, that no Additional Closing Date shall be earlier than the Closing Date
nor earlier than the third business day after the date on which the notice of
the exercise of the option shall have been given nor later than the eighth
business day after the date on which such notice shall have been given; and
further provided, that not more than two Additional Closings shall be noticed
and held following purchase of Additional Shares by the Representative.
5. Payment for the Additional Shares shall be made by certified or official bank
check in clearing house funds payable to the order of the Company at the offices
of Schneider Securities, Inc., 1120 Lincoln Street, Suite 900, Denver, Colorado,
or at such other place in Denver, Colorado as you shall determine and advise the
Company by at least two full days' notice in writing, upon delivery of
certificates representing the Additional Shares to you.
6. Certificates for the Shares purchased shall be registered in such name or
names and in such authorized denominations as you may request in writing at
least two full business days prior to the Closing Date or Additional Closing
Date, as applicable. The Company shall permit you to examine and package such
certificates for delivery at least one full business day prior to any such
closing with respect thereto.
7. If for any reason one or more Underwriters shall fail or refuse (otherwise
than for a reason sufficient to justify the termination of this Agreement under
the provisions of Section 10 hereof) to purchase and pay for the number of Firm
Shares agreed to be purchased by such Underwriter, the Company shall immediately
give notice thereof to the Representative, and the non-defaulting Underwriters
shall have the right within 24 hours after the receipt by the Representative of
such notice, to purchase or procure one or more other Underwriters to purchase,
in such proportions as may be agreed upon among the Representative and such
purchasing Underwriter or Underwriters and upon the terms herein set forth, the
Firm Shares which such defaulting Underwriter or Underwriters agreed to
purchase. If the non-defaulting Underwriters fail so to make such arrangements
with respect to all such Firm Shares, the number of Firm Shares which each
non-defaulting Underwriter is otherwise obligated to purchase under the
Agreement shall be automatically increased pro rata to absorb the remaining Firm
Shares which the defaulting Underwriter or Underwriters agreed to purchase;
provided, however, that the non-defaulting Underwriters shall not be obligated
to purchase the Firm Shares which the defaulting Underwriter or Underwriters
agreed to purchase in excess of 10% of the total number of Shares which such
non-defaulting Underwriter agreed to purchase hereunder, and provided further
that the non-defaulting Underwriters shall not be obligated to purchase any Firm
Shares which the defaulting Underwriter or Underwriters agreed to purchase if
such additional purchase would cause the Underwriter to be in violation of the
net capital rule of the Commission or other applicable law. If the total number
of Firm Shares which the defaulting Underwriter or Underwriters agreed to
purchase shall not be purchased or absorbed in accordance with the two preceding
sentences, the Company shall have the right, within 24 hours next succeeding the
24-hour period above referred to, to make arrangements
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<PAGE> 15
with other underwriters or purchasers satisfactory to the Representative for the
purchase of such Firm Shares on the terms herein set forth. In any such case,
either the Representative or the Company shall have the right to postpone the
Closing for not more than seven business days after the date originally fixed as
the Closing in order that any necessary changes in the Registration Statement,
the Prospectus or any other documents or arrangements may be made. If neither
the non-defaulting Underwriters nor the Company shall make arrangements within
the 24-hour periods stated above for the purchase of all the Firm Shares which
the defaulting Underwriter or Underwriters agreed to purchase hereunder, this
Agreement shall be terminated without further act or deed and without any
liability on the part of the Company to any non-defaulting Underwriter, except
the Company shall be liable for actual expenses incurred by the Representative
as provided in Section 10 hereof, and without any liability on the part of any
non-defaulting Underwriter to the Company.
8. Nothing contained herein shall relieve any defaulting Underwriter of its
liability, if any, to the Company or to the remaining Underwriters for damages
occasioned by its default hereunder.
9. Offering. The Underwriters are to make a public offering of the Shares as
soon, on or after the effective date of the Registration Statement, as the
Representative deems it advisable so to do. The Shares are to be initially
offered to the public at the initial public offering price as provided for in
Section 3 (such price being herein called the "public offering price"). After
the initial public offering, you may from time to time increase or decrease the
price of the Shares in your sole discretion, by reason of changes in general
market conditions or otherwise.
10. Covenants of the Company. The Company covenants that it will:
a. Use its best efforts to cause the Registration Statement to become
effective as promptly as possible. If the Registration Statement has become
or becomes effective with a form of Prospectus omitting certain information
pursuant to Rule 430A of the Regulations, or filing of the Prospectus is
otherwise required under Rule 424(b), the Company will file the Prospectus,
properly completed, pursuant to Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to you of such timely
filing.
b. Notify you immediately, and confirm such notice in writing, (i) when the
Registration Statement and any post-effective amendment thereto become
effective, (ii) of the receipt of any comments from the Commission or the
"blue sky" or securities authority of any jurisdiction regarding the
Registration Statement, any post-effective amendment thereto, the
Prospectus, or any amendment or supplement thereto, and (iii) of the
receipt of any notification with respect to a Stop Order or the initiation
or threatening of any proceeding with respect to a Stop Order. The Company
will use its best efforts to prevent the issuance of any Stop Order and, if
any Stop Order is issued, to obtain the lifting thereof as promptly as
possible.
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<PAGE> 16
c. During the time when a prospectus relating to the Shares is required to
be delivered hereunder or under the Act or the Regulations, comply so far
as it is able with all requirements imposed upon it by the Act, as now
existing and as hereafter amended, and by the Regulations, as from time to
time in force, so far as necessary to permit the continuance of sales of or
dealings in the Shares and Representative's Warrant Shares in accordance
with the provisions hereof and the Prospectus. If, at any time when a
prospectus relating to the Shares or Representative's Warrant Shares is
required to be delivered hereunder or under the Act or the Regulations, any
event shall have occurred as a result of which, in the reasonable opinion
of counsel for the Company or counsel for the Representative, the
Registration Statement or the Prospectus, as then amended or supplemented,
contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, or if, in the opinion of either of such
counsel, it is necessary at any time to amend or supplement the
Registration Statement or the Prospectus to comply with the Act or the
Regulations, the Company will immediately notify you and promptly prepare
and file with the Commission an appropriate amendment or supplement (in
form and substance satisfactory to you) which will correct such statement
or omission or which will effect such compliance and will use its best
efforts to have any such amendment declared effective as soon as possible.
d. Deliver without charge to you such number of copies of each Preliminary
Prospectus as you may reasonably request and, as soon as the Registration
Statement or any amendment thereto becomes effective or a supplement is
filed, deliver without charge to you two signed copies of the Registration
Statement or such amendment thereto, as the case may be, including
exhibits, and two copies of any supplement thereto, and deliver without
charge to you such number of copies of the Prospectus, the Registration
Statement, and amendments and supplements thereto, if any, without
exhibits, as you may reasonably request for the purposes contemplated by
the Act.
e. Endeavor in good faith, in cooperation with you, at or prior to the time
the Registration Statement becomes effective, to qualify the Shares and
Representative's Warrant Shares for offering and sale under the "blue sky"
or securities laws of such jurisdictions as you may designate; provided,
however, that no such qualification shall be required in any jurisdiction
where, as a result thereof, the Company would be subject to service of
general process or to taxation as a foreign corporation doing business in
such jurisdiction to which it is not then subject. In each jurisdiction
where such qualification shall be effected, the Company will, unless you
agree in writing that such action is not at the time necessary or
advisable, file and make such statements or reports at such times as are or
may be required by the laws of such jurisdiction.
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<PAGE> 17
f. Make generally available (within the meaning of Section 11(a) of the Act
and the Regulations) to its security holders as soon as practicable, but
not later than fifteen (15) months after the date of the Prospectus, an
earnings statement (which need not be certified by independent certified
public accountants unless required by the Act or the Regulations, but which
shall satisfy the provisions of Section 11(a) of the Act and the
Regulations) covering a period of at least 12 months beginning after the
effective date of the Registration Statement.
g. For a period of 12 months after the date of the Prospectus, not, without
your prior written consent, offer, issue, sell, contract to sell, grant any
option for the sale of, or otherwise dispose of, directly or indirectly,
any shares of Common Stock (or any security or other instrument which by
its terms is convertible into, exercisable for, or exchangeable for shares
of Common Stock) except as provided in Section 3 and except for (i) the
issuance of Additional Shares or issuance of Common Stock underlying
options and warrants outstanding on the date hereof which are properly
described in the Prospectus, (ii) the issuance of the Representative's
Warrant Shares, or (iii) the grant of options pursuant to the Company's
existing stock option plan, or (iv) the issuance of capital stock in
connection with any acquisitions undertaken by the Company.
h. For a period of five years after the Effective Date of the registration
statement, furnish you, without charge, the following:
i. Within 105 days after the end of each fiscal year, three
copies of consolidated financial statements certified by independent
certified public accountants, including a balance sheet, statement of
operations, and statement of cash flows of the Company and its then
existing Subsidiaries, with supporting schedules, prepared in
accordance with generally accepted accounting principles, at the end of
such fiscal year and for the 12 months then ended;
ii. As soon as practicable after they have been sent to
stockholders of the Company or filed with the Commission, three copies
of each annual and interim financial and other report or communication
sent by the Company to its stockholders or filed with the Commission;
iii. As soon as practicable, two copies of every press release
and every material news item and article in respect of the Company or
its affairs which was released by the Company;
iv. Notice of any regular or special meeting of the Company's
Board of Directors concurrently with the sending of such notice to the
Company's directors; and
v. Such additional documents and information with respect to
the Company and its affairs and the affairs of any of its Subsidiaries
as you may from time to time reasonably request.
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<PAGE> 18
a. Designate an Audit Committee and a Compensation Committee, the members of
which shall be subject to your reasonable approval, which will generally
supervise the financial affairs of the Company and review executive
compensation, respectively.
b. Furnish to you as early as practicable prior to the Closing Date and any
Additional Closing Date, as the case may be, but not less than two full business
days prior thereto, a copy of the latest available unaudited interim
consolidated financial statements of the Company which have been read by the
Company's independent certified public accountants, as stated in their letters
to be furnished pursuant to Section 7(e).
c. File no amendment or supplement to the Registration Statement or Prospectus
at any time, whether before or after the Effective Date of the Registration
Statement, unless such filing shall comply with the Act and the Regulations and
unless you shall previously have been advised of such filing and furnished with
a copy thereof, and you and counsel for the Representative shall have approved
such filing in writing within a reasonable time of receipt thereof.
d. Comply with all periodic reporting and proxy solicitation requirements which
may from time to time be applicable to the Company as a result of the Company's
registration under the Exchange Act on a registration statement on Form 8-A .
e. Comply with all provisions of all undertakings contained in the Registration
Statement.
f. Prior to the Closing Date or any Additional Closing Date, as the case may be,
issue no press release or other communication, directly or indirectly, and hold
no press conference and grant no interviews with respect to the Company, the
financial condition, results of operations, business, properties, assets, or
liabilities of the Company, or this offering, without your prior written
consent.
g. Appoint American Securities Transfer & Trust, Incorporated as its transfer
agent.
h. On or prior to the Closing Date, sell to the Representative for a total
purchase price of $10, Representative's Warrants entitling the Representative or
its assigns to purchase 110,000 shares of Common Stock at a price equal to 120%
of the public offering price of the Shares, with the terms of the
Representative's Warrants, including exercise period, anti-dilution provisions,
exercise price, exercise provisions, transferability, and registration rights,
to be in the form filed as an exhibit to the Registration Statement.
i. Until expiration of the Representative's Warrants, keep reserved sufficient
shares of Common Stock for issuance as Representative's Warrant Shares upon full
exercise of the Representative's Warrants.
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<PAGE> 19
j. Adopt procedures for the application of the net proceeds it receives from the
sale of the Shares and apply the net proceeds from the sale of the Shares
substantially in the manner set forth in the Registration Statement, which does
not contemplate repayment of debt to officers, directors, stockholders or
affiliates of the Company, unless any deviation from such application is in
accordance with the Registration Statement and occurs only after approval by the
Board of Directors of the Company and then only after the Board of Directors has
obtained the written opinion of recognized legal counsel experienced in federal
and state securities laws as to the propriety of any such deviation.
k. Within the time period which the Prospectus is required to be delivered under
the Act, comply, at its own expense, with all requirements imposed upon it by
the Act, as now or hereafter amended, by the Rules and Regulations, as from time
to time may be enforced, and by any order of the Commission, so far as necessary
to permit the continuance of sales or dealing in the Shares.
l. At the Closing, deliver to the Representative true and correct copies of the
Articles of Incorporation of the Company and all amendments thereto, all such
copies to be certified by the Secretary of the Company; true and correct copies
of the by-laws of the Company and of the minutes of all meetings of the
directors and stockholders of the Company held prior to the Closing which in any
way relate to the subject matter of this Agreement or the Registration
Statement.
m. Use all reasonable efforts to comply or cause to be complied with the
conditions precedent to the several obligations of the Underwriters in Section 7
hereof.
n. File with the Commission all required information concerning use of proceeds
of the Public Offering in Forms 10-Q and 10-K in accordance with the provisions
of the Exchange Act and to provide a copy of such reports to the Representative
and its counsel.
o. Supply to the Representative and the Representative's counsel at the
Company's cost, two bound volumes each containing material documents relating to
the offering of the Shares within a reasonable time after the Closing, not to
exceed 90 days.
p. As soon as possible prior to the Effective Date, and as a condition of the
Underwriter's obligations hereunder, (i) if requested by the Representative,
have the Company listed on an accelerated basis, and to maintain such listing
for not less than ten years from the Closing Date, in Standard & Poor's Standard
Corporation Records; and (ii) have the Common Stock quoted on the Nasdaq
National Market as of the Effective Date, on the Closing Date, on the Additional
Closing Date and thereafter for at least ten years provided the Company is in
compliance with the Nasdaq National Market maintenance requirements.
y. Continue, for a period of at least five years following the
Effective Date of the Registration Statement, to appoint such auditors as are
reasonably acceptable to the Representative, which auditors shall (i) prepare
consolidated financial statements in accordance
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with Regulation S-X under the General Rules and Regulations of the Act and (ii)
examine (but not audit) the Company's consolidated financial statements for each
of the first three (3) fiscal quarters prior to the announcement of quarterly
financial information, the filing of the Company's 10-Q quarterly report and the
mailing of quarterly financial information to security holders.
z. Within 90 days of the Effective Date of the Registration Statement,
obtain "key man" life insurance policies in the amount of $1,000,000 each on the
lives of such key employees as may be mutually agreed upon between the Company
and the Representative, with the Company designated as the beneficiary of such
policy, and pay the annual premiums thereon for a period of not less than five
years from the Effective Date of the Registration Statement.
aa. Cause its transfer agent to furnish the Representative a duplicate
copy of the daily transfer sheets prepared by the transfer agent during the
six-month period commencing on the Effective Date of the Registration Statement
and instruct the transfer agent to timely provide, upon the request of the
Representative, duplicate copies of such transfer sheets and/or a duplicate copy
of a list of stockholders, all at the Company's expense, for a period of 4 1/2
years after such six-month period.
bb. Refrain from filing a Form S-8 registration statement for a period
of 12 months from the Effective Date of the Registration Statement without the
Representative's prior written consent. The Company will also obtain from each
holder of options to acquire Common Stock of the Company such person's written
enforceable agreement not to sell shares of Common Stock pursuant to the
exemption afforded by Rule 701 under the 1933 Act for a minimum period of 12
months from the Effective Date without the prior written consent of the
Representative.
cc. Afford the Representative the right, but not the obligation,
commencing on the Effective Date and surviving for a period of three years, to
designate an observer to attend meetings of the Board of Directors. The
designee, if any, and the Representative will receive notice of each meeting of
the Board of Directors in accordance with Colorado law, of which no less than
four meetings will be held in person or by video conference each year. Any such
designee will receive reimbursement for all reasonable costs and expenses
incurred in attending meetings of the Board of Directors, including but not
limited to, food, lodging and transportation, together with such other fee or
compensation (but excluding options or securities) as is paid by the Company to
other members of the Board of Directors. Moreover, to the extent permitted by
law, the Representative and its designee shall be indemnified for the actions of
such designee as an observer to the Board of Directors and in the event the
Company maintains a liability insurance policy affording coverage for the acts
of its officers and/or
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<PAGE> 21
directors, to the extent permitted under such policy, each of the
Representative and its designee shall be an insured under such policy.
1. Payment of Expenses. The Company hereby agrees to pay all expenses (subject
to the last sentence of this Section 6) in connection with the offering,
including but not limited to (a) the preparation, printing, filing,
distribution, and mailing of the Registration Statement and the Prospectus,
including NASD, SEC, Nasdaq filing and/or application fees, and the printing,
filing, distribution, and mailing of this Agreement, any Agreement Among
Underwriters, Selected Dealers Agreement, preliminary and final Blue Sky
Memorandums, material to be circulated to the Underwriters by you and other
incidental or related documents, including the cost of all copies thereof and of
the Preliminary Prospectuses and of the Prospectus, and any amendments or
supplements thereto, supplied to the Representative in quantities as herein
above stated, (b) the issuance, sale, transfer, and delivery of the Firm Shares,
Additional Shares, the Representative's Warrants and the Representative's
Warrant Shares, including, without limitation, any original issue, transfer or
other taxes payable thereon and the costs of preparation, printing and delivery
of certificates representing such securities, as applicable, (c) the
qualification of the Firm Shares, Additional Shares, the Representative's
Warrants and the Representative's Warrant Shares under state or foreign "blue
sky" or securities laws, which qualification shall be undertaken by counsel to
the Representative at the Company's expense, (d) the fees and disbursements of
counsel for the Company and the accountants for the Company, (e) the listing of
the Shares on the Nasdaq National Market and (f) the Representative's
non-accountable expense allowance equal to 3% of the aggregate gross proceeds
from the sale of the Shares. Prior to or immediately following the Closing Date,
the Company shall bear the costs of tombstone announcements if requested to do
so by the Representative.
2. The Company has previously remitted to the Representative the sum of $50,000,
which sum has been credited as a partial payment in advance of the
non-accountable expense allowance provided for in Section 6(f) above.
3. Conditions of Underwriters' Obligations. The Underwriters' obligation to
purchase and pay for the Firm Shares and Additional Shares, as provided herein,
shall be subject to the continuing accuracy of the representations and
warranties of the Company contained herein and in each certificate and document
contemplated under this Agreement to be delivered to you, as of the date hereof
and as of the Closing Date (or the Additional Closing Date, as the case may be),
to the performance by the Company of its obligations hereunder, and to the
following conditions:
a. The Registration Statement shall have become effective not later than
5:00 p.m., Mountain time, on the date of this Agreement or such later date
and time as shall be consented to in writing by you.
b. At the Closing Date and any Additional Closing Date, you shall have
received the favorable opinion of Smith McCullough, P.C., counsel for the
Company, dated the date of
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<PAGE> 22
delivery, addressed to you, and in form and scope satisfactory to your
counsel, to the effect that:
i. The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Colorado, with full
power and authority, and, after reasonable investigation, counsel has no
knowledge that the Company does not have all necessary consents,
authorizations, approvals, orders, certificates, and permits of and from,
and declarations and filings with, all federal, state, local, and other
governmental authorities and all courts and other tribunals, to own,
lease, license, and use its properties and assets and to conduct its
business in the manner described in the Prospectus. The Company is duly
qualified to do business and is in good standing in every jurisdiction in
which its ownership, leasing, licensing, or use of property and assets or
the conduct of its business makes such qualification necessary;
ii. Each Subsidiary is a corporation duly organized and validly
existing in good standing under the laws of the jurisdiction of its
organization, with full corporate power and authority to own, lease, and
operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendment or
supplement thereto); and all the outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly issued,
are fully paid and nonassessable, and are owned by the Company directly,
or indirectly through one of the other Subsidiaries, free and clear of
any perfected security interest, or, to the best knowledge of such
counsel after reasonable inquiry, any other security interest, lien,
adverse claim, equity or other encumbrance;
iii. The authorized capital stock of the Company as of the date of
this Agreement consisted of 45,000,000 shares of Common Stock, of which
6,018,334 shares of Common Stock are issued and outstanding, 5,536,751
shares of Common Stock are reserved for issuance upon the exercise of
outstanding options and warrants and 2,302,700 shares of Common Stock are
reserved for issuance upon the exercise of the remaining options
authorized under the Company's option plan; and 5,000,000 shares of
Preferred Stock, none of which are issued and outstanding; and there have
been no changes in the authorized and outstanding capital stock of the
Company since the date of this Agreement, except as contemplated by the
Registration Statement and the Prospectus. Each outstanding share of
capital stock is validly authorized, validly issued, fully paid, and
nonassessable, with no personal liability attaching to the ownership
thereof, has not been issued and is not owned or held in violation of any
preemptive right of stockholders. There is no commitment, plan, or
arrangement to issue, and no outstanding option, warrant, or other right
calling for the issuance of, any share of capital stock of the Company or
any security or other instrument which by its
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<PAGE> 23
terms is convertible into, exercisable for, or exchangeable for capital
stock of the Company, except as set forth above, and except as is
properly described in the Prospectus. There is outstanding no security or
other instrument which by its terms is convertible into or exchangeable
for capital stock of the Company, except as described in the Prospectus;
iv. To the knowledge of counsel, after reasonable investigation,
there is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending, threatened, or
in prospect (or any basis therefor) with respect to the Company or any of
its respective operations, businesses, properties, or assets, except as
may be properly described in the Prospectus or such as individually or in
the aggregate do not now have and will not in the future have a material
adverse effect upon the operations, business, properties, or assets of
the Company. To the knowledge of counsel, the Company is not in violation
of, or in default with respect to, any law, rule, regulation, order,
judgment, or decree, except as may be properly described in the
Prospectus or such as in the aggregate have been disclosed to the
Representative and do not now have and will not in the future have a
material adverse effect upon the operations, business, properties, or
assets of the Company; nor is the Company required to take any action in
order to avoid any such violation or default;
v. Based upon the certificates received from the Company's officers,
neither the Company nor any other party is now or is expected by the
Company to be in violation or breach of, or in default with respect to,
complying with any material provision of any contract, agreement,
instrument, lease, license, arrangement, or understanding which is
material to the Company;
vi. Neither the Company nor any Subsidiary is in violation or breach
of, or in default with respect to, any term of its Articles of
Incorporation or by-laws;
vii. The Company has all requisite power and authority to execute
and deliver and to perform thereunder this Agreement and the
Representative's Warrants. All necessary corporate proceedings of the
Company have been taken to authorize the execution and delivery and
performance thereunder by the Company of this Agreement and the
Representative's Warrants. Each of this Agreement and the
Representative's Warrants have been duly authorized, executed and
delivered by the Company, and is a legal, valid, and binding obligation
of the Company, and (subject to applicable bankruptcy, insolvency, and
other laws affecting the enforceability of creditors' rights generally)
enforceable as to the Company in accordance with its respective terms. No
consent, authorization, approval, order, license, certificate, or permit
of or from, or declaration or filing with, any federal, state, local, or
other governmental authority or any court or other tribunal is required
by the Company for the execution or delivery, or
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<PAGE> 24
performance thereunder by the Company of this Agreement or the
Representative's Warrants (except filings under the Act which have been
made prior to the Closing Date, such as have been obtained under the
Gaming Laws, and consents consisting only of consents under "blue sky" or
securities laws which are required in connection with the transactions
contemplated by this Agreement, and which counsel has been advised by
counsel to the underwriters have been obtained on or prior to the date
the Registration Statement becomes effective under the Act). No consent
of any party to any contract, agreement, instrument, lease, license,
arrangement, or understanding to which the Company is a party, or to
which any of its properties or assets are subject, is required for the
execution or delivery, or performance thereunder of this Agreement or the
Representative's Warrants; and the execution and delivery and performance
thereunder of this Agreement and the Representative's Warrants will not
violate, result in a breach of, conflict with, or (with or without the
giving of notice or the passage of time or both) entitle any party to
terminate or call a default under any such contract, agreement,
instrument, lease, license, arrangement, or understanding, or violate or
result in a breach of any term of the Articles of Incorporation or
by-laws of the Company, or violate, result in a breach of, or conflict
with any law, rule, regulation, order, judgment, or decree binding on the
Company or to which any of its operations, businesses, properties, or
assets are subject;
viii. The Shares are, and the Representative's Warrant Shares will
be upon exercise of the Representative's Warrants, validly authorized,
validly issued, fully paid, and nonassessable and are not issued in
violation of any preemptive rights of shareholders, and the Underwriters
have received good title to the Shares purchased by them from the
Company, free and clear of all liens, security interests, pledges,
charges, encumbrances, shareholders' agreements, and voting trusts. The
Representative's Warrant Shares have been duly and validly reserved for
issuance pursuant to the terms of the Representative's Warrants. The
Shares, the Representative's Warrants and the Representative's Warrant
Shares conform to all statements relating thereto contained in the
Registration Statement or the Prospectus;
ix. To the knowledge of counsel, after reasonable investigation, all
contracts, agreements, instruments, leases, and licenses that are
required to be described in the Registration Statement or the Prospectus
have been properly described therein. To the knowledge of counsel, after
reasonable investigation, all contracts, agreements, instruments, leases,
or licenses required to be filed as an exhibit to the Registration
Statement have been filed with the Commission as an exhibit to or have
been incorporated as an exhibit by reference into the Registration
Statement;
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<PAGE> 25
x. Insofar as statements in the Prospectus purport to summarize the
status of litigation or the provisions of laws, rules, regulations,
orders, judgments, decrees, contracts, agreements, instruments, leases,
or licenses (excluding, however, those matters opined to specifically by
gaming counsel), such statements have been prepared or reviewed by such
counsel and accurately reflect the status of such litigation and
provisions purported to be summarized and are correct in all material
respects;
xi. Except as provided in the Registration Statement, no person or
entity has the right to require registration of shares of Common Stock or
other securities of the Company because of the filing or effectiveness of
the Registration Statement;
xii. The Registration Statement has become effective under the Act.
No Stop Order has been issued and no proceedings for that purpose have
been instituted or threatened;
xiii. The Registration Statement and the Prospectus, and any
amendment or supplement thereto, comply as to form in all material
respects with the requirements of the Act and the Regulations;
xiv. After reasonable investigation, such counsel has no knowledge
that either the Registration Statement or the Prospectus, or any
amendment or supplement thereto, contains any untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading
(except that no opinion need be expressed as to the consolidated
financial statements and other financial data and schedules which are or
should be contained therein);
xv. After reasonable investigation, such counsel has no knowledge of
any event which has occurred since the Effective Date which should have
been set forth in an amendment or supplement to the Registration
Statement or the Prospectus that has not been set forth in such an
amendment or supplement;
xvi. The Company is not currently offering any securities for sale
except as described in the Registration Statement;
xvii. After reasonable investigation, such counsel has no knowledge
of any promoters, affiliates, parents or Subsidiaries of the Company
except as are described in the Registration Statement;
xviii. The Company and its Subsidiaries own or possess, free and
clear of all liens or encumbrances and rights thereto or therein by third
parties, the requisite licenses or other rights to use all trademarks,
copyrights, service marks, service names, trade names and licenses
necessary to conduct business (including without limitation, any such
licenses or rights described in the Registration Statement as being owned
or possessed by the Company or any Subsidiary) (all of which are
collectively referred to herein as the "Intellectual Property"); there is
no actual or, to the knowledge of
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<PAGE> 26
counsel, pending, or threatened claim, proceeding or action by any person
pertaining to or which challenges the exclusive rights of the Company
with respect to any of the Company's Intellectual Property; based on a
review of all the Company's products, proposed products and Intellectual
Property, to the knowledge of counsel, such products, proposed products
or Intellectual Property do not and will not infringe on any trademarks,
copyrights, service marks, service names, trade names or valid patents or
patents pending held by third parties known to the Company and such
counsel;
xix. The Company is not a party to any agreement giving rise to any
obligation by the Company or any Subsidiary to pay any third-party
royalties or fees of any kind whatsoever with respect to any technology
developed, employed, used or licensed by the Company or any Subsidiary,
other than is disclosed in the Prospectus;
xx. The Shares are eligible for quotation on the Nasdaq National
Market; and
xxi. All issued and outstanding shares of Common Stock and all other
securities issued and sold or exchanged by the Company or its
Subsidiaries have been issued and sold or exchanged in compliance with
all applicable state and federal securities laws and regulations. Such
opinion shall be governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991) and shall be subject to the qualifications,
exceptions, definitions, limitations on coverage and other limitations
set forth therein and in such opinion. Qualifications in such opinion as
to knowledge or the absence of knowledge shall be based upon and limited
to the "Actual Knowledge" (as defined in the Accord) of the "Primary
Lawyer Group" (as identified in such opinion). In rendering such opinion,
such legal counsel shall be entitled to rely upon Public Authority
Documents and upon information provided by client officials in written
Certificates provided that copies of such Public Authority Documents and
Certificates are attached as exhibits to the written opinion of legal
counsel. The term "Public Authority Documents" shall have the meaning
ascribed to it in the Legal Opinion Accord of the ABA Section of Business
Law (1991).
c. At the Closing Date and any Additional Closing Date, you shall have
received a signed opinion of gaming counsel for the Company, dated the date of
delivery, addressed to you, and in form and scope satisfactory to your counsel,
to the effect that:
i. The Company has the requisite corporate power and authority to
execute, deliver and perform all of its obligations pursuant to this
Agreement and to authorize, issue and sell the Shares as contemplated by
this Agreement; this Agreement has been duly authorized, executed and
delivered by the Company;
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<PAGE> 27
ii. The Shares have been duly authorized, executed and delivered by
the Company;
iii. The Company and each of the Subsidiaries is duly incorporated
and is validly existing as a corporation under the laws of their
respective states of incorporation and has the requisite corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and Prospectus;
iv. The issuance and sale of the Shares and the consummation of the
transactions contemplated hereby will not conflict with or result in a
breach or violation of or constitute a default or cause an acceleration
of any obligation under, or result in the imposition or creation of (or
the obligation to create or impose) any lien with respect to (A) any of
the respective charters and by-laws of any of the Company or the
Subsidiaries, (B) any applicable statute, rule or regulation, or (C) any
order of any court or governmental agency, body or official, including
the Gaming Authorities, having jurisdiction over the Company or any of
the Subsidiaries or any of their properties except, in the case of clause
(B) and (C), for such conflicts, breaches, violations or defaults that
could not reasonably be expected to have, singly or in the aggregate, a
material adverse effect on the Company;
v. No authorization, approval, consent or order of the Gaming
Authorities or any other governmental body, agency or official is
necessary in connection with the issuance of the Shares and the due and
valid execution, delivery and performance by the Company or any of the
Subsidiaries, as the case may be, of this Agreement and any of the
transactions contemplated hereby to be entered into prior to or
contemporaneously with such agreements, except (a) as disclosed in the
Registration Statement, (b) such authorizations, approvals, consents or
licenses of the Gaming Authorities that have been obtained prior to the
date of such opinion, and (c) the transactions described therein that
have been approved by the Gaming Authorities to the extent required by
the Gaming Laws. Such counsel has received no notice that such approvals
have been revoked, modified or rescinded as of the date of such opinion;
vi. Except as disclosed in the Registration Statement, (a) to the
best knowledge of such counsel, the Company and each of its Subsidiaries
has made all declarations and filings with the Gaming Authorities
necessary to use its properties and assets and to conduct its business
pursuant to Gaming Laws, as of the date of such opinion, (b) no facts
have come to the attention of such counsel that would lead such counsel
to believe that all authorizations of and from the Gaming Authorities are
not valid and in full force and effect as of the date of such opinion,
(c) no facts have come to the attention of such counsel that would lead
such counsel to believe that the
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<PAGE> 28
Company and each of its Subsidiaries is not in compliance in all material
respects with the terms and conditions of all authorizations of and from
the Gaming Authorities and with the Gaming Laws, as of the date of such
opinion, and (d) as of the date of such opinion, such counsel has
received no notice of any proceedings relating to the revocation or
modification of any authority granted by any of the Gaming Authorities to
the Company and its Subsidiaries, and such counsel is aware of no
restrictions imposed by any of the Gaming Authorities which would have a
material adverse effect on the properties, plans, results of operations,
management, condition (financial or otherwise) or business affairs of the
Company or its Subsidiaries, in the aggregate; no facts have come to the
attention of such counsel that would lead such counsel to believe that
any of the Gaming Authorities is considering modifying, limiting,
conditioning, suspending, revoking or not renewing the licenses, permits,
certificates, consents, orders, approvals and other authorizations from
such Gaming Authority (collectively, the "Gaming Licenses") of the
Company or any of its Subsidiaries, except where such modification,
revocation, suspension, limitation or condition would not have a material
adverse effect on the properties, plans, results of operations,
management, condition (financial or otherwise) or business affairs of the
Company or its Subsidiaries, in the aggregate; such counsel is aware of
no notice given to the Company or any of its Subsidiaries that any of the
Gaming Authorities are investigating the Company or any of its
Subsidiaries (other than normal overseeing reviews incident to the gaming
activities of the Company and its Subsidiaries); and such counsel has
received no notice that the Company or any of its Subsidiaries has any
reason to believe there is an existing basis for any of the Gaming
Authorities to deny the renewal of the Gaming Licenses held by the
Company or any of its Subsidiaries;
vii. Each of the persons listed under the caption "Management" in
the Prospectus has been or will be qualified or licensed by the Gaming
Laws as required by the Gaming Laws; and
viii. (a) The statements in the Prospectus under the captions "Risk
Factors -- New or revised regulations could adversely affect Leisure
Time's business," "Risk Factors -- Changes in laws pertaining to gaming
route operations could affect Leisure Time's business" and "Business --
Regulation" fairly present the information with respect to such Gaming
Laws and proceedings thereunder, and (b) no facts have come to the
attention of such counsel that would lead such counsel to believe that
the statements listed in clause (a) of this paragraph (viii) contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make such statements, in
light of the circumstances under which they are made, not misleading, or
that the statements listed in clause (a) of this paragraph (viii), as
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contained in the Prospectus at the time of filing thereof or on the date
of such counsel's opinion, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make such statements, in light of the circumstances
under which they were made, not misleading.
ix. To the best of such counsel's knowledge and information, after
due investigation, nothing has come to such counsel's attention that
leads them to believe that the licensing or other applications filed by
the Company or its Subsidiaries with the States of Mississippi and
Montana and with the Province of Ontario, Canada will not eventuate in an
issued license or permit or will not otherwise afford the Company the
right to conduct operations or business within such jurisdictions.
x. To the best of such counsel's knowledge and information, after
due inquiry of the officers of the Company, such counsel has no reason to
believe that the Company has conducted operations or business in any
jurisdiction within which, in order to conduct such operations or
business, the Company would have been required to be licensed or to
otherwise have submitted applications or documents under the gaming laws
of any such jurisdiction except as otherwise permitted under the
respective gaming laws of any such jurisdiction.
xi. To the best of such counsel's knowledge and information, after
due investigation, nothing has come to such counsel's attention that
leads them to believe that the Company's operation of vessels offering
gaming activities has not been in accordance with applicable United
States and international laws, rules and regulations.
xii. To the best of such counsel's knowledge and information, after
due investigation, the Company and each of its Subsidiaries is in
compliance in all material respects with the Gaming Laws of the State of
South Carolina applicable to the conduct of gaming route operations, and
each of the Company and its Subsidiaries is in material compliance with
revenue sharing agreements with third parties.
xiii. To the best of such counsel's knowledge and information, after
due investigation, each of the Company and its Subsidiaries is in
compliance in all material respects with the Gaming Laws applicable to
the manufacture and sale of video gaming machines in the State of
Georgia.
d. On or prior to the Closing Date and any Additional Closing Date, as
the case may be, you shall have been furnished such information, documents,
certificates, and opinions as you may reasonably require for the purpose of
enabling you to review the matters referred to in Section 7(b), and in order to
evidence the accuracy, completeness, or satisfaction of any of the
representations, warranties, covenants, agreements, or conditions herein
contained, or as you may reasonably request.
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<PAGE> 30
e. At the Closing Date and any Additional Closing Date, as the case may
be, you shall have received a certificate of the chief executive officer
and of the chief financial officer of the Company, dated the Closing Date
or such Additional Closing Date, as the case may be, to the effect that the
conditions set forth in Section 7(a) have been satisfied, that as of the
date of this Agreement and as of the Closing Date or such Additional
Closing Date, as the case may be, the representations and warranties of the
Company contained herein were and are accurate, and that as of the Closing
Date or such Additional Closing Date, as the case may be, the obligations
to be performed by the Company hereunder on or prior thereto have been
fully performed.
f. At the time this Agreement is executed and at the Closing Date and
any Additional Closing Date, as the case may be, you shall have received
letters from Ehrhardt Keefe Steiner & Hottman PC, Certified Public
Accountants, addressed to you and dated the date of delivery but covering a
period within three business days of such date, in form and substance
satisfactory to you.
g. All proceedings taken in connection with the issuance, sale,
transfer, and delivery of the Firm Shares and the Additional Shares shall
be satisfactory in form and substance to you and to counsel for the
Representative, and you shall have received a favorable opinion from
counsel to the Company, dated as of the Closing Date or the Additional
Closing Date, as the case may be, with respect to such of the matters set
forth under Section 7(b) and with respect to such other related matters as
you may reasonably request.
h. The NASD, upon review of the terms of the public offering of the
Firm Shares and the Additional Shares shall not have objected to your
participation in such offering.
i. The Company shall have received notice that the Common Stock will be
quoted on the Nasdaq National Market as of the Effective Date.
Any certificate or other document signed by any officer of the Company and
delivered to you or to counsel for the Representative shall be deemed a
representation and warranty by such officer individually and by the Company
hereunder to the Representative as to the statements made therein. If any
condition to your obligations hereunder to be fulfilled prior to or at the
Closing Date or any Additional Closing Date, as the case may be, is not so
fulfilled, you may terminate this Agreement or, if you so elect, in writing
waive any such conditions which have not been fulfilled or extend the time for
their fulfillment.
1. Indemnification and Contribution.
a. Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Underwriters, the Representative, and each
of their officers, directors, partners, employees, agents, and counsel, and
each person, if any, who controls the Representative or any one of the
Underwriters within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act, against any and all loss, liability, claim, damage,
and
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<PAGE> 31
expense whatsoever (which shall include, for all purposes of this Section
8, but not be limited to, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and
all amounts paid in settlement of any claim or litigation) as and when
incurred arising out of, based upon, or in connection with (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in
any Preliminary Prospectus, the Registration Statement, or the Prospectus
(as from time to time amended and supplemented), or any amendment or
supplement thereto, or (B) in any application or other document or
communication (in this Section 8 collectively called an "application") in
any jurisdiction in order to qualify the Common Stock under the "blue sky"
or securities laws thereof or filed with the Commission or any securities
exchange; or any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, or (ii) any breach of any representation, warranty,
covenant, or agreement of the Company contained in this Agreement. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this
Agreement; however, the Company shall have no liability under this Section
8 if such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company as stated in Section 8(b)
with respect to the Underwriters by or on behalf of the Underwriters
expressly for inclusion in any Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto, or in
any application, as the case may be.
If any action is brought against the Underwriters, the Representative
or any of their officers, directors, partners, employees, agents, or
counsel, or any controlling persons of an Underwriter or the Representative
(an "indemnified party") in respect of which indemnity may be sought
against the Company pursuant to the foregoing paragraph, such indemnified
party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve
the Company from any liability it may have other than pursuant to this
Section 8(a)) and the Company shall promptly assume the defense of such
action, including the employment of counsel (satisfactory to such
indemnified party or parties) and payment of expenses. Such indemnified
party or parties shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless the employment of such
counsel shall have been authorized in writing by the Company in connection
with the defense of such action or the Company shall not have promptly
employed counsel satisfactory to such indemnified party or parties to have
charge of the defense of such action or such indemnified party or parties
shall have reasonably concluded that there may be one or more legal
defenses available to it or them or to other indemnified parties which are
different from or additional to those available to the Company, in any of
which events such fees and expenses shall be borne by the Company.
31
<PAGE> 32
Anything in this paragraph to the contrary notwithstanding, the Company
shall not be liable for any settlement of any such claim or action
effected without its written consent. The Company agrees promptly to
notify the Underwriters and the Representative of the commencement of
any litigation or proceedings against the Company or against any of its
officers or directors in connection with the sale of the Shares, any
Preliminary Prospectus, the Registration Statement, or the Prospectus,
or any amendment or supplement thereto, or any application.
a. The Underwriters agree to indemnify and hold harmless the Company,
the Company's counsel, each director of the Company, each officer of
the Company who shall have signed the Registration Statement, each
other person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, to the same
extent as the foregoing indemnity from the Company to the Underwriters
in Section 8(a), but only with respect to statements or omissions, if
any, made in any Preliminary Prospectus, the Registration Statement, or
the Prospectus (as from time to time amended and supplemented), or any
amendment or supplement thereto, or in any application, in reliance
upon and in conformity with written information furnished to the
Company as stated in this Section 8(b) with respect to the Underwriters
by or on behalf of the Underwriters expressly for inclusion in any
Preliminary Prospectus, the Registration Statement, or the Prospectus,
or any amendment or supplement thereto, or in any application, as the
case may be; provided, however, that the obligation of the Underwriters
to provide indemnity under the provisions of this Section 8(b) shall be
limited to the amount which represents the product of the number of
Firm Shares and Additional Shares sold hereunder and the initial public
offering price per Share set forth on the cover page of the Prospectus.
For all purposes of this Agreement, the amounts of the selling
concession and reallowance set forth in the Prospectus, the information
under "Underwriting" and the identification of counsel to the
Representative under "Legal Matters" constitute the only information
furnished in writing by or on behalf of the Underwriters expressly for
inclusion in any Preliminary Prospectus, the Registration Statement, or
the Prospectus (as from time to time amended or supplemented), or any
amendment or supplement thereto, or in any application, as the case may
be. If any action shall be brought against the Company or any other
person so indemnified based on any Preliminary Prospectus, the
Registration Statement, or the Prospectus, or any amendment or
supplement thereto, or any application, and in respect of which
indemnity may be sought against the Underwriters pursuant to this
Section 8(b), the Underwriters shall have the rights and duties given
to the Company, and the Company and each other person so indemnified
shall have the rights and duties given to the indemnified parties, by
the provisions of Section 8(a).
b. In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this
Section 8 is for any reason held to be unavailable to the Underwriters
or the Company, then the Company shall contribute to the damages paid
by
32
<PAGE> 33
the several Underwriters, and the several Underwriters shall contribute
to the damages paid by the Company; provided, however, that no person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. In determining the
amount of contribution to which the respective parties are entitled,
there shall be considered the relative benefits received by each party
from the sale of the Firm Shares and Additional Shares (taking into
account the portion of the proceeds of the offering realized by each),
the parties' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission, and any
other equitable considerations appropriate in the circumstances. The
Company and the Underwriters agree that it would not be equitable if
the amount of such contribution were determined by pro rata or per
capita allocation (even if the Underwriters were treated as one entity
for such purpose). No Underwriter or person controlling such
Underwriter shall be obligated to make contribution hereunder which in
the aggregate exceeds the total public offering price of the Firm
Shares and Additional Shares purchased by such Underwriter under this
Agreement, less the aggregate amount of any damages which such
Underwriter and its controlling persons have otherwise been required to
pay in respect of the same or any substantially similar claim. The
Underwriters' obligations to contribute hereunder are several in
proportion to their respective underwriting obligations and not joint.
For purposes of this Section, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act shall have the
same rights to contribution as such Underwriter, and each director of
the Company, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company within the
meaning of Section 15 of the Act, shall have the same rights to
contribution as the Company. Anything in this Section 8(c) to the
contrary notwithstanding, no party shall be liable for contribution
with respect to the settlement of any claim or action effected without
its written consent. This Section 8(c) is intended to supersede any
right to contribution under the Act, the Exchange Act, or otherwise.
2. Representations and Agreements to Survive Delivery. All representations,
warranties, covenants, and agreements contained in this Agreement shall be
deemed to be representations, warranties, covenants, and agreements at the
Closing Date and any Additional Closing Date, and such representations,
warranties, covenants, and agreements of the Underwriters and the Company,
including the indemnity and contribution agreements contained in Section 8,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Representative, the Underwriters or
any indemnified person, or by or on behalf of the Company or any person or
entity which is entitled to be indemnified under Section 8(b), and shall survive
termination of this Agreement or the delivery of the Firm Shares and Additional
Shares to the Underwriters for a period equal to the statute of limitations for
claims related hereto, but not to exceed an aggregate of five years from the
33
<PAGE> 34
date hereof. In addition, the provisions of Sections 5(a), 6, 8, 9, 10, and 12
shall survive termination of this Agreement, whether such termination occurs
before or after the Closing Date or any Additional Closing Date.
3.
4.
5. Effective Date of This Agreement and Termination Thereof.
a. This Agreement shall be executed within 24 hours of the Effective
Date of the Registration Statement and shall become effective on the
Effective Date or at the time of the initial public offering of the
Shares, whichever is earlier. The time of the initial public offering
shall mean the time, after the Registration Statement becomes
effective, of the release by the Representative for publication of the
first newspaper advertisement which is subsequently published relating
to the Shares or the time, after the Registration Statement becomes
effective, when the Shares are first released by the Representative for
offering by dealers by letter or telegram, whichever shall first occur.
The Representative or the Company may prevent this Agreement from
becoming effective without liability of any party to any other party,
except as noted below in this Section 10, by giving the notice
indicated in Section 10(c) before the time this Agreement becomes
effective.
b. The Representative shall have the right to terminate this Agreement
at any time prior to the Closing Date or any Additional Closing Date,
as the case may be, by giving notice to the Company if there shall have
been a general suspension of, or a general limitation on prices for,
trading in securities on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market; or if there shall
have been an outbreak of major hostilities or other national or
international calamity; or if a banking moratorium has been declared by
a state or federal authority; or if a moratorium in foreign exchange
trading by major international banks or persons has been declared; or
if there shall have been a material interruption in the mail service or
other means of communication within the United States; or if the
Company shall have sustained a material or substantial loss by fire,
flood, accident, hurricane, earthquake, theft, sabotage, or other
calamity or malicious act which, whether or not such loss shall have
been insured, will, in the Representative's opinion, make it
inadvisable to proceed with the offering, sale, or delivery of the Firm
Shares and Additional Shares, as the case may be; or if there shall
have been such material and adverse change in the market for securities
in general so as to make it inadvisable to proceed with the offering,
sale, and delivery of the Shares, as the case may be, on the terms
contemplated by the Prospectus due to the impaired investment quality
of the Shares; or if the Dow Jones Industrial Average shall have fallen
by 15% or more from its closing price on the day immediately preceding
the date that the Registration Statement is declared effective by the
Commission.
34
<PAGE> 35
c. If the Representative elects to prevent this Agreement from becoming
effective as provided in this Section 10, or to terminate this
Agreement, it shall notify the Company promptly by telephone, telex, or
telegram, confirmed by letter. If, as so provided, the Company elects
to prevent this Agreement from becoming effective, the Company shall
notify the Representative promptly by telephone, telex, or telegram,
confirmed by letter.
d. Anything in this Agreement to the contrary notwithstanding other
than Section 10(e), if this Agreement shall not become effective by
reason of an election pursuant to this Section 10 or if this Agreement
shall terminate or shall otherwise not be carried out prior to January
29, 2000 because (i) of any reason solely within the control of the
Company or its stockholders and not due to the breach of any
representation, warranty or covenant or bad faith of the
Representative, (ii) the Company unilaterally withdraws the proposed
Public Offering from the Representative in favor of another
underwriter, (iii) the Company does not permit the Registration
Statement to become effective, (iv) of any material discrepancy in any
representation by the Company and/or its officers, directors,
stockholders, agents, advisers or representatives, made in writing,
including but not limited to the Registration Statement, to the
Representative, (v) the Company is, directly and/or indirectly,
negotiating with other persons or entities of whatsoever nature
relating to a possible Public Offering of its securities, or (vi) of
any failure on the part of the Company to perform any covenant or
agreement or satisfy any condition of this Agreement by it to be
performed or satisfied, then, in any of such events, the Company shall
be obligated to reimburse the Representative for its out-of-pocket
expenses on an accountable basis. Should the Representative be required
to account for "out-of-pocket" expenses, any expense incurred by the
Representative shall be deemed to be reasonable and unobjectionable
upon a reasonable showing by the Representative that such expenses were
incurred, directly or indirectly, in connection with the proposed
transaction and/or relationship of the parties hereto, as described
herein. In no event will the Representative be entitled to
reimbursement of accountable expenses exceeding $100,000, inclusive of
the $50,000 advanced against the non-accountable expense allowance. The
Representative will return to the Company any portion of the $50,000
payment previously received that is not used in the payment of
accountable expenses if the Public Offering is not completed.
e. Notwithstanding any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out,
the provisions of Sections 5(a), 6, 8, 9, and 10 shall not be in any
way affected by such election or termination or failure to carry out
the terms of this Agreement or any part hereof.
6. Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the
Representative, shall be mailed, delivered, or sent by facsimile transmission
and confirmed by original letter, to Schneider Securities, Inc., 1120 Lincoln
Street, Suite 900, Denver, Colorado 80203, Attention: Keith Koch, with a copy to
Robert W. Walter,
35
<PAGE> 36
Esq., Berliner Zisser Walter & Gallegos, P.C., 1700 Lincoln Street, Suite 4700,
Denver, Colorado 80203; or if sent to the Company shall be mailed, delivered, or
telexed or telegraphed and confirmed by letter, to Leisure Time Casinos &
Resorts, Inc., 4258 Communications Drive, Norcross, Georgia, 30093, Attention:
Alan N. Johnson, President, with a copy to Thomas S. Smith, Esq. , Smith
McCullough, P.C., 4643 South Ulster Street, Suite 900, Denver, Colorado 80237.
All notices hereunder shall be effective upon receipt by the party to which it
is addressed.
7. Parties. This Agreement shall inure solely to the benefit of, and shall be
binding upon, the Underwriters, the Company, and the persons and entities
referred to in Section 8 who are entitled to indemnification or contribution,
and their respective successors, legal representatives, and assigns (which shall
not include any buyer, as such, of the Firm Shares and Additional Shares) and no
other person shall have or be construed to have any legal or equitable right,
remedy, or claim under or in respect of or by virtue of this Agreement or any
provision herein contained.
8. Construction. This Agreement shall be construed in accordance with the laws
of the State of Colorado, without giving effect to conflict of laws. Time is of
the essence in this Agreement. The parties acknowledge that this Agreement was
initially prepared by the Representative, and that all parties have read and
negotiated the language used in this Agreement. The parties agree that, because
all parties participated in negotiating and drafting this Agreement, no rule of
construction shall apply to this Agreement which construes ambiguous language in
favor of or against any party by reason of that party's role in drafting this
Agreement.
If the foregoing correctly sets forth the understanding between us,
please so indicate in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement between us.
Very truly yours,
LEISURE TIME CASINOS & RESORTS, INC.
By:
--------------------------------------------
Alan N. Johnson, President
By:
--------------------------------------------
Eldon W. Rance, Executive Vice President
Accepted as of the date first above written.
Denver, Colorado
SCHNEIDER SECURITIES, INC.
for itself and any other Underwriters:
By:
----------------------------------------------
Thomas Schneider, Chief Executive Officer
36
<PAGE> 37
LEISURE TIME CASINOS & RESORTS, INC.
(a Colorado corporation)
SCHEDULE 1
This Schedule sets forth the name of each Underwriter referred to in
the Underwriting Agreement and the number of Shares to be sold by the Company.
<TABLE>
<CAPTION>
Number of
Name Shares
-------------------------- ---------
<S> <C>
Schneider Securities, Inc.
Total 1,100,000
=========
</TABLE>
37
<PAGE> 1
EXHIBIT 1.1
SELECTED DEALERS AGREEMENT
PUBLIC OFFERING OF
1,100,000 SHARES
OFFERING PRICE: $ PER SHARE
LEISURE TIME CASINOS & RESORTS, INC..
, 1999
Schneider Securities, Inc., on behalf of itself and other underwriters
(the "Underwriters") for which it is the representative (the "Representative"),
has severally agreed with Leisure Time Casinos & Resorts, Inc., a Colorado
corporation (the "Company"), to purchase 1,100,000 Shares (the "Firm Shares")
and the Representative has been granted the right to purchase up to an
additional 165,000 Shares (the "Additional Shares") at its option for the sole
purpose of covering over-allotments in the sale of the Firm Shares (the Firm
Shares and Additional Shares being collectively referred to as the "Shares" or
a "Security"). The Underwriters are offering the Shares to the public at an
offering price of $ per Share. Certain other capitalized terms used herein are
defined in the Underwriting Agreement and are used herein as therein defined.
The Representative is offering the Shares to certain selected dealers
(the "Selected Dealers"), when, as and if accepted by the Representative and
subject to withdrawal, cancellation or modification of the offer without notice
and further subject to the terms of (i) the Company's current Prospectus, (ii)
the Underwriting Agreement, (iii) this Agreement, and (iv) the Representative's
instructions which may be forwarded to the Selected Dealer from time to time. A
copy of the Underwriting Agreement will be delivered to you forthwith for
inspection or copying or both, upon your request therefor. This invitation is
made by the Representative only if the Shares may be offered lawfully to
dealers in your state.
The further terms and conditions of this invitation are as follows:
<PAGE> 2
1. Acceptance of Orders. Orders received by the Representative from
the Selected Dealer will be accepted only at the price, in the amounts and on
the terms which are set forth in the Company's current Prospectus, subject to
allotment in the Representative's uncontrolled discretion. The Representative
reserves the right to reject any orders, in whole or in part.
2. Selling Concession. As a Selected Dealer, you will be allowed on
all Shares purchased by you, which the Underwriters have not repurchased or
contracted to repurchase prior to termination of this Agreement at or below the
public offering price, a concession of ___% of the full 8% Underwriting
discount, i.e., $___ per Security as shown in the Company's current Prospectus.
No selling concession will be allowed to any domestic broker-dealer who is not
a member of the National Association of Securities Dealers, Inc. (the
"Association"), or to any foreign broker-dealer eligible for membership in the
Association who is not a member of the Association. Payment of such selling
concession to you will be made only as provided in Section 4 hereof. After the
Shares are released for sale to the public, the Representative is authorized
to, and may, change the public offering price and the selling concession.
3. Reoffer of Shares. Shares purchased by you are to be bona fide
reoffered by you in conformity with this Agreement and the terms of offering
set forth in the Prospectus. You agree that you will not bid for, purchase,
attempt to induce others to purchase, or sell, directly or indirectly, any
Shares except as contemplated by this Agreement and except as a broker pursuant
to unsolicited orders. You confirm that you have complied and agree that you
will at all times comply with the provisions of Regulation M of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") applicable to this
offering. In respect of Shares sold by you and thereafter purchased by the
Representative at or below the public offering price prior to the termination
of this Agreement as described hereinafter (or such longer period as may be
necessary to cover any short position with respect to the offering), you agree
at the Representative's option either to repurchase the Shares at a price equal
to the cost thereof to the Representative, including commissions and transfer
taxes on redelivery, or to repay the Representative such part of your Selected
Dealers' concessions on such Shares as the Representative designates.
2
<PAGE> 3
4. Payment for Shares. Payment for the Shares purchased by you is to
be made at the net Selected Dealers' price of $_____ per Security, at the
offices of Schneider Securities, Inc., Suite 900, 1120 Lincoln Street, Denver,
Colorado 80203, Attention: Syndicate Department, at such time and on such date
as the Representative may designate, by certified or official bank check,
payable in clearing house funds to the order of the Representative, against
delivery of certificates for the Shares so purchased. If such payment is not
made at such time and on such date, you agree to pay the Representative
interest on such funds at the current interest rate. The Representative may in
its discretion deliver the Shares purchased by you through the facilities of
the Depository Trust Company or, if you are not a member, through your ordinary
correspondent who is a member unless you promptly give the Representative
written instructions otherwise.
5. Offering Representations. The Representative has been informed that
a Registration Statement in respect of the Shares is expected to become
effective under the Securities Act of 1933, as amended (the "Act"). You are not
authorized to give any information or to make any representations other than
those contained in the Prospectus or to act as agent for the Company or for the
undersigned when offering the Shares to the public or otherwise.
6. Blue Sky. Neither the Representative nor the Underwriters assume
any responsibility or obligations as to your right to sell the Shares in any
jurisdiction, notwithstanding any information furnished in that connection. The
Selected Dealer shall report in writing to the Representative the number of
Shares which have been sold by it in each state and the number of transactions
made in each such state. This state report shall be submitted to the
Representative as soon as possible after completion of billing, but in any
event not more than three days after the closing.
7. Dealer Undertakings. By accepting this Agreement, the Selected
Dealer in offering and selling the Shares in the Public Offering (i)
acknowledges its understanding of (a) the Conduct Rules (the "Rules") of the
Association and the interpretations of such Rules promulgated by the Board of
Governors of the Association (the "Interpretations") including, but not limited
to the Rule and Interpretation with respect to "Free-Riding and Withholding"
defined therein, (b) Rule 174 of
3
<PAGE> 4
the rules and regulations promulgated under the Act, (c) Regulation M
promulgated under the Exchange Act, (d) Release No. 3907 under the Act, (e)
Release No. 4150 under the Act, and (f) Sections 2730, 2740, 2420 and 2750 of
the Rules and Interpretations thereunder, and (ii) represents, warrants,
covenants and agrees that it shall comply with all applicable requirements of
the Act and the Exchange Act in addition to the specific provisions cited in
subparagraph (i) above and that it shall not violate, directly or indirectly,
any provision of applicable law in connection with its participation in the
Public Offering of the Shares.
8. Conditions of Public Offering. All sales shall be subject to
delivery by the Company of certificates evidencing the Shares against payment
therefor.
9. Failure of Order. If an order is rejected or if a payment is
received which proves insufficient or worthless, any compensation paid to the
Selected Dealer shall be returned by (i) restoration by the Representative to
the Selected Dealer of the latter's remittance or (ii) a charge against the
account of the Selected Dealer with the Representative, as the latter may elect
without notice being given of such election.
10. Additional Representations, Covenants and Warranties of Selected
Dealer. By accepting this Agreement, the Selected Dealer represents that it is
registered as a broker-dealer under the Exchange Act; is qualified to act as a
dealer in the states or the jurisdictions in which it shall offer the Shares;
is a member in good standing of the Association; and shall maintain such
registrations, qualifications and membership in full force and effect and in
good standing throughout the term of this Agreement. If the Selected Dealer is
not a member of the Association, it represents that it is a foreign dealer not
registered under the Exchange Act and agrees to make no sales within the United
States, its territories or its possessions or to persons who are citizens
thereof or residents therein, and in making any sales to comply with the
Association's Rules and Interpretations with respect to Free-Riding and
Withholding. Further, the Selected Dealer agrees to comply with all applicable
federal laws including, but not limited to, the Act and Exchange Act and the
rules and regulations of the Commission thereunder; the laws of the states or
other jurisdictions in which Shares may be offered or sold by it; and the
Constitution, Bylaws, and rules of the
4
<PAGE> 5
Association. Further, the Selected Dealer agrees that it will not offer or sell
the Shares in any state or jurisdiction except those in which the Shares have
been qualified or qualification is not required. The Selected Dealer
acknowledges its understanding that it shall not be entitled to any
compensation hereunder for any period during which it has been suspended or
expelled from membership in the Association.
11. Employees and other Agents of the Selected Dealer. By accepting
this Agreement, the Selected Dealer assumes full responsibility for thorough
and proper training of its employees and other agents and representatives
concerning the selling methods to be used in connection with the Public
Offering of the Shares, giving special emphasis to the principles of full and
fair disclosure to prospective investors and the prohibitions against
"Free-Riding and Withholding" as set forth in Section 2110 of the Rules and the
Interpretations thereunder.
12. Indemnification by the Company. The Company has agreed in Section
8 of the Underwriting Agreement to indemnify and hold harmless the
Underwriters, the Representative and each person if any, who controls the
Representative or any of the Underwriters within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act against any and all loss,
liability, claim, damage, and expense whatsoever (which shall include, for all
purposes of Section 8 of the Underwriting Agreement, but not be limited to,
attorneys' fees and any and all expense whatsoever incurred in investigating,
preparing, or defending against any litigation, commenced or threatened, or any
claim whatsoever and any and all amounts paid in settlement of any claim or
litigation) as and when incurred arising out of, based upon, or in connection
with (i) any untrue statement or alleged untrue statement of a material fact
contained (A) in any Preliminary Prospectus, the Registration Statement, or the
Prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto, or (B) in any application or other document or
communication (in the Underwriting Agreement collectively called an
"application") in any jurisdiction in order to qualify the Shares under the
"blue sky" or securities laws thereof or filed with the Commission or any
securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) any breach of any
5
<PAGE> 6
representation, warranty, covenant, or agreement of the Company contained in
the Underwriting Agreement. The Representative has agreed to give the Company
an opportunity and the right to participate in the defense or preparation of
the defense of any action brought against the Representative, any Underwriter
or any controlling person thereof to enforce any such loss, claim, demand,
liability or expense. The agreement of the Company under this indemnity is
conditioned upon notice of any such action having been promptly given by the
indemnified party to the Company. Failure to notify the Company as provided in
the Underwriting Agreement shall not relieve the Company of its liability which
it may have to the Representative, the Underwriters, or any controlling person
thereof other than pursuant to Section 8(a) of the Underwriting Agreement. This
agreement is subject in all respects, especially insofar as the foregoing
description of the indemnification provisions set forth in the Underwriting
Agreement is concerned, to the terms and provisions of the Underwriting
Agreement, a copy of which will be made available for inspection or copying or
both to the Selected Dealer upon written request to the Representative
therefor. The Selected Dealer acknowledges and confirms that, by signing a
counterpart of this Agreement, it shall be deemed an agent of the Underwriters
or a "Representative" for all purposes of Section 8 of the Underwriting
Agreement, as expressly set forth therein.
13. Indemnification by the Selected Dealer. The Selected Dealer shall
indemnify and hold harmless the Company, each director of the Company, each
officer of the Company who shall have signed the Registration Statement, each
other person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, to the same extent as the
indemnity from the Company to the Underwriters in Section 8(a) of the
Underwriting Agreement, but only with respect to statements or omissions, if
any, made in any Preliminary Prospectus, the Registration Statement, or the
Prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto, or in any application, in reliance upon and in conformity
with information furnished to the Representative or the Company with respect to
the Selected Dealer by or on behalf of the Selected Dealer expressly for
inclusion in any Preliminary Prospectus, the Registration Statement, or the
Prospectus, or any amendment or
6
<PAGE> 7
supplement thereto, or in any application, as the case may be, or are based
upon alleged misrepresentations or omissions to state material facts in
connection with statements made by the Selected Dealer or the Selected Dealer's
employees or other agents to the Company or the Representative orally or by any
other means; provided, however, that the obligation of the Selected Dealer to
provide indemnity hereunder shall be limited to the amount which represents the
product of the number of Firm Shares and Additional Shares sold and the initial
public offering price per Security set forth on the cover page of the
Prospectus. If any action shall be brought against the Company or any other
person so indemnified in respect of which indemnity may be sought against the
Selected Dealer pursuant to this provision, the Selected Dealer shall have the
rights and duties given to the Company in the Underwriting Agreement, and the
Company and each other person so indemnified shall have the rights and duties
given to the indemnified parties, by the provisions of Section 8(a) of the
Underwriting Agreement; and the Selected Dealer shall reimburse the Company and
the Representative for any legal or other expenses reasonably incurred by them
in connection with the investigation of or the defense of any such action or
claim. The Representative shall, after receiving the first summons or other
legal process disclosing the nature of the action being brought against it or
the Company in any proceeding with respect to which indemnity may be sought by
the Company or the Representative hereunder, notify promptly the Selected
Dealer in writing of the commencement thereof; and the Selected Dealer shall be
entitled to participate in (and, to the extent the Selected Dealer shall wish,
to direct) the defense thereof at the expense of the Selected Dealer, but such
defense shall be conducted by counsel satisfactory to the Company and the
Representative. If the Selected Dealer shall fail to provide such defense, the
Company or the Representative may defend such action at the cost and expense of
the Selected Dealer. The Selected Dealer's obligation under this Section 13
shall survive any termination of this Agreement, the Underwriting Agreement and
the delivery of and payment for the Shares under the Underwriting Agreement,
and shall remain in full force and effect regardless of the investigation made
by or on behalf of any Representative within the meaning of Section 15 of the
Act.
7
<PAGE> 8
14. No Authority to Act as Partner or Agent. Nothing herein shall
constitute the Selected Dealers as an association or other separate entity or
partners with or agents of the Representative or with each other, but each
Selected Dealer shall be responsible for its pro rata share of any liability or
expense based upon any claims to the contrary. The Representative shall not be
under any liability for or in respect of the value, validity or form of the
Shares, or the delivery of certificates for the Shares or the performance by
any person of any agreement on its part, or the qualification of the Shares for
sale under the laws of any jurisdiction, or for or in respect of any matter in
connection with this Agreement, except for lack of good faith and for
obligations expressly assumed by the Representative in this Agreement.
15. Expenses. No expenses incurred in connection with offers and sales
of the Shares under the Public Offering will be chargeable to the Selected
Dealers. A single transfer tax, if any, on the sale of Shares by the Selected
Dealer to its customers will be paid when such Shares are delivered to the
Selected Dealer for delivery to its customers. Notwithstanding the foregoing,
the Selected Dealer shall pay its proportionate share of any transfer tax or
any other tax (other than the single transfer tax described above) if any such
tax shall at any time be assessed against the Representative and other Selected
Dealers.
16. Notices. All notices, demands or requests required or authorized
hereunder shall be deemed given sufficiently if in writing and sent by
registered or certified mail, return receipt requested and postage prepaid, or
by tested telex, telegram, cable or facsimile to, in the case of the
Representative, the address set forth above directed to the attention of the
President of the Representative, and in the case of the Selected Dealer, to the
address provided below by the Selected Dealer, directed to the attention of the
President.
17. Termination. This Agreement may be terminated by the
Representative with or without cause upon written notice to Selected Dealer to
such effect; and such notice having been given, this Agreement shall terminate
at the time specified therein. Additionally, this Agreement shall terminate
upon the earlier of the termination of the Underwriting Agreement, or at the
close of business thirty days after the Shares are released by the
Representative for sale to the public.
8
<PAGE> 9
18. General Provisions. This Agreement shall be construed and enforced
in accordance with and governed by the laws of the State of Colorado. This
Agreement embodies the entire agreement and understanding between the
Representative and the Selected Dealer and supersedes all prior agreements and
understandings related to the subject matter hereof, and this Agreement may not
be modified or amended or any term or provision hereof waived or discharged
except in writing signed by the party against whom such amendment,
modification, waiver or discharge is sought to be enforced. All the terms of
this Agreement, whether so expressed or not, shall be binding upon, and shall
inure to the benefit of, the respective successors, legal representatives and
assigns of the parties hereto; provided, however, that none of the parties
hereto can assign this Agreement or any of its rights hereunder without the
prior written consent of the other party hereto, and any such attempted
assignment or transfer without the other party's prior written consent shall be
void and without force or effect. The headings of this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
If the foregoing correctly sets forth the terms and conditions of your
agreement to purchase the Shares allotted to you, please indicate your
acceptance thereof by signing and returning to Schneider Securities, Inc. the
duplicate copy of this Agreement, whereupon this letter and your acceptance
shall become and evidence a binding contract between you and the
Representative.
SCHNEIDER SECURITIES, INC.
By:
----------------------------------
Title:
-------------------------------
9
<PAGE> 10
Gentlemen:
The undersigned confirms its agreement to purchase __________ Shares
of Leisure Time Casinos & Resorts, Inc., upon the terms and subject to the
conditions of the foregoing Selected Dealers Agreement, and further agrees that
any agreement by it to purchase Additional Shares during the life of such
Agreement will be upon the same terms and subject to the same conditions. The
undersigned acknowledges receipt of the Prospectus relating to the public
offering of the Shares and confirms that in agreeing to purchase such Shares it
has relied on such Prospectus and not on any other statement whatsoever written
or oral.
Firm Name:
---------------------------------------------
(Print or Type name of Firm)
By:
---------------------------------------------------
(Authorized Agent)
---------------------------------------------
(Print or Type Name and Title of
Authorized Agent)
Address:
-----------------------------------------------
- -------------------------------------------------------
Telephone No.
------------------------------------------
IRS Employer Identification No.:
----------------------
Dated: _____________________________, 1999
10
<PAGE> 1
EXHIBIT 2.0
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
U.S. GAMES, INC.,
LEISURE TIME CASINOS & RESORTS, INC.,
LEISURE ACQUISITIONS, INC.
AND
CERTAIN HOLDERS OF U.S. GAMES, INC.
OUTSTANDING STOCK, OPTIONS AND WARRANTS
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I PLAN OF MERGER
<S> <C> <C>
Section 1.01. Merger..............................................................1
Section 1.02. Filing..............................................................5
Section 1.03. Effective Date......................................................5
Section 1.04. Effect of Merger....................................................5
Section 1.05. Further Assurances..................................................5
Section 1.06. Escrow Deposit......................................................6
Section 1.07. Closing.............................................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF HOLDERS
Section 2.01. Authority of Holder.................................................6
Section 2.02. No Conflict or Breach...............................................6
Section 2.03. Ownership of Shares.................................................7
Section 2.04. Financial Advisors..................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING USG
Section 3.01. Effect of Agreement.................................................7
Section 3.02. Organization........................................................8
Section 3.03. Capital Stock.......................................................8
Section 3.04. Financial Statements................................................8
Section 3.05. Absence of Certain Changes..........................................8
Section 3.06. Litigation..........................................................9
Section 3.07. Brokers' Fees.......................................................9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF LEISURE AND ACQUISITION SUB
Section 4.01. Organization; Good Standing; Power..................................9
Section 4.02. Authority Relative to Agreement.....................................9
Section 4.03. Effect of Agreement.................................................9
Section 4.04. No Other Representations...........................................10
</TABLE>
-i-
<PAGE> 3
<TABLE>
ARTICLE V CERTAIN COVENANTS
<S> <C> <C>
Section 5.01. Conduct of Business.....................................................10
Section 5.02. Access to Books, Records, and Properties................................10
Section 5.03. Confidentiality.........................................................10
Section 5.04. Settlement of Certain Claims............................................11
ARTICLE VI NATURE AND SURVIVAL OF COVENANTS, REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
Section 6.01. Survival of Representations.............................................11
Section 6.02. Indemnification by Holders..............................................11
Section 6.03. Indemnification by Leisure and Acquisition Sub..........................12
Section 6.04. Notice of Claim.........................................................12
Section 6.05. Limits of Indemnification...............................................12
ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
USG AND THE HOLDERS
Section 7.01. Accuracy of Representations and Warranties..............................13
Section 7.02. Resolutions of the Boards of Directors of Leisure and Acquisition Sub...13
Section 7.03. Delivery of Merger Consideration........................................13
Section 7.04. Other Deliveries........................................................13
Section 7.05. Repurchase of Options...................................................13
Section 7.06. Deferred Compensation Agreements........................................14
Section 7.07. Time....................................................................14
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF
LEISURE AND ACQUISITION SUB
Section 8.01. Accuracy of Representations and Warranties..............................14
Section 8.02. Performance of Agreements...............................................14
Section 8.03. Corporate Approval......................................................14
Section 8.04. Repurchase of Options...................................................14
Section 8.05. Termination of Agreements...............................................14
Section 8.06. Deferred Compensation Agreements........................................14
Section 8.07. Other Agreements........................................................14
Section 8.08. Available Cash..........................................................15
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 8.09. Discharge of Obligations.................................................15
Section 8.10. Resolution of License Application........................................15
Section 8.11. Other Deliveries.........................................................15
ARTICLE IX TERMINATION OF AGREEMENT
Section 9.01. Conditions for Termination...............................................15
Section 9.02. Deposit; Liquidated Damages..............................................16
ARTICLE X MISCELLANEOUS PROVISIONS
Section 10.01. Brokerage................................................................16
Section 10.02. Expenses.................................................................16
Section 10.03. Governing Law............................................................16
Section 10.04. Entire Agreement.........................................................16
Section 10.05. Amendments and Modifications.............................................16
Section 10.06. Assignment...............................................................16
Section 10.07. Captions.................................................................16
Section 10.08. Execution in Counterparts................................................16
Section 10.09. Number and Gender........................................................17
Section 10.10. Notices..................................................................17
Section 10.11. Successors and Assigns...................................................18
Section 10.12. Post Merger Operations...................................................18
Section 10.13. Insurance................................................................19
Section 10.14. Definition of "Knowledge"................................................19
Section 10.15. Public Announcement......................................................19
</TABLE>
-iii-
<PAGE> 5
Exhibit A - Form of Certificate of Merger
Exhibit B - Financial Statements
Exhibit C - Form of Note
Exhibit D - Security Agreement
Exhibit E - Paying Agent Agreement
Exhibit F - Form of Deferred Compensation Agreement
Exhibit G - Form of Noncompetition Agreement
Exhibit H - Form of Employment Agreement Amendment for Michael I. Jacobson
Exhibit I - Form of Employment Agreement Amendment for Richard Martin
Exhibit J - Form of Release
-iv-
<PAGE> 6
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (together with all
Schedules and Exhibits hereto, the "Agreement"), made and entered into as of the
30th day of August, 1996, by and among U. S. GAMES, INC., a Georgia corporation
("USG" or the "Surviving Corporation"), LEISURE TIME CASINOS & RESORTS, INC., a
Colorado corporation ("Leisure"), LEISURE ACQUISITION, INC., a Georgia
corporation and wholly owned subsidiary of Leisure ("Acquisition Sub" or the
"Merging Corporation"), the undersigned sole shareholder of USG and the
undersigned holders of certain outstanding options or warrants (the "Purchase
Rights") to purchase shares of USG common stock, no par value (the "Shares").
The sole shareholder and such option and warrant holders are referred to herein
each individually as a "Holder" and collectively as the "Holders." USG and
Acquisition Sub are sometimes referred to individually as a Constituent
Corporation and collectively as the Constituent Corporations.
RECITAL:
The Board of Directors of each of the Constituent Corporations
deems it advisable that Acquisition Sub merge with and into USG on the terms and
conditions set forth herein (the "Merger"), and the Board of Directors of each
of the Constituent Corporations has duly approved and authorized the execution
and delivery of this Agreement.
THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto do hereby agree as follows:
ARTICLE I
PLAN OF MERGER
SECTION 1.01. MERGER. This Section 1.01 shall constitute the
"plan of merger" within the meaning of the Georgia Business Corporation Act
(the "BCA").
(A) The name of the corporation proposing to merge is Leisure
Acquisition, Inc., a Georgia corporation (the "Merging Corporation"), and the
name of the corporation into which the Merging Corporation proposes to merge is
U.S. Games, Inc., a Georgia corporation (the "Surviving Corporation" or "USG").
The Merging Corporation and the Surviving Corporation are hereinafter referred
to collectively as the "Constituent Corporations." Leisure Time Casinos &
Resorts, Inc., a Colorado corporation ("Leisure"), owns all the issued and
outstanding capital stock of the Merging Corporation.
(B) Until the effective time of the Merger (the "Effective
Time"), each of the Constituent Corporations shall continue to conduct its
business without material change and shall not make any distribution or other
disposition of assets, capital or surplus, except in the ordinary course of
business or with the consent of the other Constituent Corporation.
(C) As of the Effective Time, the Merging Corporation's
liabilities and assets of every nature shall become those of the Surviving
Corporation by operation of law.
(D)(1) At the Effective Time, by virtue of the Merger and
without any action on the part of the shareholders of the Surviving
Corporation, each share (the "Shares") of the Surviving Corporation's
common stock, no par value ("USG Stock"), issued and outstanding as of
the Effective Time shall be converted into and shall represent the
right to receive, upon surrender of the certificate representing such
Share, (i) $5.26163, in cash payable to the holders thereof by wire
transfer of
<PAGE> 7
immediately available funds to the accounts designated by such
holders, (ii) the Surviving Corporation's Promissory Note in the
principal amount of $4.78 having a payment term of six years and in a
form mutually acceptable to such holders and the Surviving Corporation
(collectively, the "Notes") and (iii) the right to receive certain
additional payments from the Surviving Corporation after the Effective
Time as specified in Section (E) below (the "Post Merger Payments").
(2) At the Effective Time, by virtue of the Merger and without
any action on the part of the holders of any outstanding options to
purchase shares of USG Stock (the "Options"), the Options shall be
converted into and shall represent the right to receive, upon surrender
of the corresponding option agreement evidencing such Options, on an
as-if-converted, per share basis (based on the number of shares of USG
Stock for which such Options could be exercised), (i) $5.26163, in cash
payable to the holders thereof by wire transfer of immediately
available funds to the accounts designated by such holders, (ii) a Note
in the principal amount of $4.78 and (iii) the right to receive Post
Merger Payments as specified in Section (E) below.
(3) At the Effective Time, by virtue of the Merger and without
any action on the part of the holders of any outstanding warrants to
purchase shares of USG Stock (the "Warrants"), the Warrants shall be
converted into and shall represent the right to receive, upon surrender
of the corresponding warrant agreement evidencing such Warrants, on an
as-if-converted, per share basis (based on the number of shares of USG
Stock for which such Warrants could be exercised), (i) $5.02, in cash
payable to the holders thereof by wire transfer of immediately
available funds to the accounts designated by such holders, (ii) a Note
in the principal amount of $4.78 and (iii) the right to receive Post
Merger Payments as specified in Section (E) below. As used herein, the
term "Purchase Rights" shall mean the Options and Warrants
collectively.
(4) As used herein, the term "Merger Consideration" shall mean
the aggregate cash consideration, aggregate principal amount of Notes
and aggregate Post Merger Payments payable in the Merger in exchange
for all outstanding USG Stock and Purchase Rights as provided in
Sections (D)(1), (D)(2) and (D)(3) above. Subject to Section 5.04
hereof, 42% ($1,900,000) of the cash portion of the Merger
Consideration shall be paid by or on behalf of Leisure and 58%
($2,623,656) of the cash portion of the Merger Consideration shall be
paid from the Surviving Corporation's accounts (which shall be
considered payments in redemption of a portion of the Shares and
Purchase Rights which together with the other Merger Consideration
results in a complete termination of the recipients' equity interest in
the Surviving Corporation pursuant to and in accordance with Section
302(b)(3) of the Internal Revenue Code of 1986, as amended). The cash
portion of the Merger Consideration shall be increased by $.82 for each
$1.00 of unrestricted cash on hand at the Surviving Corporation as of
the Effective Time in excess of $250,000 after giving effect to the
payment of the cash portion of the Merger Consideration as provided in
Sections (D)(1), (D)(2) and (D)(3) above. Each Holder shall share in
the increase pro rata based on his or its relative interest in USG
immediately prior to the Merger, calculated on a fully diluted,
as-if-converted basis.
(5) At the Effective Time, by virtue of the Merger and without
any action on the part of Leisure, each share of the Merging
Corporation's Common Stock, no par value, issued and outstanding as of
the Effective Time shall be converted into and shall represent the
right to receive, upon surrender of the certificate representing such
share, 8,643.04 shares of USG Stock.
(6) Promptly after the Effective Time, each person who was, at
the Effective Time, a holder of record of Shares, shall surrender to
Leisure the certificate or certificates representing such
-2-
<PAGE> 8
Shares, duly endorsed for transfer in blank or accompanied by a
separate stock power and such other documents as may be reasonably
requested. Each holder of a Purchase Right shall also surrender the
original executed copy of the option agreement or warrant agreement
evidencing such Purchase Right, duly endorsed for transfer in blank
and such other documents as may be reasonably requested. Upon
surrender of the foregoing, Leisure shall promptly pay or cause the
payment of the cash portion of the Merger Consideration, and shall
cause the Surviving Corporation to issue the Notes, to the persons
entitled thereto. The Surviving Corporation shall make the Post Merger
Payments as specified in Section (E) below.
(7) Until surrendered, each certificate or other instrument
which prior to the Effective Time represented Shares or a Purchase
Right shall be deemed upon the Effective Time for all purposes to
represent only the right to receive a portion of the Merger
Consideration as provided in Sections (D)(1), (D)(2) and (D)(3) above.
Except for interest accrued under the Notes, no interest will be paid
or accrued on the Merger Consideration upon the surrender of the
certificates or other instruments representing Shares or Purchase
Rights. If payment of any Merger Consideration is to be made to a
person other than the one in whose name a certificate or instrument
surrendered is registered, it shall be a condition of such payment that
the certificate or instrument so surrendered shall be properly endorsed
or otherwise in proper form for transfer, and that the person
requesting such payment shall pay to Leisure or the Surviving
Corporation any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the certificate
or instrument surrendered or establish to the satisfaction of Leisure
and the Surviving Corporation that such tax has been paid or is not
applicable. With respect to any certificate or instrument that has been
lost or destroyed, Leisure shall pay or cause payment of the Merger
Consideration attributable to the Shares or Purchase Rights represented
by such certificate or instrument upon receipt of evidence and
indemnity reasonably satisfactory to it of ownership of the Shares or
Purchase Rights represented thereby. After the Effective Time, no
transfer of Shares or Purchase Rights shall be made on the stock
transfer books of the Surviving Corporation.
(E)(1) The parties agree that up to $2,893,963 of Post Merger
Payments shall be payable as provided in this Section (E), the provisions of
which shall survive the Effective Time forever. Amounts available for payment to
the Holders hereunder shall be payable pro rata based on his or its relative
interest in USG immediately prior to the Merger, calculated on a fully diluted,
as-if-converted basis. Post Merger Payments shall be payable to the Holders
based on sales by the Surviving Corporation after the Effective Time of its
"Pot-O-Gold" video devices (as produced at the Effective Time or as thereafter
renamed or replaced) (the "POGs"). The Holders shall be entitled to receive an
aggregate payment as provided below for each such device sold up to an aggregate
of $2,893,963 (the "Maximum Proceeds"), which amount shall be payable at the
times and in the manner provided in Section E(2) below. The aggregate payment
made with respect to each POG sale shall be determined based on the number of
POGs sold as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Units of POGs Sold Aggregate Post Merger Payments
Each Month After the Effective
Time
---------------------------------------------------------------------
<S> <C>
201-400 $661
---------------------------------------------------------------------
401-500 $744
---------------------------------------------------------------------
501-600 $827
---------------------------------------------------------------------
601-700 $909
---------------------------------------------------------------------
701 and greater $992
---------------------------------------------------------------------
</TABLE>
-3-
<PAGE> 9
The Surviving Corporation's obligation to pay the Post Merger Payments shall be
secured by a first lien on its assets and a requirement to maintain a cash
collateral account as more particularly described in a Security Agreement to be
executed by the Surviving Corporation in a form acceptable to the Holders.
(E)(2) The Post Merger Payments shall be payable in arrears on
the 10th business day of each calendar month based on the number of POGs for
which the Surviving Corporation collected payment during the preceding month,
provided that (i) the Surviving Corporation may prepay such amounts in full at
any time without penalty or premium and (ii) no payments shall be due with
respect to any month in which less than 201 POGs are sold. If the Surviving
Corporation shall prepay in full all amounts due under this Section 1.01(E)(2)
on or before the sixth-month anniversary of the date on which occurred the
Effective Time, such amount shall be discounted by 14.28%. Beginning March 1,
1997, however, the Post Merger Payment for each month shall equal the greater of
the amount determined as provided in Section 1.01(E)(1), or 4.14% of the
Surviving Corporation's gross sales of Gaming Products during the month. Gaming
Products shall mean any electronic gaming, lottery, wagering or amusement device
(including software related to any of the foregoing) sold by the Surviving
Corporation or any other entity controlled by Leisure (or its successors in
interest), but not including sales or royalties with respect to the accounting
software produced under the name "Table Trac". Each Post Merger Payment shall be
accompanied by appropriate evidence of the volume of product sales and
collections by the Surviving Corporation during the preceding month. Payment
shall be made by delivery of a bank check in the amount then due and shall be
payable to the order of Gaming Equipment Finance Corp., as agent (the "Agent")
for Holders at 1450 Metropolitan Center, 333 South Seventh Street, Minneapolis,
Minnesota 55402, or such other address as the Agent shall designate in writing
to the Surviving Corporation. Prior to or following the Closing, Leisure may
substitute a nationally recognized commercial bank reasonably acceptable to
Holders in place of the Agent; provided, that the Holders agree that First Union
National Bank is acceptable for this purpose. The Agent shall distribute the
proceeds thereof to the Holders in accordance with the terms of a Paying Agent
Agreement in a form acceptable to the Holders. The Surviving Corporation shall
keep and maintain full, true and accurate books of account and other records
with sufficient detail to permit the computation and verification of the amounts
to be paid hereunder. Upon prior written notice to the Surviving Corporation,
the Agent (and if the Agent is a bank, one representative designated by a
majority in interest of the Holders determined by reference to their interests
in the Post Merger Payments) shall be permitted at the expense of the Holders,
to inspect such books and records at the Surviving Corporation's premises during
normal business hours, to verify the accuracy of the amounts paid hereunder. In
the event that such inspection reveals an underpayment in the amount of 5% or
more of any payment, then the Surviving Corporation shall promptly reimburse the
costs of such inspection to the parties who bore such expense. In the event any
payment is not paid on the date due pursuant to the terms hereof, the amount
that should have been so paid shall bear interest from the date due until paid
at the prime rate plus one percentage point as announced from time to time in
the Southeastern Edition of The Wall Street Journal. If any Post Merger Payment
is not paid within five days of a Holder's demand therefor, Holders may exercise
their rights under the Security Agreement and, to the extent permitted by and in
accordance with the terms of the Security Agreement, declare the entire
remaining maximum proceeds (regardless of the amount of POGs sold and
collections made as of such date) immediately due and payable without
presentment, demand, protest or notice of any kind, all of which shall be
deemed waived by the Surviving Corporation.
-4-
<PAGE> 10
(F) The Articles of Incorporation and Bylaws of the Surviving
Corporation shall continue as the Articles of Incorporation and Bylaws,
respectively, of the Surviving Corporation, except that the name of the
Surviving Corporation shall be amended and become "Leisure Time Technology,
Inc." The officers and directors of the Surviving Corporation shall resign as of
the Effective Time and the officers and directors of the Merging Corporation
immediately prior to the Effective Time shall by virtue of the Merger become the
officers and directors of the Surviving Corporation.
(G) The Effective Time shall be 11:59:59 p.m. on the day the
Certificate of Merger is filed with the Georgia Secretary of State.
SECTION 1.02. FILING. Upon fulfillment or waiver of the
conditions specified in ARTICLES VII and VIII and provided that this Agreement
has not been terminated pursuant to ARTICLE IX, the Constituent Corporations
will cause a Certificate of Merger in substantially the form of Exhibit A
attached hereto (the "Certificate of Merger") to be executed and filed with the
Secretary of the State of Georgia.
SECTION 1.03. EFFECTIVE DATE. The Merger shall be effective
at the Effective Time.
SECTION 1.04. EFFECT OF MERGER. From and after the Effective
Time, the separate existence of the Merging Corporation shall cease, and the
Surviving Corporation shall thereupon and thereafter, to the extent consistent
with its Articles of Incorporation as established or changed by the Merger,
possess all the rights, privileges, immunities and franchises, of a public as
well as of a private nature, of each of the Constituent Corporations; and all
property, real, personal and mixed, and all debts due on whatever account, and
all other choses in action, and all and every other interest, of or belonging to
or due to each of the Constituent Corporations shall be taken and deemed to be
transferred to and vested in the Surviving Corporation without further act or
deed; and the title to any real estate or any interest therein, vested in either
of the Constituent Corporations shall not revert or be in any way impaired by
reason of the Merger. The Surviving Corporation shall thenceforth be responsible
and liable for all the liabilities, obligations and penalties of each of the
Constituent Corporations; and any claim existing or action or proceeding, civil
or criminal, pending by or against either of the Constituent Corporations may be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in its place; and any judgment rendered against either of the
Constituent Corporations may be enforced against the Surviving Corporation.
Neither the rights of creditors nor any liens upon the property of either of the
Constituent Corporations shall be impaired by reason of the Merger.
SECTION 1.05. FURTHER ASSURANCES. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
further deeds, assignments or assurances in law or any other actions are
necessary, desirable or proper to vest, perfect or confirm of record or
otherwise, in it, the title to any property or rights of the Constituent
Corporations acquired or to be acquired by reason of, or as a result of, the
Merger, the Constituent Corporations agree that such Constituent Corporations
and their proper officers and directors shall and will execute and deliver all
such proper deeds, assignments and assurances in law and do all things
necessary, desirable or proper to vest, perfect or confirm title to such
property or rights in the Surviving Corporation and otherwise to carry out the
purpose of this Agreement, and that the proper officers and directors of the
Surviving Corporation are fully authorized and directed in the name of the
Constituent Corporations or otherwise to take any and all such actions.
-5-
<PAGE> 11
SECTION 1.06. ESCROW DEPOSIT. Prior to the date of this
Agreement, Leisure has placed into escrow, in accordance with an Escrow
Agreement dated August 7, 1996, as amended, One Million Six Hundred Thousand
Dollars ($1,600,000.00) (such amount being referred to as the "Escrow Deposit").
At Closing, such amount, together with all additions thereto, if any, will be
credited against the cash portion of the Merger Consideration.
SECTION 1.07. CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Womble Carlyle Sandridge & Rice, P.L.L.C., 3250 One Ninety One Peachtree
Tower, 191 Peachtree Street, N.E., Atlanta, Georgia 30303 at 11:00 A.M. on the
business day following the satisfaction of the conditions to closing set forth
in ARTICLES VII and VIII (the "Closing Date") unless the parties hereto agree in
writing upon a different time, date or place. The Closing shall not be deemed to
have occurred until all actions necessary to complete the Closing have occurred.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF HOLDERS
Subject to the limitations and qualifications set forth in
this Agreement, including the Disclosure Schedule attached hereto, each Holder,
severally with respect to itself or himself only and not jointly, represents and
warrants to Leisure and Acquisition Sub as follows:
SECTION 2.01. AUTHORITY OF HOLDER. Following the consummation
of the actions described in item 1 on Schedule 3.01 of the Disclosure Schedule,
Holder has full capacity, power and authority to execute and deliver this
Agreement and to perform the transactions contemplated hereby. Holder's
execution, delivery and performance of this Agreement has been duly and validly
authorized by all necessary action on the part of Holder. This Agreement has
been duly executed and delivered by Holder. Following the consummation of the
actions described in item 1 on Schedule 3.01 of the Disclosure Schedule, this
Agreement constitutes the legal, valid and binding obligation of Holder,
enforceable in accordance with its terms, except that enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by principles of equity regarding the
availability of remedies.
SECTION 2.02. NO CONFLICT OR BREACH. To the Holder's knowledge
and except as otherwise disclosed on Schedule 2.02 of the Disclosure Schedule,
the execution, delivery and performance of this Agreement do not and will not:
(a) conflict with or constitute a violation of any law,
statute, judgment, order, decree or regulation of any legislative body,
court, administrative agency, governmental authority or arbitrator
applicable to or relating to Holder;
(b) conflict with, constitute a default under, result in a
breach or acceleration of or require notice to or the consent of any
third party under any material contract, agreement, commitment,
mortgage, note, license or other instrument or obligation to which
Holder is party or by which Holder is bound; or
(c) in the case of any Shares held for the benefit of Michael
R. Pace, conflict with or constitute a violation of that certain Stock
Ownership Trust Agreement dated April 18, 1995, as amended (the "Trust
Agreement"), under which such Shares are held;
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except in the cases of any of the foregoing that do not and will not have a
material adverse effect on the ability of Holder to consummate the transactions
contemplated by this Agreement.
SECTION 2.03. OWNERSHIP OF SHARES. Except as provided in the
Trust Agreement, Holder is the owner, beneficially and of record, of all right,
title and interest in and to, or Holder has the right to acquire, the number of
Shares set forth beside such Holder's name on Schedule 2.03 of the Disclosure
Schedule. Holder has, or will have at the Closing, good and marketable title to
his or its Shares or Purchase Rights and the absolute right to sell, assign and
transfer the same in the Merger, free and clear of all liens, pledges,
encumbrances, security interests, options or other restrictions except as
provided on Schedule 2.02 of the Disclosure Schedule. Holder is not a party to
any option, warrant, right, contract, call, put or other agreement or commitment
providing for the disposition or acquisition of any of his or its Shares or
Purchase Rights other than this Agreement and Holder is not a party to any
voting trust, proxy or other agreement or understanding (other than the Trust
Agreement with respect to the Shares held in accordance therewith) with respect
to his or its Shares or Purchase Rights. Except as disclosed on Schedule 3.06,
Holder is not a party to any litigation regarding Holder's ownership of his or
its Shares or Purchase Rights.
SECTION 2.04. FINANCIAL ADVISORS. Holder is solely responsible
for the payment of the fees and expenses of any finder, broker, agent or other
intermediary who has acted for or on behalf of Holder in connection with the
negotiation or consummation of this Agreement (the "Holder's Broker"), and
Holder agrees to indemnify, defend and hold Purchaser and Acquisition Sub
harmless from and against any claims for any brokerage commission, finder's fee
or similar payment with respect to the Holder's Broker.
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING USG
Subject to the limitations and qualifications set forth in
this Agreement, including the Disclosure Schedule attached hereto, the Holders
represent and warrant, severally and not jointly, to Leisure and Acquisition Sub
as follows:
SECTION 3.01. EFFECT OF AGREEMENT. Following the consummation
of the actions described in item 1 on Schedule 3.01 of the Disclosure Schedule,
this Agreement is a legal, valid and binding obligation of USG and is
enforceable against USG in accordance with its terms, except that enforceability
hereof may be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting creditors' rights generally and by principles of equity regarding
the availability of remedies. USG has the requisite corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby and the execution, delivery and performance of this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of USG. Except as set forth on Schedule 3.01 of the
Disclosure Schedule or to the extent the following would reasonably not be
expected to have a material adverse effect on the business of USG ("Material
Adverse Effect"), the execution, delivery and performance of this Agreement by
USG and the consummation of the transactions contemplated hereby will not (i)
require the consent, approval or authorization of any person, corporation,
partnership, joint venture or other business association or public authority;
(ii) violate, with or without the giving of notice or the passage of time, or
both, any provisions of law applicable to USG; (iii) with or without the giving
of notice or the passage of time, or both, conflict with or result in a breach
or termination of any provision of, or constitute a default under, or result in
the creation of any lien, charge or encumbrance upon any of the properties or
assets of USG pursuant to any corporate charter or bylaw or material indenture,
note, bond, pledge, mortgage, deed of trust, lease, license, contract,
agreement, commitment or other instrument, or obligation, or any order,
judgment, award,
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decree, statute, ordinance, regulation or any other restriction of any kind or
character, to which USG is a party or by which USG or any of its assets or
properties may be bound; or (iv) result in the acceleration of any indebtedness
of USG or increase the rate of interest payable by USG with respect to any
indebtedness. It is, however, expressly understood and agreed that neither USG
nor any Holder is making or has made any representation or warranty that USG is
licensed in any jurisdiction or by any authority, government or agency (except
as provided on Schedule 3.02 of the Disclosure Schedule solely with respect to
the status of its licenses as of the date of this Agreement) or as to the effect
of the consummation of the transactions contemplated by this Agreement
(including without limitation the withdrawal of USG's appeal of the license
denial in Arizona and the surrender of its Mississippi license as described in
Section 8.10 below) on the licensability of USG and that Leisure and Acquisition
Sub agree to undertake any and all risk that USG may not be or remain licensable
in any jurisdiction or by any authority, government or agency.
SECTION 3.02. ORGANIZATION. USG is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia. USG has all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as now being conducted. USG
neither owns nor has the right to acquire an equity interest in any corporation,
partnership or other organization. As of the date of this Agreement, USG is
qualified to conduct business and holds licenses as provided on Schedule 3.02 of
the Disclosure Schedule.
SECTION 3.03. CAPITAL STOCK. The authorized capital stock of
USG consists of 5,000,000 shares of common stock, no par value, of which 688,500
shares of common stock are issued, outstanding, fully paid and nonassessable and
356,804 shares are issuable upon exercise of valid purchase options or warrants
and are owned of record (or otherwise subject to purchase) by those persons set
forth on Schedule 2.03 of the Disclosure Schedule. Except as provided on such
Schedule 2.03, there are no outstanding or authorized subscriptions, options,
warrants, calls, rights, commitments or any other agreements of any character
obligating USG to issue any additional shares of its capital stock or any
securities convertible into or evidencing the right to subscribe for, purchase
or acquire any shares of capital stock, nor are there any voting trusts or any
other agreements or understandings with respect to the voting of the capital
stock of USG except the Trust Agreement.
SECTION 3.04. FINANCIAL STATEMENTS. Complete copies of the
audited financial statements of USG as of June 30, 1995 and for the year then
ended and USG's interim unaudited financial statements as of April 30, 1996 and
for the ten-month period then ended previously have been delivered to Leisure
and are attached hereto as Exhibit B. Such financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied and present fairly in all material respects the financial
position and results of operation of USG as of such dates and for the periods
then ended, subject to year end adjustments in the case of interim financial
statements; provided, that such statements (i) do not contain footnotes or a
statement of cash flow, (ii) do not reflect any liability for the settlement of
the matters disclosed on Schedule 3.06 of the Disclosure Schedule, the payment
of any bonuses or other amounts reflected on Schedule 5.01 or income taxes
payable with respect to prior periods, (iii) do not reflect the value of
purchased capitalized software which may or may not be recoverable and (iv) did
not involve a review of inventory, or any assessment of the recoverability or
valuation thereof, or pricing or the undertaking of any physical count. The
balance sheet of USG at April 30, 1996 is referred to herein as the "Balance
Sheet" and April 30,1996 is referred to herein as the "Balance Sheet Date."
SECTION 3.05. ABSENCE OF CERTAIN CHANGES. Except as set forth
on Schedule 3.05 of the Disclosure Schedule or otherwise contemplated by the
terms of this Agreement, since the Balance Sheet
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<PAGE> 14
Date, to the Holders' knowledge, no material adverse change has occurred to USG
or its business, properties, financial condition or prospects.
SECTION 3.06. LITIGATION. Except as set forth on Schedule 3.06
of the Disclosure Schedule, to the knowledge of Holders, there is no claim,
action, suit, proceeding (legal, administrative or otherwise), investigation or
inquiry (by an administrative agency, governmental body or otherwise) pending
or, to the knowledge of USG, threatened by or against, or otherwise affecting,
USG, its capital stock, properties or assets or the transactions contemplated
hereby, at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, agency, instrumentality or
authority, domestic or foreign.
SECTION 3.07. BROKERS' FEES. Except as provided on Schedule
3.07 of the Disclosure Schedule, USG has not incurred any liability for brokers'
fees, finders' fees, agents' commissions, financial advisory fees or other
similar forms of compensation in connection with this Agreement or any
transaction contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LEISURE AND ACQUISITION SUB
Subject to the limitations and qualifications set forth in
this Agreement, Leisure and Acquisition Sub, jointly and severally, represent
and warrant to USG and the Holders as follows:
SECTION 4.01. ORGANIZATION; GOOD STANDING; POWER. Each of
Leisure and Acquisition Sub is a corporation duly organized, validly existing,
and in good standing under the laws of the States of Colorado and Georgia,
respectively, and has all requisite corporate power and authority to own, lease
and operate its properties, to carry on its business as now being conducted and
to enter into this Agreement and perform its obligations hereunder. Acquisition
Sub has no assets or liabilities and will have no assets or liabilities as of
the Effective Time. Neither Leisure nor Acquisition Sub has any knowledge that
Leisure, Acquisition Sub or any person associated with either of them would not
be licensable, qualified or otherwise suitable to be a shareholder, officer,
director, employee or agent of the Surviving Corporation as of and after the
Effective Time under any law, rule or regulation, including those which regulate
gaming activities, in the locations in which USG conducts or has an application
pending for a license to conduct, business immediately prior to the Effective
Time.
SECTION 4.02. AUTHORITY RELATIVE TO AGREEMENT. The execution,
delivery and performance of this Agreement have been duly and effectively
authorized by all necessary corporate action on the part of Leisure and
Acquisition Sub and are valid, legally binding and enforceable obligations of
Leisure and Acquisition Sub, except that enforceability hereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally and by principles of equity regarding the
availability of remedies.
SECTION 4.03. EFFECT OF AGREEMENT. Except as provided on
Schedule 4.03 of the Disclosure Schedule, the execution, delivery and
performance of this Agreement by Leisure and Acquisition Sub and the
consummation of the transactions contemplated hereby will not (i) require the
consent, approval or authorization of any person, corporation, partnership,
joint venture or other business association or public authority; (ii) violate,
with or without the giving of notice or the passage of time, or both, any
provision of law now applicable to Leisure or Acquisition Sub; (iii) with or
without the giving of notice or the passage of time, or both, conflict with or
result in a breach or termination of any provision of, or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon any of
the property or assets of Leisure or
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<PAGE> 15
Acquisition Sub pursuant to any corporate charter, bylaw, indenture, note, bond,
pledge, mortgage, deed of trust, lease, license, contract, agreement, commitment
or other instrument or obligation or any order, judgment, award, decree,
statute, ordinance, regulation, or any other restriction of any kind or
character, to which Leisure or Acquisition Sub is a party, or by which Leisure
or Acquisition Sub or any of their assets or properties are bound; or (iv)
result in the acceleration of any indebtedness of Leisure or increase the rate
of interest payable by Leisure with respect to any indebtedness.
SECTION 4.04. NO OTHER REPRESENTATIONS. Leisure and
Acquisition Sub specifically acknowledge that neither USG nor any Holder shall
be deemed to have made to Leisure or Acquisition Sub any representation or
warranty not expressly set forth herein or otherwise with respect to
projections, estimates or budgets, if any, heretofore delivered or made
available to them concerning future revenues, expenses, results or anticipated
results of operations or the financial condition of USG or regarding the
licensability of USG. Leisure and Acquisition Sub confirm that they have been
given full access to all material information concerning the condition,
properties, operations and prospects of USG and have had an opportunity to ask
questions of, and to receive information from, USG and persons acting on its
behalf concerning USG and to verify the accuracy of the information and data
received by them. Leisure and Acquisition Sub have made such independent
investigation of USG, its management and related matters as they have, in their
sole discretion, deemed to be necessary or advisable in connection with the
consummation of the transactions contemplated by this Agreement. It is agreed
that matters disclosed on any Schedule of the Disclosure Schedule shall be
deemed disclosed for purposes of each other Schedule, whether or not
specifically cross-referenced.
ARTICLE V
CERTAIN COVENANTS
SECTION 5.01. CONDUCT OF BUSINESS. Between the date hereof and
the Closing Date, USG covenants and agrees that except as set forth herein or as
otherwise approved in writing by Leisure and except as set forth on Schedule
5.01 of the Disclosure Schedule, (i) the business of USG will be conducted in a
manner not materially different from its past practice and only in the ordinary
course, and (ii) it will refrain from incurring any material debt, liability or
obligation, contingent or otherwise except that it may settle the litigation
described in Section 5.04 below with Leisure's consent, which shall not be
unreasonably withheld.
SECTION 5.02. ACCESS TO BOOKS, RECORDS, AND PROPERTIES. USG
has previously and shall continue to afford to Leisure and its representatives
reasonable access to the properties, books and records of USG at reasonable
times in order that Leisure may have full opportunity to make such reasonable
investigation as it desires of the affairs of USG.
SECTION 5.03. CONFIDENTIALITY. In recognition of the
confidential nature of certain of the information which will be provided to
Leisure and its affiliates by USG and the Holders, Leisure agrees to retain in
confidence, and to require its directors, officers, employees, consultants,
accountants, attorneys, lenders, other professional representatives and agents
(collectively, "Purchaser Representatives") to retain in confidence all
information transmitted or disclosed to it by USG and the Holders, and further
agrees that it will not use for its own benefit or for the benefit of any of its
affiliates and will not use or disclose to any third party, or permit the use or
disclosure to any third party of, any information so obtained or revealed,
except that Leisure may disclose the information to those of the Purchaser
Representatives who need the information for the proper performance of their
assigned duties with respect to the consummation of the transactions
contemplated hereby. In making such information available to the Purchaser
Representatives, Leisure shall take any and all precautions necessary to ensure
that the Purchaser Representatives use the information only
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<PAGE> 16
as permitted hereby. Notwithstanding anything to the contrary in the foregoing
provisions, such information may be disclosed (a) where it is required by court
order or decree or applicable law, (b) if it is ascertainable or obtained from
public or published information (c) if the recipient can demonstrate that such
information was properly in its possession prior to disclosure thereof and (d)
following successful consummation of the Closing to the extent required in
connection with the operation of USG's business. If Leisure or any Purchaser
Representative shall be required to make disclosure of any such information by
court order or decree or applicable law, Leisure shall give the affected party
or parties prior notice of the making of such disclosure and shall use all
efforts to afford them an opportunity to contest the making of such disclosure.
The restrictions under this Section shall survive Closing; provided further,
that in the event this Agreement is terminated prior to Closing, the
restrictions under this Section shall survive such termination notwithstanding
anything contained herein to the contrary. In the event that the Closing shall
not occur, Leisure shall immediately deliver, or cause to be delivered, to USG
(without retaining any copies thereof) any and all documents, statements or
other written information obtained containing confidential information of USG or
any Holder.
SECTION 5.04. SETTLEMENT OF CERTAIN CLAIMS. It is understood
and agreed that USG shall set aside at Closing a special reserve equal to the
lesser of (A) $421,000 or (B) the actual amount of payment then owed to Drews
Distributing Co., Inc. ("Drews") in connection with the settlement of the
litigation described in item 2 on Schedule 3.06 of the Disclosure Schedule (the
"Drews Reserve"); provided, that no amount payable to Drews with respect to
sales of any gaming devices after the Effective Time shall be taken into account
in determining (B) above. The proceeds of the Drews Reserve shall not be
considered "Available Cash" for purposes of Section 8.08 hereof. Furthermore,
(i) no Drews Reserve shall be required if the matter is settled prior to the
Effective Time as provided in Section 5.01 above and (ii) USG may reduce the
Drews Reserve by the amount by which the cash portion of the Merger
Consideration paid by or on behalf of Leisure is less than $1,900,000. Leisure
shall be obligated in any event to pay or cause to be paid at least $1,600,000
of the Merger Consideration in immediately available funds at the Closing.
ARTICLE VI
NATURE AND SURVIVAL OF COVENANTS, REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
SECTION 6.01. SURVIVAL OF REPRESENTATIONS. Except as otherwise
expressly provided herein, all representations, warranties, indemnities,
covenants and agreements made in this Agreement and the remedies of the parties
with respect thereto, shall, except to the extent notice is given prior to the
expiration of the applicable period, survive the Closing hereunder for a period
of one year. Such notice shall specify, in reasonable detail, the factual
details underlying the claim or liability and the basis for the claim of
indemnification, together with copies of any complaint or other documents
relevant to such claim or liability.
SECTION 6.02. INDEMNIFICATION BY HOLDERS. Subject to Section
6.05 below, Holders, severally and not jointly, shall indemnify, defend and hold
harmless Leisure (and, after the Closing, the Surviving Corporation) and their
affiliates, officers, directors, agents and employees (collectively, the
"Leisure Indemnitees") from, against, and with respect to any and all losses,
damages, claims, obligations, liabilities, costs and expenses of any kind or
character (a "Loss") arising out of or in connection with any of the following:
(a) any breach of any of the representations or warranties of
any Holder contained in or made pursuant to this Agreement; and
(b) any failure by any Holder to perform or observe, in full,
any covenant, agreement or condition to be performed or observed by him
or it pursuant to this Agreement.
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SECTION 6.03. INDEMNIFICATION BY LEISURE AND ACQUISITION SUB.
Subject to Section 6.05 below, Leisure and Acquisition Sub shall indemnify,
defend and hold harmless the Holders from, against and with respect to any Loss
arising out of or in connection with any of the following:
(a) any breach of any of the representations and warranties
of Leisure or Acquisition Sub contained in or made pursuant to this
Agreement;
(b) any failure by Leisure or Acquisition Sub to perform or
observe, in full, any covenant, agreement or condition to be performed
or observed by it pursuant to this Agreement; and
(c) any action by Drews or its affiliates related to the
reduction in the Drews Reserve as provided in Section 5.04 hereof or
otherwise in connection with the matter disclosed in item 2 of Schedule
3.06 of the Disclosure Schedule.
SECTION 6.04. NOTICE OF CLAIM. Any party seeking to be
indemnified hereunder (the "Indemnified Party") shall, within 15 days following
discovery of the matters giving rise to a Loss, notify the party from whom
indemnity is sought (the "Indemnity Obligor") in writing of any claim for
recovery, specifying in reasonable detail the nature of the Loss and the amount
of the liability estimated to arise therefrom. Failure to give such notice shall
constitute a waiver of the Loss attributable to such matters.
SECTION 6.05. LIMITS OF INDEMNIFICATION.
(A) In no event shall any Holder be liable for any Losses in
excess of his or its share of the aggregate Merger Consideration (exclusive of
interest on the Notes) that has been liquidated to cash and actually received by
such Holder (reduced by amounts paid pursuant to the second sentence of Section
1.01(D)(4) from the proceeds of USG's accounts as opposed to payments made by or
on behalf of Leisure). To the extent the Losses attributable to a Holder exceed
the Merger Consideration received that had been liquidated to cash, the Leisure
Indemnitees shall be entitled to recover any Losses from the Holder as follows:
(i) first, by reducing the amount of any remaining unpaid Post Merger Payments;
(ii) second, as a set-off against the Notes by reducing the principal amount of
the Notes in inverse order of payment on a dollar-of-principal for
dollar-of-Loss basis; and (iii) third, as a set-off against the Notes by
reducing any accrued but unpaid interest payments under the Notes on a
dollar-of-accrued-interest for dollar-of-Loss basis. No Loss shall be
indemnifiable by any Holder unless and until (and then only to the extent that)
the aggregate of all Losses claimed by all Leisure Indemnitees exceeds $250,000
in the aggregate.
(B) The amount payable with respect to any Loss by any
Indemnified Party (i) shall be reduced by the amount of any insurance proceeds
received with respect to the Loss, and each of the parties hereby agrees to use
its best efforts to collect any and all insurance proceeds to which it may be
entitled in respect of any Loss; (ii) shall be net of any federal, state or
local tax benefit derived by the Indemnified Party by reason of the Loss and
(iii) shall not include any amounts related to special or consequential damages.
(C) No Holder shall be required to indemnify any Indemnified
Party for any Loss resulting from the breach of a representation or warranty
hereunder if Leisure or Acquisition Sub knew or had reason to know at the time
of Closing of the existence of the facts or circumstances giving rise to such
breach and elected to proceed with the Closing notwithstanding such facts.
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<PAGE> 18
(D) Notwithstanding anything in this Article VI to the
contrary, each Holder shall be solely responsible (and no other Holder shall
have any liability on account thereof) for any Loss arising out of the breach by
him or it of the representations, warranties and/or covenants made by such
Holder in Article II hereof or otherwise pursuant to this Agreement which
pertain solely to himself or itself and not to USG. Any other Loss giving rise
to indemnification under Section 6.02 shall be charged pro rata against the
Holders based upon their relative Ownership Percentages as set forth opposite
their names on Schedule 2.03 of the Disclosure Schedule. It is also expressly
agreed that the sole shareholder shall be solely responsible for any breach of
Section 3.04 hereof.
(E) It is specifically understood and agreed that the trustees
under that certain Stock Ownership Trust Agreement dated April 18, 1995 shall
have no personal liability to any Leisure Indemnitee in their respective
capacities as trustees thereunder.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF USG AND THE HOLDERS
The obligations of USG and the Holders under this Agreement
are, except to the extent expressly waived in writing by them, subject to the
satisfaction at or prior to the Closing Date (including satisfaction thereof
simultaneously with the Closing, it being agreed that no action to be taken at
the Closing shall be deemed consummated until all actions to be taken at the
Closing are consummated) of each of the following conditions:
SECTION 7.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Leisure and Acquisition Sub herein contained
shall be true and correct in all material respects on and as of the Closing
Date, with the same force and effect as though made on and as of the Closing
Date, except as affected by the transactions contemplated hereby and there shall
be delivered to USG at the Closing a certificate to such effect signed by the
President of each of Leisure and Acquisition Sub.
SECTION 7.02. RESOLUTIONS OF THE BOARDS OF DIRECTORS OF
LEISURE AND ACQUISITION SUB. USG shall have received from each of Leisure and
Acquisition Sub certified copies of the resolutions of its Board of Directors
approving this Agreement and authorizing the consummation of the transactions
contemplated hereby.
SECTION 7.03. DELIVERY OF MERGER CONSIDERATION. Leisure shall
have delivered to the Holders the aggregate cash Merger Consideration and the
Notes in substantially the form of Exhibit C hereto as more particularly
provided for in Section 1.01(D) of this Agreement.
SECTION 7.04. OTHER DELIVERIES. Leisure shall cause the
Surviving Corporation to execute and deliver a Security Agreement in
substantially the form of Exhibit D hereto, UCC financing statements as
contemplated thereby and a Paying Agent Agreement in substantially the form of
Exhibit E hereto.
SECTION 7.05. REPURCHASE OF OPTIONS. Immediately prior to the
Closing, USG shall have redeemed all outstanding options to purchase USG Stock
from all persons other than the Holders listed on Schedule 2.03 of the
Disclosure Schedule.
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SECTION 7.06. DEFERRED COMPENSATION AGREEMENTS. USG shall have
entered into Deferred Compensation Agreements in substantially the form of
Exhibit F hereto with the persons listed on Schedule 8.06 of the Disclosure
Schedule providing for payments to such persons following the Closing.
SECTION 7.07. TIME. The Closing shall have occurred on or
before September 13, 1996.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF LEISURE AND ACQUISITION SUB
The obligations of Leisure and Acquisition Sub under this
Agreement are subject to the satisfaction at or prior to the Closing Date
(including satisfaction thereof simultaneously with the Closing, it being agreed
that no action to be taken at the Closing shall be deemed consummated until all
actions to be taken at the Closing shall be deemed consummated) of each of the
following conditions:
SECTION 8.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of USG and the Holders herein contained shall be
true and correct in all material respects on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date, except as
affected by transactions contemplated hereby and there shall be delivered to
Leisure and Acquisition Sub a certificate to such effect signed by the President
of USG and each Holder.
SECTION 8.02. PERFORMANCE OF AGREEMENTS. USG shall have
complied with the covenants set forth in Sections 5.01 and 5.02 and there shall
be delivered to Leisure and Acquisition Sub a certificate to such effect signed
by the President of USG and each Holder.
SECTION 8.03. CORPORATE APPROVAL. Leisure and Acquisition Sub
shall have received from USG certified copies of the resolutions of the Board of
Directors and sole shareholder approving the Agreement and authorizing the
consummation of the transactions contemplated hereby.
SECTION 8.04. REPURCHASE OF OPTIONS. Immediately prior to the
Closing, USG shall have redeemed all outstanding options to purchase USG Stock
from all persons other than the Holders listed on Schedule 2.03 of the
Disclosure Schedule and shall deliver evidence of such redemption in a form
reasonably satisfactory to Leisure at the Closing.
SECTION 8.05. TERMINATION OF AGREEMENTS. Prior to or
concurrent with the Closing, that certain Consulting and Noncompetition
Agreement between USG and Michael R. Pace dated as of April 18, 1995, as
amended, shall be terminated and that certain Agreement between USG and Robert
K. Swanson dated as of April 18, 1995, as amended, shall also have been
terminated and all payments due by USG thereunder paid in full.
SECTION 8.06. DEFERRED COMPENSATION AGREEMENTS. USG shall have
entered into Deferred Compensation Agreements in substantially the form of
Exhibit F hereto with the persons listed on Schedule 8.06 of the Disclosure
Schedule providing for payments to such persons following the Closing.
SECTION 8.07. OTHER AGREEMENTS. USG and Michael R. Pace shall
have entered into a Noncompetition Agreement in substantially the form of
Exhibit G hereto and USG and each of Michael I. Jacobson and Richard Martin
shall have entered into the Employment Agreement Amendments in the Forms
attached hereto as Exhibit H and I, respectively, and all amounts due thereunder
shall have been paid. Each Holder shall have executed and delivered a Receipt
and Release in substantially the form of Exhibit J hereto.
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SECTION 8.08. AVAILABLE CASH. After giving effect to the
transactions contemplated by this Agreement, USG shall have on hand at the
Closing not less than $250,000 in unrestricted cash ("Available Cash"). If,
however, Available Cash is less than $250,000, the aggregate cash portion of the
Merger Consideration will be reduced by an amount equal to the difference
between $250,000 and the actual amount of Available Cash (provided each Holder's
cash proceeds will be reduced pro rata based on his or its relative interest in
USG immediately prior to the Merger, calculated on a fully diluted,
as-if-converted basis). In such event, the condition set forth in this Section
8.08 shall be deemed satisfied.
SECTION 8.09. DISCHARGE OF OBLIGATIONS. USG shall have paid in
full or otherwise been released from all liability for all attorneys',
accountants', brokers' and other fees and expenses related to the transactions
contemplated by this Agreement; including without limitation, all amounts
disclosed on Schedule 3.07 and the bonus payments described on Schedule 5.01 of
the Disclosure Schedule.
SECTION 8.10. RESOLUTION OF LICENSE APPLICATION. USG shall
have withdrawn its appeal from the action denying licensure in Arizona and such
denial shall have become effective and USG shall have taken the actions
described in item 1 of Schedule 3.01 of the Disclosure Schedule.
SECTION 8.11. OTHER DELIVERIES. Each officer and director of
USG holding such positions immediately prior to the Closing shall tender their
resignations therefrom to be effective prior to or as of the Closing.
Notwithstanding the foregoing, Leisure agrees to cause the Surviving Corporation
to keep in effect the applicable provisions of its Articles of Incorporation and
Bylaws (as in effect immediately prior to the Effective Time) concerning
exculpation and indemnification of its officers and directors. The provisions of
this Section 8.11 shall survive the Closing forever.
ARTICLE IX
TERMINATION OF AGREEMENT
SECTION 9.01. CONDITIONS FOR TERMINATION. Notwithstanding
anything to the contrary herein, this Agreement may be terminated and the
transactions hereby may be abandoned:
(A) by the mutual consent of the Boards of Directors
of Leisure and USG at any time prior to the Effective Time;
(B) by action of the Board of Directors of Leisure or
USG if the Merger has not been consummated or the other party shall
have failed to satisfy the conditions to Closing to be satisfied by
such party on or before September 13, 1996;
(C) by action of the Board of Directors of Leisure if
there exists a material breach of any representation, warranty or
covenant made to Leisure or Acquisition Sub by USG or any Holder
following notice thereof and failure by such party to cure such breach
with 15 days thereafter; or
(D) by action of the Board of Directors of USG if
there exists a material breach of any representation, warranty or
covenant made to USG or the Holders by Leisure or Acquisition Sub
following notice thereof and failure by such party to cure such breach
within 15 days thereafter.
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<PAGE> 21
SECTION 9.02. DEPOSIT; LIQUIDATED DAMAGES. The parties agree
that the injury which would be caused to USG and the Holders on account of such
termination would be difficult or impossible to determine. They desire to
provide a means to compensate USG and the Holders for such damage and they have
concluded that the Escrow Deposit is a reasonable pre-estimate of the probable
loss. Thus, if this Agreement is terminated other than in accordance with
Section 9.01(A) or 9.01(C), USG shall be entitled to be paid the Escrow Deposit,
which, together with the other amounts described in Section 1.06 hereof, shall
be the sole remedy of USG and the Holders in connection with the termination of
this Agreement. Neither USG nor any Holder shall have any liability to Leisure
or Acquisition Sub or any of their affiliates, officers, directors, shareholders
or employees upon the termination of this Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. BROKERAGE. Except as disclosed on Schedule 3.07
of the Disclosure Schedule, Leisure and USG each represent and warrant to the
other that they have not dealt with any business broker, real estate agent,
finder, or other third party broker or intermediary in connection with the
subject of this Agreement or the transactions contemplated hereby, and Leisure
and USG each hereby agree to indemnify and hold each other harmless for any
obligation or liability sustained by either party on account of the breach by
the other party of such representation and warranty.
SECTION 10.02. EXPENSES. Except to the extent contemplated by
Section 8.09 hereof or as otherwise expressly provided herein, each party will
bear its own expenses in connection with the accounting, legal, investment
banking and professional services required in the negotiation and preparation of
this Agreement and the consummation of the transaction provided for in this
Agreement.
SECTION 10.03. GOVERNING LAW. This Agreement and the
transactions contemplated herein shall be governed by, interpreted, construed
and enforced in accordance with the laws of the State of Georgia applicable to
contracts made and to be performed entirely within the State of Georgia.
SECTION 10.04. ENTIRE AGREEMENT. This Agreement (including the
Schedules and any subsidiary agreements incorporated herein as Exhibits)
contains the entire agreement of the parties with respect to the subject matter
hereof and supersedes any prior agreement between or among the parties hereto,
including that certain letter of intent between Leisure and USG dated May 10,
1996, except as provided in paragraphs C, F, G and H thereof.
SECTION 10.05. AMENDMENTS AND MODIFICATIONS. This Agreement
shall not be modified, amended or changed in any respect except in writing duly
signed by the parties hereto and each party hereby waives any right to amend
this Agreement in any other way.
SECTION 10.06. ASSIGNMENT. This Agreement may not be assigned
by any of the parties hereto without the express written consent of the other
parties, except to the extent assigned to any transferee of a Holder's USG Stock
or Purchase Rights.
SECTION 10.07. CAPTIONS. Captions in this Agreement are solely
for purposes of identification and shall not in any manner alter or vary the
interpretation or construction of this Agreement.
SECTION 10.08. EXECUTION IN COUNTERPARTS. This Agreement may
be executed in more than one counterpart, each of which shall be deemed to be an
original, but all of which shall be deemed to
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<PAGE> 22
constitute one instrument. It shall not be necessary for all parties to have
signed the same counterpart provided that all parties have signed at least one
counterpart.
SECTION 10.09. NUMBER AND GENDER. Throughout this Agreement,
wherever the context so requires, the singular shall include the plural, and the
masculine gender shall include the feminine and neuter genders, and vice versa.
SECTION 10.10. NOTICES. All notices or other communications
that are required or permitted hereunder shall be given in writing and shall be
given either by personal delivery, by Federal Express or other overnight courier
or by telecopy, shall be deemed to have been given when personally delivered,
when deposited with charges prepaid with Federal Express or other nationally
recognized overnight courier service, or when transmitted to telecopy machine,
addressed to the respective parties as follows:
LEISURE AND ACQUISITION SUB:
Leisure Time Casinos and Resorts, Inc.
P.O. Box 276
1284 Miller Road
Avon, Ohio 44011
Telecopy: (216) 934-1027
Attn: Alan N. Johnson
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Keating, Muething & Klekamp
1800 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
Telecopy: (513) 579-6956
Attn: Jim Whitaker, Esquire
USG:
U.S. Games, Inc.
5825-B Peachtree Corners, East, N.W.
Norcross, Georgia 30092
Telecopy: (404) 446-2211
Attn: Michael I. Jacobson
-17-
<PAGE> 23
HOLDERS:
Samuel B. Witt, III, Trustee
Robert K. Swanson, Trustee
Michael I. Jacobson, Trustee
c/o 2300 Clarendon Blvd., Suite 407
Arlington, Virginia 22201-3367
Telecopy: (703) 525-7057
Martin J. Blank
c/o 15 Dunwoody Park Drive, Ste. 100
Atlanta, Georgia 30338
Telecopy: (770) 394-2919
Leonard D. Brinson
Alan R. Geiwitz
John Prudden
c/o Gaming Equipment Finance Corp.
1450 Metropolitan Center
333 South Seventh Street
Minneapolis, Minnesota 55402
Telecopy: (612) 339-1419
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Womble Carlyle Sandridge & Rice, P.L.L.C.
1600 BB&T Financial Center
200 West Second Street
Winston-Salem, North Carolina 27101
Telecopy: (910) 721-3660
Attn: Heather A. King, Esquire
Any party may by notice change the address to which notice or other
communications to such party are to be delivered or mailed.
SECTION 10.11. SUCCESSORS AND ASSIGNS. All of the terms and
provisions of this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their heirs, personal representatives,
transferees, successors and, to the extent permitted herein, their assigns. No
third parties are intended to benefit, however, from the terms and provisions
hereof or from any representation, warranty, covenant or obligation set forth
herein or in any schedule, exhibit or other writing delivered pursuant hereto.
SECTION 10.12. POST MERGER OPERATIONS. Following the Merger,
Leisure covenants that at no time shall the Surviving Corporation conduct
business under the name "U.S. Games" or any name substantially similar thereto
except that products, stationery and other items in USG's inventory as of the
Closing Date may be used until depleted and the Surviving Corporation may
identify itself verbally by its name including a reference that it was formerly
known as "U.S. Games." No Holder shall conduct business under the name "U.S.
Games." The provisions of this Section 10.12 shall survive the Closing forever.
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<PAGE> 24
SECTION 10.13. INSURANCE. Leisure covenants to cause the
Surviving Corporation to maintain at its or Leisure's own expense in force and
effect (with the same or greater coverage) all insurance policies that were in
effect at the Closing for the period set forth in Section 6.01, and the
provisions hereof shall survive the Closing for such period.
SECTION 10.14. DEFINITION OF "KNOWLEDGE". As used in this
Agreement, the term "to the best knowledge of USG" and similar terms shall mean
the actual knowledge of those persons who are members of USG's Board of
Directors as of the date hereof.
SECTION 10.15. PUBLIC ANNOUNCEMENT. Prior to the Closing, no
public announcements of the transactions contemplated hereby shall be made by
any of the parties hereto without the written agreement of all other parties.
[Remainder of page left blank intentionally]
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<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement on the day and year first above written.
U. S. GAMES, INC.
By: /s/
-------------------------------------
Its:
-----------------------------
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/
-------------------------------------
Its:
-----------------------------
LEISURE ACQUISITION, INC.
By: /s/
-------------------------------------
Its:
-----------------------------
/s/
-----------------------------------------
Robert K. Swanson, Trustee u/a dated
April 18, 1995 between Michael R. Pace,
Grantor, and Michael I. Jacobson,
Robert K. Swanson and Samuel B. Witt, III,
Trustees
/s/
-----------------------------------------
Samuel B. Witt, III, Trustee u/a dated
April 18, 1995 between Michael R. Pace,
Grantor, and Michael I. Jacobson,
Robert K. Swanson and Samuel B. Witt, III,
Trustees
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<PAGE> 26
/s/
-----------------------------------------
Michael I. Jacobson, Trustee u/a dated
April 18, 1995 between Michael R. Pace,
Grantor, and Michael I. Jacobson,
Robert K. Swanson and Samuel B. Witt, III,
Trustees
/s/
-----------------------------------------
Alan R. Geiwitz
/s/
-----------------------------------------
Leonard D. Brinson
/s/
-----------------------------------------
John Prudden
/s/
-----------------------------------------
Martin J. Blank
CHRIST PRESBYTERIAN CHURCH
By: /s/
-------------------------------------
Its:
-------------------------------------
CHURCH INNOVATIONS INSTITUTE
By: /s/
-------------------------------------
Its:
-------------------------------------
HOPE LUTHERAN CHURCH
By: /s/
-------------------------------------
Its:
-------------------------------------
CHILDREN'S HEALTH CARE FOUNDATION
By: /s/
-------------------------------------
Its:
-------------------------------------
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<PAGE> 1
EXHIBIT 2.1
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT ("Agreement") dated
as of January 31, 1997 is between LEISURE TIME CASINOS & RESORTS, INC., a
Colorado corporation ("Buyer"), and STAR OF CINCINNATI, INC., formerly known as
STAR CRUISES OF CINCINNATI, INC., an Ohio corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Buyer and Seller are parties to the Asset Purchase Agreement
dated as of January 25, 1996 (including all amendments, supplements or other
modifications thereto whether verbal or in writing at any time made prior to the
date of this Agreement, the "Asset Purchase Agreement"); and
WHEREAS, Buyer and Seller desire to enter into this Agreement for the
purpose of amending and restating the Asset Purchase Agreement.
NOW THEREFORE, in consideration of the foregoing recitals, the
mutuality of the terms, covenants and conditions of this Agreement and other
good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties agree to amend and restate the Asset Purchase
Agreement to read and provide as follows:
1. Purchase and Sale. Buyer agrees to purchase from Seller, and Seller
agrees to sell, transfer, convey, assign and deliver to Buyer at the Closing (as
such term is defined below), all of the following assets (the "Assets"):
1.1 The whole of the M/V "Star of Cincinnati", f/k/a "Star of
Detroit", United States Coast Guard ("USCG") Official No. 671576, together with
all of her tackle, apparel, furniture, fittings, tools, spare parts, supplies,
equipment, boats, engines, machinery, anchors, chains, electronics and all other
appurtenances and accessories thereunto appertaining and belonging (the
"Vessel").
1.2 The whole of the "Star Landing", f/k/a "Lively Lady", Ohio
No. 230102, together with all of her tackle, apparel, furniture, fittings,
tools, spare parts, supplies, equipment, boats, machinery, anchors, chains,
electronics and all other appurtenances and accessories thereunto appertaining
and belonging (the "Star Landing").
1.3 All right, title and interest of Seller in and to "Star of
Cincinnati", "Star Landing" and all other trade names and trademarks used by
Seller in its former riverboat excursion
<PAGE> 2
-2-
dining cruise business headquartered in Cincinnati, Ohio and the right to use
the name "Star" and all derivatives thereof.
1.4 All plans, logs, reports, data, notes, instruction books
and other information pertaining to the Vessel or the Star Landing.
1.5 Any other tangible and intangible assets pertaining to the
Vessel or the Star Landing, including, without limitation, all licenses,
permits, approvals, consents and certifications.
2. Purchase Price. In consideration of the sale, transfer, conveyance,
and assignment of the Assets to Buyer, Buyer shall pay to Seller at the Closing
the sum of $2,550,000 in cash (the "Purchase Price") by wire transfer of
immediately available funds.
3. No Mortgages, Liens, Rights or Encumbrances. The Assets are being
sold by Seller and being purchased by Buyer free and clear of all mortgages,
liens, rights and other encumbrances and Buyer is not assuming and shall not
otherwise be liable, directly or indirectly, for any of Seller's contracts,
agreements, leases, debts, obligations or liabilities whatsoever in respect of
the Assets.
4. Closing.
4.1 The closing of Buyer's purchase of the Assets contemplated
by this Agreement (the "Closing") shall take place at the offices of Keating,
Muething & Klekarnp, P.L.L., 1800 Provident Tower, One East Fourth Street,
Cincinnati, Ohio, commencing at 10:00 a.m. local time on a date mutually
agreeable to the parties on or before February 3, 1997 or at such later time and
date as the parties shall hereafter agree upon (the "Closing Date").
4.2 Seller shall deliver possession of (i) the Vessel to Buyer
at its current location in Panama City, Florida and (ii) the Star Landing to
Buyer at its current location in Dayton, Kentucky, each safely afloat.
Possession of the other Assets shall be delivered by Seller to Buyer at
Cincinnati, Ohio or such other location mutually agreeable to the parties,
immediately after the consummation of the Closing.
4.3 Except for Seller completing repairs to the Vessel's
propellers, starboard shaft and gears attributable to the Vessel having struck a
submerged object on or about February 3, 1996, the Vessel shall, upon Closing,
be sold "AS IS, WHERE IS" without drydocking. If all of such repairs to the
Vessel shall not have been completed before the Closing Date, the Closing will
still occur and an escrow will be established at the Closing with a portion of
the Purchase Price to cover the cost of the uncompleted repairs. The Star
Landing shall, upon Closing, be sold "AS IS, WHERE IS" without drydocking.
<PAGE> 3
-3-
5. Seller's Warranties and Representations. Seller hereby represents
and warrants to Buyer (which representations and warranties shall survive the
Closing) as follows:
5.1 Corporate Status of Seller. Seller is a corporation duly
organized and validly existing in good standing under the laws of Ohio and has
the corporate power and authority to sell the Assets under this Agreement.
Seller was formerly known as Star Cruises of Cincinnati, Inc.
5.2 Authorization of Transaction. The execution, delivery, and
performance of this Agreement by Seller has been duly and validly authorized by
its board of directors and the shareholders of Seller and Seller has taken all
necessary corporate action required for the authorization and approval of this
Agreement. This Agreement is binding upon and enforceable against Seller in
accordance with its terms.
5.3 Performance of Agreement. The execution and delivery of
this Agreement by Seller and the consummation of the transactions contemplated
herein will not result in the breach of any of the terms, covenants or
conditions of, or constitute a default with respect to, the Articles of
Incorporation or the ByLaws/Regulations of Seller or any contract, agreement,
indenture, note, bond, license or other instrument or obligation to which the
Seller is now a party or by which the Seller or any of its property or assets,
including the Assets, may be bound or affected or, to Seller's knowledge,
violate any law or any rule or regulation of any administrative agency or
governmental body or any order, writ, injunction or decree of any court,
administrative body or governmental body applicable to Seller or the Assets.
5.4 Title to Assets. Seller is the true and lawful owner of
all of the Assets. On the Closing Date, title to and ownership of the Assets
shall be transferred to Buyer free and clear of all mortgages, liens, rights and
other encumbrances, including all indebtedness and other amounts owed to
Comerica Bank, Detroit, Michigan, and all maritime and tax liens, or any other
debts, obligations or liabilities, including, without limitation, the claims of
customers, vendors or governmental authorities whatsoever relating to the
Assets.
5.5 Litigation. Except for the litigation now pending in the
United States District Court for the Northern District of Florida, Panama City
Division, entitled Comerica Bank v. M/V Star of Cincinnati, being Case No.
5:96CV212/RV, which litigation shall be settled or otherwise dismissed with
prejudice on or before the Closing, there is no existing or, to the best of
Seller's knowledge, threatened action, suit or proceeding, either legal,
equitable or administrative, affecting the Assets or any part thereof in any
court or by any federal, state, county or municipal department, commission,
board, bureau, agency or other governmental authority.
5.6 Violation of Laws. The Seller is not in violation of any
law, rule, regulation or court or administrative orders or processes applicable
to it or the Assets.
<PAGE> 4
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5.7 Solvency of Seller. The Seller is not insolvent and will
not be rendered insolvent as a result of the consummation of the transactions
contemplated by this Agreement.
5.8 Broker. At the Closing, Seller agrees to pay to Coastal
Marine the full amount of any and all fees, commissions and other amounts due
and payable to Coastal Marine as a result of the consummation of the
transactions provided for in this Agreement. Buyer shall have no liability or
obligation to pay any fees, commissions or other amounts due or payable to any
broker, finder or agent, including, without limitation, Coastal Marine, with
respect to this Agreement or the transactions contemplated hereby.
5.9 Environmental Matters. (a) Except for fuel and other
petrochemical products used or useful in the operation or maintenance of the
Vessel or the Star Landing, the Assets are, as of the date of this Agreement,
and will be, as of the Closing Date, free and clear of any and all Hazardous
Materials (as such term is defined below).
(b) Except for the flooding of the Star Landing on
or about May 13, 1996 and the Release of Hazardous Materials in the environment
as a result of such flooding (the "May 1996 Release"), Seller has not caused or
suffered to occur any Release (as such term is defined below) of any Hazardous
Materials with respect to the Assets at any time prior to the date hereof.
(c) The term "Hazardous Materials" as used in this
Agreement shall mean (i) any substance, material or waste, the generation,
handling, storage, treatment or disposal of which is regulated by any federal,
state or other governmental authority in any jurisdiction in which Seller owned,
leased or operated any of the Assets or forms the basis of liability under any
federal, state or other environmental law, rule or regulation, including any
material or substance which is either (A) defined as, (B) included in the
definition, listing or identification of, or (C) otherwise regulated as, a
"solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste" or "restricted hazardous waste" or other similar
term or phrase under any environmental laws, or (ii) petroleum or any fraction
or by-product thereof, asbestos, polychlorinated biphenyls, or radioactive
substances.
(d) The term "Release" as used in this Agreement
shall mean any release, spill, emission, leaking, pumping, pouring, emptying,
discharging, injecting, escaping, dumping, disposing, leaching or migration of
Hazardous Materials in the indoor or outdoor environment by Seller (or by a
person under Seller's direction or control), including the movement of a
Hazardous Material through or in the air, soil, surface water, ground water or
property.
(e) The May 1996 Release was cleaned up by Heritage
Environmental Services, Inc. on behalf of Seller in accordance with the
requirements of the United States Coast
<PAGE> 5
-5-
Guard. Seller shall cause Heritage Environmental Services, Inc. to deliver to
Buyer a certificate to such effect at or prior to the Closing. Such certificate
shall be in form and substance reasonably acceptable to Buyer.
6. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller (which representations and warranties shall survive the
Closing) as follows:
6.1 Corporate Status of Buyer. Buyer is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Colorado and has the corporate power and authority to purchase the Assets
under this Agreement.
6.2 Authorization of Transaction. The execution, delivery and
performance of this Agreement by Buyer has been duly and validly authorized by
its board of directors and Buyer has taken all necessary corporate action
required for the authorization and approval of this Agreement. This Agreement is
binding upon and enforceable against Buyer in accordance with its terms.
6.3 Performance of Agreement. The execution and delivery of
this Agreement by Buyer and the consummation of the transactions contemplated
herein will not result in the breach of any of the terms, covenants or
conditions of, or constitute a default with respect to, the Articles of
Incorporation or the Bylaws/Regulations of Buyer or any contract, agreement,
indenture, note, bond, license or other instrument or obligation to which Buyer
is now a party or by which Buyer or any of its property or assets may be bound
or affected or, to Buyer's knowledge, violate any law or any rule or regulation
of any administrative agency or governmental body or any order, writ, injunction
or decree of any court, administrative body or governmental body applicable to
Buyer.
7. Tax Matters. Buyer shall be responsible for the payment of any and
all sales, use, transfer or delivery taxes, assessments, fees or duties of any
kind arising out of the sale, transfer or delivery of the Assets levied or
imposed by any federal, state or local government or taxing authority. If the
levy or imposition of any such tax, assessment, fee or duty shall be made upon
the Seller, Buyer shall pay such amount to Seller upon demand of the amount
thereof. Seller shall promptly notify Buyer thereof and Buyer shall have the
right to contest any such tax, assessment, charge, fee or duty.
8. Bulk Sales. Buyer and Seller agree that the bulk sales laws are
inapplicable to the transactions contemplated by this Agreement.
9. Risk of Loss. The risk of loss to any of the Assets being purchased
shall remain with Seller until Closing pursuant to Section 4.2. If any Asset
sold hereunder shall be substantially damaged or destroyed by fire, casualty or
other cause prior to the Closing, Seller shall immediately
<PAGE> 6
-6-
notify Buyer thereof and furnish to Buyer a written statement of the amount of
the insurance, if any, payable on account thereof. For purposes of this
Agreement, Assets shall be deemed to be substantially damaged if the cost of
replacement or repair of all damages prior to completion of this transaction
will exceed $200,000. Within 10 days after receipt of notice of any such damage
or destruction, Buyer may terminate this Agreement. If any Asset is not
substantially damaged, it shall be promptly repaired or replaced at Seller's
expense prior to the Closing and the Closing Date shall be extended, if
necessary, for a reasonable period in order to permit such repairs or
replacement.
10. Conditions to Obligations of Buyer to Close. The obligation of
Buyer to consummate this Agreement shall be subject to the following conditions,
any one or more of which may be waived by Buyer:
10.1 Seller shall have delivered a Bill or Bills of Sale for
the Assets, in form and substance satisfactory to Buyer, free and clear from all
liens, charges and encumbrances whatsoever.
10.2 Seller shall have obtained an Abstract of Title from the
United States Coast Guard covering the Vessel. The Abstract of Title shall be
dated as of a recent date prior to the Closing Date reasonably accepted to
Buyer. Seller shall have delivered the original Abstract of Title and
Certificate of Documentation for the Vessel to Buyer.
10.3 Seller shall have delivered to Buyer or shall have caused
to be delivered to Buyer documentation in form and substance reasonably
acceptable to Buyer and its legal counsel evidencing and providing for the
satisfaction, termination, release and discharge of all mortgages, liens, claims
and other encumbrances on, to or in the Assets except for the Preferred
Mortgages dated May 28, 1992 granted by Seller to Henry E. Davis, Trustee,
securing indebtedness in the aggregate amount of $3,000,000 (the "Davis
Mortgages").
10.4 Seller and Buyer shall have entered into an agreement
(the "Davis Agreement") with Henry E. Davis, Trustee, whereby in consideration
of Buyer's issuance to Henry E. Davis, Trustee, of 150,000 unregistered shares
of Buyer's Common Stock, Henry E. Davis, Trustee, shall execute and deliver to
Buyer documentation in form and substance reasonably acceptable to Buyer and its
legal counsel evidencing and providing for the satisfaction, termination,
release and discharge of (a) the Davis Mortgages referred to in Section 10.3 and
described in the Abstract of Title for the M/V Star of Cincinnati referred to in
Section 10.2 and (b) all indebtedness secured by the Davis Mortgages. The Davis
Agreement shall be in form and substance reasonably acceptable to Seller and its
legal counsel and also to Buyer and its legal counsel. The transactions and
deliveries of documentation and shares of Buyer's Common Stock under the Davis
Agreement shall close and occur simultaneously with the closing of this
Agreement.
<PAGE> 7
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10.5 Prior to the Closing of this Agreement, Seller shall have
assigned to Buyer and Seller shall have caused Comerica Bank to have assigned to
Buyer all of their respective rights, as insureds, loss payees or otherwise, in
and to all insurance proceeds due or to become due with respect to claims for
known or unknown damages that are allocable to insurance policies covering the
Vessel and the Star Landing. The form and substance of each such assignment
shall be reasonably acceptable to Buyer and its legal counsel. The assignment
from Comerica Bank shall be effective immediately upon full payment to Comerica
Bank of all amounts payable to it by Seller secured by the Assets.
10.6 Seller shall have conducted searches of the necessary
offices where uniform commercial code filings are made and shall have determined
that the Assets are free and clear of all mortgages, liens, claims and other
encumbrances.
10.7 Seller shall have caused Heritage Environmental Services,
Inc. to have delivered to Buyer the certificate referred to in Section 5.9(e).
10.8 The representations and warranties made by Seller herein
shall be deemed to be repeated on the Closing Date with the same force and
effect as if made on such date and shall be true and correct in all respects as
though made on and as of the Closing Date.
10.9 Each and all of the covenants and agreements of Seller to
be performed or complied with prior to or on the Closing Date shall have been
duly performed or complied with by Seller.
10.10 All necessary corporate action shall have been taken by
Seller's board of directors and shareholders to authorize the execution,
delivery and performance of this Agreement.
10.11 The Assets shall be in as good a condition as they were
on the date of execution of this Agreement, reasonable wear and tear excepted,
subject only to the provisions of Section 4.3.
10.12 Seller shall have delivered such resolutions,
certificates and other documents reasonably requested by Buyer or Buyer's
counsel.
11. Conditions to Obligations of Seller to Close. The obligation of
Seller to consummate this Agreement shall be subject to the following
conditions, any one or more which may be waived by Seller:
11.1 The representations and warranties made by Buyer herein
shall be deemed to be repeated on the Closing Date with the same force and
effect as if made on such date, and shall be true and correct in all respects as
though made on and as of the Closing Date.
<PAGE> 8
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11.2 All necessary corporate action shall have been taken by
Buyer's board of directors to authorize the execution, delivery and performance
of this Agreement.
11.3 Buyer shall have delivered such resolutions, certificates
and other documents reasonably requested by Seller or Seller's counsel.
12. Indemnification: Setoff and Noncompetition.
12.1 Buyer shall indemnify and hold Seller, Charles W. Henne
and R. Dudley Webb harmless from and against any cost or expense, including
attorneys' fees and expenses, arising out of or relating to:
(a) all debts, liabilities and obligations of Buyer
of any nature arising from Buyer's ownership or use of the Assets after the
Closing Date; and
(b) any liability, loss, claim, damage or deficiency
resulting directly or indirectly from any misrepresentation, breach of warranty
or nonfulfillment of any term, covenant or condition on the part of Buyer under
this Agreement or from any misrepresentation in or omission from any certificate
or other instrument furnished or to be furnished by Buyer hereunder.
12.2 Seller shall indemnify and hold Buyer harmless from and
against any cost and expense, including attorneys' fees and expenses, arising
out of or relating to:
(a) all debts, liabilities and obligations of Seller
of any nature arising from the Assets, whether known or unknown, incurred on or
prior to the Closing Date; and
(b) any liability, loss, claim, damage or deficiency
resulting directly or indirectly from any misrepresentation, breach of warranty
or nonfulfillment of any term, covenant or condition on the part of Seller under
this Agreement or from any misrepresentation in or omission from any certificate
or other instrument furnished or to be furnished by Buyer hereunder.
12.3 If either party shall suffer or incur any liability,
loss, claim, damage or deficiency resulting directly or indirectly from any
misrepresentation, breach of warranty or nonfulfillment of any term, covenant or
condition on the part of the other party under this Agreement or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished by the other party, then, in each such case, such
party shall, in addition to the exercise of all of its other rights and remedies
under applicable law, be entitled, with or without notice to the other party, to
setoff against all amounts then or thereafter owed by it to the other party the
full and absolute amount of all such liabilities, losses, claims, damages or
deficiencies suffered or incurred by it.
<PAGE> 9
-9-
12.4 (a) Seller agrees that, for a period of five (5) years
following the Closing Date, neither Seller or any corporation, partnership or
other entity which is affiliated with Seller nor Charles W. Henne or R. Dudley
Webb or any corporation, partnership or other entity which is controlled by
Charles W. Henne or R. Dudley Webb (collectively, the "Non-Compete Parties")
shall engage in the excursion dining and/or gaming cruise business in direct
competition with Buyer's operation of the Vessel in the excursion dining and/or
gaming cruise business, except for the excursion dining and/or gaming cruise
business as operated by R. Dudley Webb in Key West, Florida on the date of this
Agreement (the foregoing covenant is hereinafter referred to as the "Non-Compete
Covenant").
(b) Buyer acknowledges and agrees that the ownership,
operation and/or management of marinas and/or marina facilities by any of the
Non-Compete Parties shall not constitute direct competition in breach of the
Non-Compete Covenant even if a vessel ("Competing Vessel") engaged in direct
competition with Buyer's operation of the Vessel in the excursion dining and/or
gaming cruise business is docked or moored at/in any marina or marina facility
owned, operated or rnanaged by any of the Non-Compete Parties so long as none of
the Non-Compete Parties directly or indirectly owns (through equity ownership or
otherwise), operates or manages the Competing Vessel.
(c) Buyer further acknowledges and agrees that the
ownership, operation and/or management of hotels, motels, restaurants, casinos
and other hospitality, dining and gambling facilities by any of the Non-Compete
Parties shall not constitute direct competition in breach of the Non-Compete
Covenant so long as any such facility engaged in direct competition with Buyer's
operation of the Vessel in the excursion dining and/or gaming cruise business is
located on land and permanently affixed to land.
(d) In furtherance of compliance with the Non-Compete
Covenant by the Non-Compete Parties, Buyer shall notify Seller in writing as to
the location of the Vessel's dockage or moorage at the time Buyer first places
the Vessel in the excursion dining and/or gaming cruise business and on each
subsequent occasion, if any, thereafter Buyer moves the Vessel to a different
place of dockage or moorage and each such notification shall be deemed to
constitute notice thereof to all of the Non-Compete Parties; provided, however,
Buyer's failure to so notify Seller at any time shall not relieve any of the
Non-Compete Parties from their obligation to comply with the Non-Compete
Covenant if, at any time during which direct competition in breach of the
Non-Compete Covenant shall occur, the breaching Non-Compete Party or Parties
shall otherwise have actual knowledge of the location of the dockage or moorage
of the Vessel.
(e) Notwithstanding the foregoing provisions of this
Section 12.4, if, at the time Buyer first places the Vessel in business and on
each subsequent occasion, if any, thereafter Buyer moves the Vessel to a
different place of dockage or moorage, any of the
<PAGE> 10
-10-
Non-Compete Parties are already engaged in a business at such location
("Pre-Existing Business") that would constitute a breach of the Non-Compete
Covenant after Buyer places the Vessel in business at such location, the
Pre-Existing Business shall not be deemed to constitute a breach of the
Non-Compete Covenant and the Non-Compete Parties shall thereafter be entitled to
engage in such business at such location and shall not be limited or restricted
by the Non-Compete Covenant.
13. Termination. The transactions contemplated by this Agreement may be
terminated on or before the Closing Date as follows: (a) by mutual written
agreement of each of the parties hereto; (b) by Buyer or Seller if any
representation or warranty made herein by the other was untrue or false in any
material respect as of the date given or made, (c) by Buyer or Seller if any
condition precedent to its obligation to close has not occurred and cannot be
satisfied within a reasonable period of time. In the event this Agreement is
terminated pursuant to any of the foregoing provisions, except as set forth
below, this Agreement shall forthwith become wholly void and of no force or
effect and there shall be no liability on the part of the parties hereto. If for
any reason on the Closing Date there has been non-fulfillment of any undertaking
by or condition precedent for any party not waived in writing by the party in
whose favor such undertaking or condition runs, the party in whose favor such
undertaking or condition runs may refuse to consummate the transactions
contemplated by this Agreement without any liability or obligation on its part
whatsoever. In the event of any non-fulfillment of an undertaking by Buyer or by
Seller, the refusal by Buyer or by Seller to consummate the transactions hereby
contemplated because of non-fulfillment by the other party shall not constitute
an election of remedies by Buyer or by Seller and Buyer or Seller may pursue
whatever legal rights and remedies they may have at law or in equity by reason
of such non-fulfillment or failure by Buyer or Seller.
14. Expenses. Buyer and Seller shall each bear their own legal,
accounting, appraisal, and other expenses in connection with the negotiation,
preparation and consummation of this Agreement and transactions contemplated
hereunder.
15. Covenants Pending Closing. Seller agrees to cooperate with Buyer so
as to insure a smooth and orderly transition of the transfer of the Assets to
Buyer. Seller shall insure that Buyer has access to the Vessel and the Star
Landing, including ingress and egress rights. Between tne date of this Agreement
and the Closing Date, Seller shall not, witnout the prior written cons.ent of
Buyer, (a) enter into any other agreement or incur any other obligation with
respect to the Assets; or (b) sell, abandon or otherwise dispose of or pledge,
mortgage or encumber any of the Assets.
16. Further Assurances. From time to time after the date hereof, at
Buyer's request and without further consideration, Seller shall execute and
deliver such instruments of conveyance, assignment and transfer and take such
other actions as Buyer may reasonably require to enable Seller to more
effectively transfer to Buyer and to put Buyer in possession of the Assets.
17. Survival of Representations and Warranties. The representations and
warranties set
<PAGE> 11
-11-
forth herein shall survive the Closing.
18. Notices. Whenever it is provided in this Agreement that any notice
or other communication shall or may be given to or served upon a party by the
other party, or whenever a party desires to give or serve upon the other party
any communication with respect to this Agreement, each such notice or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt or three days
after deposit in the United States Mail, registered or certified mail, return
receipt requested, with proper postage prepaid, (b) upon transmission, when sent
by telecopy or other similar facsimile transmission (with such telecopy or
facsimile confirmed by telecopy answerback) or by delivery of a copy by personal
delivery, (c) one (1) business day after deposit with a reputable overnight
courier with all charges prepaid or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number as follows:
If to Seller at: Star of Cincinnati, Inc.
10555 Montgomery Road
Cincinnati, Ohio 45242
Attention: Charles W. Henne
Facsimile No. (513) 794-9229
With a copy to: Webb, Hoskins, Glover & Strafford, P.S.C.
3010 Lexington Financial Center
250 West Main Street
Lexington, Kentucky 40507
Attention: R. Dudley Webb, Esq.
Facsimile No. (606) 281-5644
If to Buyer at: Leisure Time Casinos & Resorts, Inc.
1284 Miller Road
Avon, Ohio 44011
Attention: Alan N. Johnson
Facsimile No. (216) 934-1027
With a copy to: Keating, Muething & Klekamp, P.L.L.
1800 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
Attention: James R. Whitaker
Facsimile No. (513) 579-6956
<PAGE> 12
-12-
19. Amendment. This Agreement may not be amended or terminated orally,
but may only be amended by an agreement in writing signed by the party against
whom enforcement of any waiver, amendment, modification, extension, discharge or
termination is sought.
20. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
Closing, will supersede and replace all prior agreements, understandings and
negotiations, oral and written, between the parties hereto with respect to the
subject matter hereof, including, without limitation, (i) the Asset Purchase
Agreement, (ii) the letter agreement dated January 25, 1996 from Alan N. Johnson
on behalf of Buyer to Charles W. Henne on behalf of Seller (the "1/25/96 Letter
Agreement"), and (iii) the agreement entitled "REVISED AGREEMENT FOR PURCHASE OF
THE STAR OF CINCINNATI AND STAR LANDING" dated December 21, 1996 between the
parties (the "12/21/96 Terms Agreement").
Effective upon Closing, each of the parties hereby forever waives,
releases and discharges and agrees to hold the other party and each of its
shareholders, directors, officers, employees, agents and independent contractors
(the "Released Parties") harmless from and against any and all claims, rights,
suits or liabilities arising directly or indirectly from or by reason of the
Asset Purchase Agreement, the 1/25/96 Letter Agreement and the 12/21/96 Terms
Agreement, whether known or unknown as of the date hereof. Effective upon
Closing, each of the parties hereby covenants and agrees not to sue any of the
Released Parties with respect to any of such matters.
Effective upon Closing, each of the parties hereby further covenants
and agrees that it shall be solely responsible for and shall bear all of its
legal, accounting, appraisal and other expenses paid, incurred or accrued by it
under or as a result of the Asset Purchase Agreement, the 1/25/96 Letter
Agreement and the 12/21/96 Terms Agreement.
21. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one -and the same instrument.
22. Assignability. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by any party hereto without the prior
written consent of the other party hereto, except that Buyer shall be entitled
to assign its rights hereunder to any wholly-owned subsidiary of Buyer and
Seller shall be entitled to assign or transfer the Purchase Price or the Stock
Consideration to any of its shareholders ("Permitted Transfers"). If any
Permitted Transfer shall occur, the assigning or transferring party shall give
written notice thereof to the other party.
23. Governing Law. This Agreement and the performance hereunder shall
be governed by and construed in accordance with the laws of the State of Ohio.
<PAGE> 13
-13-
24. Waiver. Any consent by any party, or waiver of, any breach of any
provision of this Agreement by the other, whether express or implied, shall not
constitute a consent, waiver of, or excuse for any breach of any other provision
or subsequent breach of this provision. Any waiver of any terms of this
Agreement shall be in a writing executed by the waiving party.
25. Construction. The parties acknowledge that this Agreement was
initially prepared by legal counsel for Buyer and that both parties and their
respective legal counsel have read and negotiated the language used herein. The
parties agree that because both parties participated in negotiating and drafting
this Agreement, no rule of construction shall apply to this Agreement which
construes ambiguous language in favor of or against any party by reason of the
party's role in drafting this Agreement.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Amended and Restated Asset Purchase Agreement on the date first above written.
STAR OF CINCINNATI, INC.
By: /s/
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
LEISURE TIME CASINOS &
RESORTS, INC.
By: /s/
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE> 1
EXHIBIT 2.02
ACCORD AND SATISFACTION AND RELEASE OF MORTGAGES AGREEMENT
This Accord and Satisfaction and Release of Mortgages Agreement
("Agreement") dated as of February 3, 1997 by LEISURE TIME CASINOS AND RESORTS,
INC., a Colorado corporation ("Leisure Time"), STAR OF CINCINNATI, INC., an
Ohio corporation ("Star") and HENRY E. DAVIS, TRUSTEE ("Trustee").
WITNESSETH:
WHEREAS, Star on May 28, 1992, granted to Trustee a mortgage recorded
with the United States Coast Guard, St. Louis, Missouri at Book PM-139, Page
225, in the amount of $2,300,000, and a mortgage recorded with the United
States Coast Guard, St. Louis, Missouri at Book PM-130, Page 225, in the amount
of $700,000, securing indebtedness in the aggregate amount of $3,000,000
(together, the "Davis Mortgages");
WHEREAS, Star and Leisure Time are parties to an Amended and Restated
Asset Purchase Agreement ("Asset Purchase Agreement") dated as of January 31,
1997 which provides that as a condition to the closing of Leisure Time's
obligations under the Asset Purchase Agreement, Star, Leisure Time and Trustee
shall have entered into an agreement whereby in consideration of Leisure Time's
issuance to Trustee of 150,000 unregistered shares of Leisure Time's common
stock, Trustee shall execute and deliver to Leisure Time documentation
evidencing and providing for the satisfaction, termination, release and
discharge of the Davis Mortgages and the payment in full of all indebtedness
secured by the Davis Mortgages.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutuality of this Agreement, the parties agree as follows:
1. Capitalized Terms. Capitalized terms not defined herein shall have
the meanings assigned to them in the Asset Purchase Agreement.
2. Issuance of Shares. Leisure Time shall issue to Trustee 150,000
shares of its Common Stock ("Shares"). The Shares will not be registered under
the Securities Act of 1933 (the "Act") or under the laws of any state and in
accepting delivery of the Shares, the Trustee shall thereby acknowledge Leisure
Time is not obliged to so register any of the Shares at any time in the future.
The certificate or certificates representing the Shares shall include a
customary legend to the effect that the Shares may not be transferred by the
holder thereof in the absence of (a) an effective registration statement for
the shares under the Act and applicable state laws or (b) an opinion of counsel
for Leisure Time that such registration is not required. Leisure Time shall
deliver a certificate representing the Shares to the Trustee as soon as
practicable after the date of this Agreement.
3. Satisfaction of Davis Mortgages and Indebtedness. In consideration
of the issuance of the Shares, the Trustee hereby satisfies, terminates,
releases and discharges the Davis Mortgages and all indebtedness secured by the
Davis Mortgages is hereby deemed to be paid in full.
4. Release and Discharge. Trustee does hereby release and discharge
Star and Leisure Time from and against any and all claims, causes of action,
liabilities and demands of any nature,
<PAGE> 2
-2-
kind or description whatsoever relating, directly or indirectly, to the Davis
Mortgages or any indebtedness secured by the Davis Mortgages.
5. Further Assurances. Trustee further agrees to execute and deliver,
at any time and from time to time after the date hereof, such satisfactions of
mortgage, releases, termination statements and other documents and instruments
as Leisure Time may reasonably request in connection with the foregoing
provisions of the this Agreement.
6. Put Option. In the event Leisure Time's initial public offering of
its Common Stock shall not have been closed on or before February 3, 2000,
Trustee shall be entitled, during the period beginning on February 3, 2000 and
ending on May 3, 2000, but only during such period, to sell to Leisure Time,
upon 30 days' prior written notice to Leisure Time, all or any portion of the
Shares for a price of $7.50 per share. Leisure Time shall pay Trustee the
aggregate price for all Shares so sold, without interest, at the rate of 10%
per month for 10 consecutive months with the first such payment due on the
closing date of Trustee's sale of the Shares to Leisure Time and each
subsequent monthly payment due on the same day in each consecutive month
thereafter until such aggregate price shall have been paid in full. The
certificate or certificates representing the Shares shall also include a legend
to the effect of the foregoing provisions of this Section 6.
7. Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Ohio and all of its
terms and conditions shall be binding upon and shall inure to the benefit of
the parties and their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
LEISURE TIME CASINOS AND RESORTS, INC.,
a Colorado corporation
By: /s/
--------------------------------------
Name:
Title:
STAR OF CINCINNATI, INC., an Ohio corporation
By: /s/
--------------------------------------
Name:
Title:
/s/
---------------------------------------
Henry E. Davis, Trustee
<PAGE> 1
EXHIBIT 3.0
ARTICLES OF INCORPORATION
OF
LEISURE TIME CASINOS & RESORTS, INC.
The undersigned natural person of the age of eighteen years or more,
acting as an incorporator of a corporation under the Colorado Corporation Code,
adopts the following Articles of Incorporation for such corporation.
FIRST: The name of the corporation is LEISURE TIME CASINOS & RESORTS,
INC.
SECOND: The aggregate number of shares of stock which the corporation
shall have authority to issue is 50,000,000, of which 45,000,000 shares shall
be common stock, $0.001 par value, and 5,000,000 shares shall be preferred
stock no par value. The designations, preferences, limitations and relative
rights of the shares of each class are as follows:
Common Stock:
(a) All common stock, when issued, shall be fully paid and
nonassessable.
(b) No holder of shares of common stock of the corporation
shall be entitled, as such, to any preemptive right to acquire
unissued shares of the corporation or securities convertible into such
shares or carrying a right to subscribe to or acquire such shares or
to any preemptive right to acquire any other securities which the
corporation may now or in the future be authorized to issue. The Board
of Directors of the corporation may, however, in its discretion by
resolution determine that any unissued securities of the corporation
shall be offered for subscription solely to the holders of any class
or classes of such common stock, in such proportions based on common
stock ownership as the Board of Directors in its discretion may
determined.
(c) Each share of common stock shall be entitled to one vote
at stockholders' meetings, either in person or by proxy. Cumulative
voting in the election of directors shall not be permitted.
Preferred Stock:
The Board of Directors hereby is expressly authorized, by resolution
or resolutions, to provide out of the unissued shares of preferred stock, for
the issuance of one or more series of preferred stock, with such voting powers,
if any, and with such designations, preferences, and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof as shall be expressed in the resolution or resolutions
providing for the issuance thereof adopted by the Board of Directors,
including, without limiting the generality of the foregoing, the following:
<PAGE> 2
(a) The designation of such series, the number of shares to
constitute such series and the stated value thereof if different from
the par value thereof;
(b) Whether the shares of such series shall have voting
rights, in addition to any voting rights provided by law, and, if so,
the terms of such voting rights which may be general or limited;
(c) The dividends, if any, payable on such series, whether
any such dividends shall be cumulative, and, if so, from what dates,
the conditions and dates upon which such dividends shall be payable,
the preference or relation which such dividends shall bear to the
dividends payable on any shares of stock of any other class or any
other series of this class;
(d) Whether the shares of such series shall be subject to
redemption by the corporation, and, if so, the times, prices and other
terms and conditions of such redemption;
(e) The amount or amounts payable upon such shares of such
series upon, and the rights of the holders of such series in, the
voluntary or involuntary liquidation, dissolution or winding up, or
upon any distribution of the assets, of the corporation;
(f) Whether the shares of such series shall be subject to the
operation of a retirement or sinking fund, and, if so, the extent to
and manner in which any such retirement or sinking fund shall be
applied to the purchase or redemption of the shares of such series for
retirement or other corporate purposes and the terms and provisions
relative to the operation thereof;
(g) Whether the shares of such series shall be convertible into or
exchangeable for, shares of stock of any other class or classes or of
any other series of preferred stock or any other class or classes of
capital stock, and if so, the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting the same,
and any other terms and conditions of such conversion or exchange;
(h) The limitations and restrictions, if any, to be effective while
any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, or upon the
purchase, redemption or other acquisition by the corporation of, the
common stock or shares of any other class or any other series of
preferred stock; and
(I) The conditions of restrictions, if any, upon the creation
of indebtedness of the corporation or upon the issue of any additional
stock, including additional shares of such series or of any other
series of preferred stock or of any other class or classes.
The holders of common stock shall have and possess all rights as
stockholders of the corporation, including such rights as may be granted
elsewhere by these Articles of Incorporation, except as such rights may be
limited by the preferences, privileges and voting powers, and the restrictions
and limitations of the preferred stock.
Subject to preferential dividend rights, if any, of the holders of
preferred stock, dividends
2
<PAGE> 3
upon the common stock may be declared by the Board of Directors and paid out of
any funds legally available therefor at such times and in such amounts as the
Board of Directors shall determine.
Dividends on shares of common stock and preferred stock may be paid in
shares of common stock or preferred stock.
THIRD: The corporation shall have the right to impose restrictions on
the sale or other disposition of its shares which restrictions may be placed
upon all or a portion or portions of the certificates evidencing the
corporation's shares to which such restrictions apply.
FOURTH: The address of the corporation's initial registered office is
1610 Wink Street, Suite 200, Denver, Colorado 80202, and the name of the
initial registered agent at such address is Thomas S. Smith.
FIFTH: Meetings of shareholders may be held at such time and place as
the Bylaws shall provide. A majority of the shares entitled to vote represented
in person or by proxy shall constitute a quorum at any meeting of the
shareholders.
SIXTH: The number of directors constituting the initial Board of
Directors of the corporation is one. The name and address of the person who is
to serve as the director until the first annual meeting of shareholders or
until his successor is elected and shall qualify is:
<TABLE>
Name Address
- ------------------------------ -----------------------------
<S> <C>
Alan N. Johnson Address
522 Broadway
Lorain, Ohio 44052
</TABLE>
The number of directors to be elected at the annual meeting of shareholders or
at a special meeting called for the election of directors shall not be less
than three, the exact number to be fixed by the Bylaws; provided that, if the
outstanding shares are held of record by fewer than three shareholders, there
need only be as many directors as there are shareholders.
SEVENTH The name and address of the incorporator is Thomas S. Smith,
1610 Wynkoop Street, Suite 200, Denver, Colorado 80202.
EIGHTH The officers and directors of this corporation shall be subject
to the doctrine of corporate opportunities only insofar as it applies to
business opportunities in areas of interest designated by the Board of
Directors of this corporation from time to time in resolutions appearing in the
corporation's Minutes. When such an area of interest is delineated, all such
business opportunities within such area of interest which come to the attention
of the officers and directors of this corporation shall be disclosed promptly
to this corporation and made available to it. The Board of Directors may reject
any business opportunity presented to it in such an area of interest and,
thereafter, any officer or director may avail himself or herself of such
opportunity. Until such time as this corporation, through its Board of
Directors, has designated an area as an area of
3
<PAGE> 4
interest, the officers and directors of this corporation shall be free to
engage in such area of interest on their own and this doctrine shall not limit
the rights of any officer or director of this corporation to continue a
business existing prior to the time that such area of interest is designated by
this corporation. This provision shall not be construed to release any officer,
director or employee of the corporation from any other duties which he or she
may have to the corporation.
NINTH: Any of the directors or officers of this corporation shall not,
in the absence of fraud, be disqualified by his or her office from dealing or
contracting with this corporation whether as vendor, purchaser or otherwise,
nor shall any firm, partnership, association, or corporation of which he or she
shall be a member or in which he or she may be pecuniarily interested in any
manner, be so disqualified. No director or officer of this corporation, nor any
firm, partnership, association or corporation with which he or she is connected
as aforesaid, shall be liable to account to this corporation or its
shareholders for any profit realized by him or her or such firm, partnership,
association or corporation from or through any such transaction or contract; it
being the express purpose and intent of this Article to permit this corporation
to buy from, sell to, or otherwise deal with the officers and directors of this
corporation and firms, partnerships, associations or corporations of which the
directors and officers of this corporation, or any one or more of them, may be
members, directors, or officers, or in which they or any of them have pecuniary
interests; and the contracts and transactions of this corporation with any such
persons or entities, in the absence of fraud, shall not be void or voidable or
affected in any manner by reason of the officers or directors having a direct
or indirect interest therein or a direct or indirect interest in such entities.
The interested director or directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or a committee thereof
authorizing, approving or ratifying any such contract or transaction. Further,
the vote of any such interested director at a meeting of the Board of Directors
or committee thereof authorizing, approving or ratifying any such contract or
transaction may be counted if his or her relationship or interest with respect
to any such contract or transaction (i) is disclosed and such transaction or
contract is authorized, approved or ratified by a majority of the directors
without counting the vote or consent of such interested director, or (ii) is
disclosed to the shareholders of the corporation and authorized, approved or
ratified by the shareholders by vote or written consent, or (iii) such contract
or transaction is fair and reasonable to the corporation.
TENTH: When, with respect to any action to be taken by the
shareholders of this corporation, the Colorado Corporation Code requires the
vote or concurrence of the holders of two-thirds of the outstanding shares
entitled to vote thereon, or of any class or series, such action may be taken
by the vote or concurrence of a majority of such shares or class or series
thereof.
ELEVENTH: A director of this corporation shall not be personally
liable to the corporation or its shareholders for monetary damages for breach
of fiduciary duty as a director except that this provision shall not eliminate
or limit the liability of a director to the corporation or to its shareholders
for monetary damages for (i) any breach of the director's duty of loyalty to
the corporation or to its shareholders; (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the
law; (iii) acts specified in Section 7-5-114 of the Colorado Corporation Code
as the same may be amended from time to time; or (iv) any transactions from
which the director derived an improper personal benefit.
4
<PAGE> 5
Any repeal or modification of this Article Eleventh by the
shareholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
TWELFTH: Subject to repeal by action of the shareholders, the Board of
Directors of this corporation is authorized to adopt, confirm, ratify, alter,
amend, rescind and repeal Bylaws or any portion thereof from time to time.
Dated: February 4, 1993.
/s/ Thomas S. Smith
----------------------------------
Thomas S. Smith
5
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
LEISURE TIME CASINOS & RESORTS, INC.
Pursuant to the provisions of the Colorado Business Corporation Act,
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is LEISURE TIME CASINOS & RESORTS,
INC.
SECOND: The following amendments to the Articles of Incorporation were
duly adopted by the directors on March 7, 1997 and by the shareholders on April
2, 1997. The number of votes cast for the amendments by each voting group
entitled to vote separately on the amendments was sufficient for approval by
that voting group:
Article SECOND of the Articles of Incorporation is amended in its
entirety so that as amended it reads as follows:
SECOND
AUTHORIZED CAPITAL
1. The aggregate number of shares which the corporation shall have
authority to issue is 45,000,000 shares of $0.001 par value common stock and
5,000,000 shares of no par value preferred stock. The preferred stock may be
issued in any number of series, as determined by the board of directors. The
board of directors may by resolution fix the designation and number of shares
of any such series, and may determine, alter or revoke the rights, including
voting rights, preferences, privileges and restrictions pertaining to any
wholly unissued shares. The board of directors may thereafter in the same
manner increase or decrease the number of shares of any such series (but not
below the number of shares of that series then outstanding).
2. Each common shareholder of record shall have one vote for each
share of stock standing in the shareholder's name on the books of the
corporation and entitled to vote. Cumulative voting shall not be permitted in
the election of directors or otherwise.
3. Unless otherwise ordered by a court of competent jurisdiction, at
all meetings of shareholders, one-third of the votes entitled to vote at such
meeting, represented in person or by proxy, shall constitute a quorum of that
voting group.
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4. Except as bylaws adopted by the shareholders may provide for a
greater voting requirement and except as is otherwise provided by the Colorado
Business Corporation Act with respect to action on a plan of merger or share
exchange, on the disposition of substantially all of the property of the
corporation, and on the dissolution of the corporation, action on a matter
other than the election of directors is approved if a quorum exists and if the
votes cast favoring the action exceed the votes cast opposing the action. Any
bylaw adding, changing, or deleting a greater quorum or voting requirement for
shareholders shall meet the same quorum requirement and be adopted by the same
vote required to take action under the quorum and voting requirements then in
effect or proposed to be adopted, whichever are greater.
Article THIRD of the Articles of Incorporation is amended in its
entirety so that as amended it reads as follows:
THIRD
PURPOSES
The corporation shall have and may exercise all of the rights, powers
and privileges now or hereafter conferred upon corporations organized under the
laws of Colorado. In addition, the corporation may do everything necessary,
suitable or proper for the accomplishment of any of its corporate purposes. The
corporation may conduct part or all of its business in any part of Colorado,
the United States or the world and may hold, purchase, mortgage, lease and
convey real and personal property in any of such places.
Article FOURTH of the Articles of Incorporation is amended in its
entirety so that as amended it reads as follows:
FOURTH
BOARD OF DIRECTORS
The corporate powers shall be exercised by or under the authority of,
and the business and affairs of the corporation shall be managed under the
direction of, a board of directors. The number of directors of the corporation
shall be fixed by the bylaws, or if the bylaws fail to fix such a number, then
by resolution adopted from time to time by the board of directors.
Article FIFTH of the Articles of Incorporation is amended in its
entirety so that as amended it reads as follows:
FIFTH
LIMITATION ON DIRECTOR LIABILITY
A director of the corporation shall not be personally liable to the
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director; except that this provision shall not eliminate or limit the
liability of a director to the corporation or to its
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shareholders for monetary damages otherwise existing for (i) any breach of the
director's duty of loyalty to the corporation or to its shareholders; (ii) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) acts specified in Section 7-108-403 of the
Colorado Business Corporation Act, as it may be amended from time to time; or
(iv) any transaction from which the director directly or indirectly derived any
improper personal benefit. If the Colorado Business Corporation Act is
hereafter amended to eliminate or limit further the liability of a director,
then, in addition to the elimination and limitation of liability provided by
the preceding sentence, the liability of each director shall be eliminated or
limited to the fullest extent permitted by the Colorado Business Corporation
Act as so amended. Any repeal or modification of this Article FIFTH shall not
adversely affect any right or protection of a director of the corporation under
this Article FIFTH, as in effect immediately prior to such repeal or
modification, with respect to any liability that would have accrued, but for
this Article FIFTH, prior to such repeal or modification. Nothing contained
herein will be construed to deprive any director of the director's right to all
defenses ordinarily available to a director nor will anything herein be
construed to deprive any director of any right the director may have for
contribution from any other director or other person.
Article SIXTH of the Articles of Incorporation is amended in its
entirety so that as amended it reads as follows:
SIXTH
CONFLICTING INTEREST TRANSACTIONS AND INDEMNIFICATION
The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation, and the same
are in furtherance of and not in limitation or exclusion of the powers
conferred by law.
1. CONFLICTING INTEREST TRANSACTIONS. As used in this paragraph,
"conflicting interest transaction" means any of the following: (i) a loan or
other assistance by the corporation to a director of the corporation or to an
entity in which a director of the corporation is a director or officer or has a
financial interest; (ii) a guaranty by the corporation of an obligation of a
director of the corporation or of an obligation of an entity in which a
director of the corporation is a director or officer or has a financial
interest; or (iii) a contract or transaction between the corporation and a
director of the corporation or between the corporation and an entity in which a
director of the corporation is a director or officer or has a financial
interest. No conflicting interest transaction shall be void or voidable, be
enjoined, be set aside, or give rise to an award of damages or other sanctions
in a proceeding by a shareholder or by or in the right of the corporation,
solely because the conflicting interest transaction involves a director of the
corporation or an entity in which a director of the corporation is a director
or officer or has a financial interest, or solely because the director is
present at or participates in the meeting of the corporation's board of
directors or of the committee of the board of directors which authorizes,
approves or ratifies a conflicting interest transaction, or solely because the
director's vote is counted for such purpose if: (A) the material facts as to
the director's relationship or interest and
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as to the conflicting interest transaction are disclosed or are known to the
board of directors or the committee, and the board of directors or committee in
good faith authorizes, approves or ratifies the conflicting interest
transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors are less than a quorum; or
(B) the material facts as to the director's relationship or interest and as to
the conflicting interest transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the conflicting interest transaction
is specifically authorized, approved or ratified in good faith by a vote of the
shareholders; or (C) the conflicting interest transaction is fair as to the
corporation as of the time it is authorized, approved or ratified by the board
of directors, a committee thereof, or the shareholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting
of the board of directors or of a committee which authorizes, approves or
ratifies the conflicting interest transaction.
2. LOANS AND GUARANTIES FOR THE BENEFIT OF DIRECTORS. Neither the
board of directors nor any committee thereof shall authorize a loan by the
corporation to a director of the corporation or to an entity in which a
director of the corporation is a director or officer or has a financial
interest, or a guaranty by the corporation of an obligation of a director of
the corporation or of an obligation of an entity in which a director of the
corporation is a director or officer or has a financial interest, until at
least ten days after written notice of the proposed authorization of the loan
or guaranty has been given to the shareholders who would be entitled to vote
thereon if the issue of the loan or guaranty were submitted to a vote of the
shareholders. The requirements of this paragraph 2 are in addition to, and not
in substitution for, the provisions of paragraph 1 of this Article SIXTH.
3. INDEMNIFICATION. The corporation shall indemnify, to the maximum
extent permitted by law in effect from time to time, any person who is or was a
director, officer, agent, fiduciary or employee of the corporation against any
claim, liability or expense arising against or incurred by such person made
party to a proceeding because such person is or was a director, officer, agent,
fiduciary or employee of the corporation or because such person is or was
serving another entity as a director, officer, partner, trustee, employee,
fiduciary or agent at the corporation's request. The corporation shall further
have the authority to the maximum extent permitted by law to purchase and
maintain insurance providing such indemnification.
4. NEGATION OF EQUITABLE INTERESTS IN SHARES OR RIGHTS. Unless a
person is recognized as a shareholder through procedures established by the
corporation pursuant to Section 7-107-204 of the Colorado Business Corporation
Act or any similar law, the corporation shall be entitled to treat the
registered holder of any shares of the corporation as the owner thereof for all
purposes permitted by the Colorado Business Corporation Act, including without
limitation all rights deriving from such shares, and the corporation shall not
be bound to recognize any equitable or other claim to, or interest in, such
shares or rights deriving from such shares on the part of any other person
including without limitation, a purchaser, assignee or transferee of such
shares, unless and until such other person becomes the registered holder of
such shares or is recognized as such, whether or not the corporation shall have
either actual or
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constructive notice of the claimed interest of such other person. By way of
example and not of limitation, until such other person has become the
registered holder of such shares or is recognized pursuant to Section 7-107-204
of the Colorado Business Corporation Act or any similar applicable law, such
person shall not be entitled: (i) to receive notice of the meetings of the
shareholders; (ii) to vote at such meetings; (iii) to examine a list of the
shareholders; (iv) to be paid dividends or other distributions payable to
shareholders; or (v) to own, enjoy and exercise any other rights deriving from
such shares against the corporation. Nothing contained herein will be construed
to deprive any beneficial shareholder, as defined in Section 7-113-101(1) of
the Colorado Business Corporation Act, as amended from time to time, of any
right such beneficial shareholder may have pursuant to Article 113 of the
Colorado Business Corporation Act or any similar law subsequently enacted.
Article SEVENTH is of the Articles of Incorporation is amended in its
entirety so that as amended it reads as follows:
SEVENTH
PREEMPTIVE RIGHTS
Shareholders shall not have preemptive rights to acquire unissued or
treasury shares of the corporation or securities convertible into such shares
or carrying a right to subscribe to or acquire such shares.
Articles EIGHTH, NINTH, TENTH, ELEVENTH and TWELFTH are hereby deleted
from the Articles of Incorporation.
Dated the 2nd day of April, 1997.
LEISURE TIME CASINOS & RESORTS, INC.,
a Colorado corporation
By: /s/ Alan N. Johnson
-------------------------------------
Alan N. Johnson, President
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EXHIBIT 3.2
ADOPTED APRIL 2, 1997
EFFECTIVE APRIL 3, 1997
BYLAWS
OF
LEISURE TIME CASINOS & RESORTS, INC.
ARTICLE I
OFFICES
The principal office of the corporation shall be designated from time
to time by the corporation and may be within or outside of Colorado.
The corporation may have such other offices, either within or outside
Colorado, as the board of directors may designate or as the business of the
corporation may require from time to time.
The registered office of the corporation required by the Colorado
Business Corporation Act to be maintained in Colorado may be, but need not be,
identical with the principal office, and the address of the registered office
may be changed from time to time by the board of directors.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders
shall be held each year on a date and at a time fixed by the board of directors
of the corporation (or by the chairman of the board or the president in the
absence of action by the board of directors), for the purpose of electing
directors and for the transaction of such other business as may come before the
meeting. If the election of directors is not held on the day fixed as provided
herein for any annual meeting of the shareholders, or any adjournment thereof,
the board of directors shall cause the election to be held at a special meeting
of the shareholders as soon thereafter as it may conveniently be held.
A shareholder may apply to the district court in the county in
Colorado where the corporation's principal office is located or, if the
corporation has no principal office in Colorado, to the district court of the
county in which the corporation's registered office is located to seek an order
that a shareholder meeting be held (i) if an annual meeting was not held within
six months after the close of the corporation's most recently ended fiscal year
or fifteen months after its last annual meeting, whichever is earlier, or (ii)
if the shareholder participated in a proper call of or proper demand for a
special meeting and notice of the special meeting was not given within thirty
days after the date of the call or the date the last of the demands necessary
to require calling of the meeting was received by the corporation, or the
special meeting was not held in accordance with the notice.
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SECTION 2. SPECIAL MEETINGS. Unless otherwise prescribed by statute,
special meetings of the shareholders may be called for any purpose by the
chairman of the board, by the president or by the board of directors. The
president shall call a special meeting of the shareholders if the corporation
receives one or more written demands for the meeting, stating the purpose or
purposes for which it is to be held, signed and dated by holders of shares
representing at least ten percent of all the votes entitled to be cast on any
issue proposed to be considered at the meeting.
SECTION 3. PLACE OF MEETING. The board of directors may designate any
place, either within or outside Colorado, as the place for any annual meeting
or any special meeting called by the board of directors. A waiver of notice
signed by all shareholders entitled to vote at a meeting may designate any
place, either within or outside Colorado, as the place for such meeting. If no
designation is made, or if a special meeting is called other than by the board
of directors, the place of meeting shall be the principal office of the
corporation.
SECTION 4. NOTICE OF MEETING. Written notice stating the place, date,
and time of the meeting shall be given not less than ten nor more than sixty
days before the date of the meeting, except that (i) if the number of
authorized shares is to be increased, at least thirty days notice shall be
given, or (ii) any other longer notice period shall be given if required by the
Colorado Business Corporation Act. Notice of a special meeting shall include a
description of the purpose or purposes of the meeting. Notice of an annual
meeting need not include a description of the purpose or purposes of the
meeting except the purpose or purposes shall be stated with respect to (i) an
amendment to the articles of incorporation of the corporation, (ii) a merger or
share exchange in which the corporation is a party and, with respect to a share
exchange, in which the corporation's shares will be acquired, (iii) a sale,
lease, exchange or other disposition, other than in the usual and regular
course of business, of all or substantially all of the property of the
corporation or of another entity which this corporation controls, in each case
with or without the goodwill, (iv) a dissolution of the corporation, or (v) any
other purpose for which a statement of purpose is required by the Colorado
Business Corporation Act. Notice shall be given personally or by mail, private
carrier, telegraph, teletype, electronically transmitted facsimile or other
form of wire or wireless communication by or at the direction of the president,
the secretary, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed and if in a
comprehensible form, such notice shall be deemed to be given and effective when
deposited in the United States mail, addressed to the shareholder at his
address as it appears in the corporation's current record of shareholders, with
postage prepaid. If notice is given other than by mail, and provided that such
notice is in a comprehensible form, the notice is given and effective on the
date received by the shareholder.
If requested by the person or persons lawfully calling such meeting,
the secretary shall give notice thereof at corporate expense. No notice need be
sent to any shareholder if three successive notices mailed to the last known
address of such shareholder have been returned as undeliverable until such time
as another address for such shareholder is made known to the corporation by
such shareholder. In order to be entitled to receive notice of any meeting, a
shareholder shall advise the corporation in writing of any change in such
shareholder's mailing
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address as shown on the corporation's books and records.
When a meeting is adjourned to another date, time or place, notice
need not be given of the new date, time or place if the new date, time or place
of such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact any
business which may have been transacted at the original meeting. If the
adjournment is for more than 120 days, or if a new record date is fixed for the
adjourned meeting, a new notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting as of the new record
date.
A shareholder may waive notice of a meeting before or after the time
and date of the meeting by a writing signed by such shareholder. Such waiver
shall be delivered to the corporation for filing with the corporate records.
Further, by attending a meeting either in person or by proxy, a shareholder
waives objection to lack of notice or defective notice of the meeting unless
the shareholder objects at the beginning of the meeting to the holding of the
meeting or the transaction of business at the meeting because of lack of notice
or defective notice. By attending the meeting, the shareholder also waives any
objection to consideration at the meeting of a particular matter not within the
purpose or purposes described in the meeting notice unless the shareholder
objects to considering the matter when it is presented.
SECTION 5. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of shareholders
or any adjournment thereof, (ii) receive distributions or share dividends, or
(iii) demand a special meeting, or to make a determination of shareholders for
any other proper purpose, the board of directors may fix a future date as the
record date for any such determination of shareholders, such date in any case
to be not more than seventy days, and, in case of a meeting of shareholders,
not less than ten days, prior to the date on which the particular action
requiring such determination of shareholders is to be taken. If no record date
is fixed by the board of directors, the record date shall be the date on which
notice of the meeting is mailed to shareholders, or the date on which the
resolution of the board of directors providing for a distribution is adopted,
as the case may be. When a determination of shareholders entitled to vote at
any meeting of shareholders is made as provided in this Section, such
determination shall apply to any adjournment thereof unless the board of
directors fixes a new record date, which it must do if the meeting is adjourned
to a date more than 120 days after the date fixed for the original meeting.
Notwithstanding the above, the record date for determining the
shareholders entitled to take action without a meeting or entitled to be given
notice of action so taken shall be the date the corporation first receives a
writing upon which the action is taken. The record date for determining
shareholders entitled to demand a special meeting shall be the date of the
earliest of any of the demands pursuant to which the meeting is called.
SECTION 6. VOTING LISTS. The secretary shall make, at the earlier of
ten days before each meeting of shareholders or two business days after notice
of the meeting has been given, a
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complete list of the shareholders entitled to be given notice of such meeting
or any adjournment thereof. The list shall be arranged by voting groups and
within each voting group by class or series of shares, shall be in alphabetical
order within each class or series, and shall show the address of and the number
of shares of each class or series held by each shareholder. For the period
beginning the earlier of ten days prior to the meeting or two business days
after notice of the meeting is given and continuing through the meeting and any
adjournment thereof, this list shall be kept on file at the principal office of
the corporation, or at a place (which shall be identified in the notice) in the
city where the meeting will be held. Such list shall be available for
inspection on written demand by any shareholder (including for the purpose of
this Section 6 any holder of voting trust certificates) or his agent or
attorney during regular business hours and during the period available for
inspection. The original stock transfer books shall be prima facie evidence as
to the shareholders entitled to examine such list or to vote at any meeting of
shareholders.
Any shareholder, his agent or attorney may copy the list during
regular business hours and during the period it is available for inspection,
provided (i) the shareholder has been a shareholder for at least three months
immediately preceding the demand or holds at least five percent of all
outstanding shares of any class of shares as of the date of the demand, (ii)
the demand is made in good faith and for a purpose reasonably related to the
demanding shareholder's interest as a shareholder, (iii) the shareholder
describes with reasonable particularity the purpose and the records the
shareholder desires to inspect, (iv) the records are directly connected with
the described purpose, and (v) the shareholder pays a reasonable charge
covering the costs of labor and material for such copies, not to exceed the
estimated cost of production and reproduction.
SECTION 7. RECOGNITION PROCEDURE FOR BENEFICIAL OWNERS. The board of
directors may adopt by resolution a procedure whereby a shareholder of the
corporation may certify in writing to the corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution may set forth (i) the types of
nominees to which it applies, (ii) the rights or privileges that the
corporation will recognize in a beneficial owner, which may include rights and
privileges other than voting, (iii) the form of certification and the
information to be contained therein, (iv) if the certification is with respect
to a record date, the time within which the certification must be received by
the corporation, (v) the period for which the nominee's use of the procedure is
effective, and (vi) such other provisions with respect to the procedure as the
board of directors deems necessary or desirable. Upon receipt by the
corporation of a certificate complying with the procedure established by the
board of directors, the persons specified in the certification shall be deemed,
for the purpose or purposes set forth in the certification, to be the
registered holders of the number of shares specified in place of the
shareholder making the certification.
SECTION 8. QUORUM AND MANNER OF ACTING. One third of the votes
entitled to be cast on a matter by a voting group shall constitute a quorum of
that voting group for action on the matter. If less than one third of such
votes are represented at a meeting, a majority of the votes
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so represented may adjourn the meeting from time to time without further
notice, for a period not to exceed 120 days for any one adjournment. If a
quorum is present at such adjourned meeting, any business may be transacted
which might have been transacted at the meeting as originally noticed. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, unless the meeting is adjourned and a
new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of
directors by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group
opposing the action, unless the vote of a greater number or voting by classes
is required by law or the articles of incorporation.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy by signing an appointment form or similar writing, either
personally or by his duly authorized attorney-in-fact. A shareholder may also
appoint a proxy by transmitting or authorizing the transmission of a telegram,
teletype, or other electronic transmission providing a written statement of the
appointment to the proxy, a proxy solicitor, proxy support service
organization, or other person duly authorized by the proxy to receive
appointments as agent for the proxy, or to the corporation. The transmitted
appointment shall set forth or be transmitted with written evidence from which
it can be determined that the shareholder transmitted or authorized the
transmission of the appointment. The proxy appointment form or similar writing
shall be filed with the secretary of the corporation before or at the time of
the meeting. The appointment of a proxy is effective when received by the
corporation and is valid for eleven months unless a different period is
expressly provided in the appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile,
of an appointment of a proxy may be substituted for or used in lieu of the
original appointment for any purpose for which the original appointment could
be used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate
votes before the proxy exercises his authority under the appointment. Other
notice of revocation may, in the discretion of the corporation, be deemed to
include the appearance at a shareholders' meeting of the shareholder who
granted the proxy and his voting in person on any matter subject to a vote at
such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises
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his authority under the appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by the
shareholder (including a shareholder who is a successor to the shareholder who
granted the proxy) either personally or by his attorney-in-fact,
notwithstanding that the revocation may be a breach of an obligation of the
shareholder to another person not to revoke the appointment.
Subject to Section 11 of Article II and any express limitation on the
proxy's authority appearing on the appointment form, the corporation is
entitled to accept the proxy's vote or other action as that of the shareholder
making the appointment.
SECTION 10. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one vote, except in the election of directors, and
each fractional share shall be entitled to a corresponding fractional vote on
each matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares of any class or classes are limited
or denied by the articles of incorporation as permitted by the Colorado
Business Corporation Act. Cumulative voting shall not be permitted in the
election of directors or for any other purpose. Each record holder of stock
shall be entitled to vote in the election of directors and shall have as many
votes for each of the shares owned by him as there are directors to be elected
and for whose election he has the right to vote.
At each election of directors, that number of candidates equaling the
number of directors to be elected, having the highest number of votes cast in
favor of their election, shall be elected to the board of directors.
Except as otherwise ordered by a court of competent jurisdiction upon
a finding that the purpose of this Section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the shares
in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of
redemption is mailed to the holders and a sum sufficient to redeem the shares
has been deposited with a bank, trust company or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares.
SECTION 11. CORPORATION'S ACCEPTANCE OF VOTES. If the name signed on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy
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appointment revocation and give it effect as the act of the shareholder. If the
name signed on a vote, consent, waiver, proxy appointment or proxy appointment
revocation does not correspond to the name of a shareholder, the corporation,
if acting in good faith, is nevertheless entitled to accept the vote, consent,
waiver, proxy appointment or proxy appointment revocation and to give it effect
as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports
to be that of an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if
the corporation requests, evidence of fiduciary status acceptable to
the corporation has been presented with respect to the vote, consent,
waiver, proxy appointment or proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation
requests, evidence of this status acceptable to the corporation has
been presented with respect to the vote, consent, waiver, proxy
appointment or proxy appointment revocation;
(iv) the name signed purports to be that of a pledgee,
beneficial owner or attorney-in-fact of the shareholder and, if the
corporation requests, evidence acceptable to the corporation of the
signatory's authority to sign for the shareholder has been presented
with respect to the vote, consent, waiver, proxy appointment or proxy
appointment revocation;
(v) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least
one of the co-tenants or fiduciaries, and the person signing appears
to be acting on behalf of all the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy
appointment or proxy appointment revocation is otherwise proper under
rules established by the corporation that are not inconsistent with
this Section 11.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other officer
or agent authorized to tabulate votes, acting in good faith, has reasonable
basis for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
Neither the corporation nor its officers nor any agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section
is liable in damages for the consequences of the acceptance or rejection.
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SECTION 12. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a written consent (or counterparts thereof) that sets forth the
action so taken is signed by all of the shareholders entitled to vote with
respect to the subject matter thereof and received by the corporation. Such
consent shall have the same force and effect as a unanimous vote of the
shareholders and may be stated as such in any document. Action taken under this
Section 12 is effective as of the date the last writing necessary to effect the
action is received by the corporation, unless all of the writings specify a
different effective date, in which case such specified date shall be the
effective date for such action. If any shareholder revokes his consent as
provided for herein prior to what would otherwise be the effective date, the
action proposed in the consent shall be invalid. The record date for
determining shareholders entitled to take action without a meeting is the date
the corporation first receives a writing upon which the action is taken.
Any shareholder who has signed a writing describing and consenting to
action taken pursuant to this Section 12 may revoke such consent by a writing
signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the corporation before the effectiveness of the action.
SECTION 13. MEETINGS BY TELECOMMUNICATION. Any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during
the meeting. A shareholder participating in a meeting by this means is deemed
to be present in person at the meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the corporation
shall be managed under, the direction of its board of directors, except as
otherwise provided in the Colorado Business Corporation Act or the articles of
incorporation.
SECTION 2. NUMBER, QUALIFICATIONS AND TENURE. The number of directors
of the corporation shall be fixed from time to time by the board of directors.
A director shall be a natural person who is eighteen years of age or older. A
director need not be a resident of Colorado or a shareholder of the
corporation.
Directors shall be elected at each annual meeting of shareholders.
Each director shall hold office until the next annual meeting of shareholders
following his election and thereafter until his successor shall have been
elected and qualified. Directors shall be removed in the
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manner provided by the Colorado Business Corporation Act.
SECTION 3. VACANCIES. Any director may resign at any time by giving
written notice to the corporation. Such resignation shall take effect at the
time the notice is received by the corporation unless the notice specifies a
later effective date. Unless otherwise specified in the notice of resignation,
the corporation's acceptance of such resignation shall not be necessary to make
it effective. Any vacancy on the board of directors may be filled by the
affirmative vote of a majority of the shareholders or the board of directors.
If the directors remaining in office constitute fewer than a quorum of the
board of directors, the directors may fill the vacancy by the affirmative vote
of a majority of all the directors remaining in office. If elected by the
directors, the director shall hold office until the next annual shareholders'
meeting at which directors are elected. If elected by the shareholders, the
director shall hold office for the unexpired term of his predecessor in office;
except that, if the director's predecessor was elected by the directors to fill
a vacancy, the director elected by the shareholders shall hold office for the
unexpired term of the last predecessor elected by the shareholders.
SECTION 4. REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without notice immediately after and at the same place
as the annual meeting of shareholders. The board of directors may provide by
resolution the time and place, either within or outside Colorado, for the
holding of additional regular meetings without other notice.
SECTION 5. SPECIAL MEETINGS. Special meetings of the board of
directors may be called by or at the request of the chairman of the board, the
president or any two directors. The person or persons authorized to call
special meetings of the board of directors may fix any place, either within or
outside Colorado, as the place for holding any special meeting of the board of
directors called by them.
SECTION 6. NOTICE. Notice of any special meeting shall be given at
least two days prior to the meeting by written notice either personally
delivered or mailed to each director at his business address, or by notice
transmitted by telegraph, telex, electronically transmitted facsimile or other
form of wire or wireless communication. If mailed, such notice shall be deemed
to be given and to be effective on the earlier of (i) three days after such
notice is deposited in the United States mail, properly addressed, with postage
prepaid, or (ii) the date shown on the return receipt, if mailed by registered
or certified mail return receipt requested. If notice is given by telex,
electronically transmitted facsimile or other similar form of wire or wireless
communication, such notice shall be deemed to be given and to be effective when
sent, and with respect to a telegram, such notice shall be deemed to be given
and to be effective when the telegram is delivered to the telegraph company. If
a director has designated in writing one or more reasonable addresses or
facsimile numbers for delivery of notice to him, notice sent by mail,
telegraph, telex, electronically transmitted facsimile or other form of wire or
wireless communication shall not be deemed to have been given or to be
effective unless sent to such addresses or facsimile numbers, as the case may
be.
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A director may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such director. Such waiver shall be
delivered to the corporation for filing with the corporate records. Further, a
director's attendance at or participation in a meeting waives any required
notice to him of the meeting unless at the beginning of the meeting, or
promptly upon his later arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 7. QUORUM. A majority of the number of directors fixed by the
board of directors pursuant to Section 2 of Article III or, if no number is
fixed, a majority of the number in office immediately before the meeting
begins, shall constitute a quorum for the transaction of business at any
meeting of the board of directors.
If less than such majority is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time without further
notice, for a period not to exceed sixty days at any one adjournment.
SECTION 8. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
SECTION 9. COMPENSATION. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings, a fixed sum for attendance at each meeting, a stated
salary as director, or such other compensation as the board of directors and
the director may reasonably agree upon. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
SECTION 10. PRESUMPTION OF ASSENT. A director of the corporation who
is present at a meeting of the board of directors or committee of the board of
directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless (i) the director objects at the
beginning of the meeting, or promptly upon his later arrival, to the holding of
the meeting or the transaction of business at the meeting and does not
thereafter vote for or assent to any action taken at the meeting, (ii) the
director contemporaneously requests that his dissent or abstention as to any
specific action taken be entered in the minutes of the meeting, or (iii) the
director causes written notice of his dissent or abstention as to any specific
action to be received by the presiding officer of the meeting before its
adjournment or by the corporation promptly after the adjournment of the
meeting. A director may dissent to a specific action at a meeting, while
assenting to others. The right to dissent to a specific action taken at a
meeting of the board of directors or a committee of the board of directors
shall not be available to a director who voted in favor of such action.
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SECTION 11. COMMITTEES. By resolution adopted by a majority of all the
directors in office when the action is taken, the board of directors may
designate from among its members an executive committee and one or more other
committees, and appoint one or more members of the board of directors to serve
on them. To the extent provided in the resolution, each committee shall have
all the authority of the board of directors, except that no such committee
shall have the authority to (i) authorize distributions, (ii) approve or
propose to shareholders actions or proposals required by the Colorado Business
Corporation Act to be approved by shareholders, (iii) fill vacancies on the
board of directors or any committee thereof, (iv) amend articles of
incorporation, (v) adopt, amend or repeal the bylaws, (vi) approve a plan of
merger not requiring shareholder approval, (vii) authorize or approve the
reacquisition of shares unless pursuant to a formula or method prescribed by
the board of directors, or (viii) authorize or approve the issuance or sale of
shares, or contract for the sale of shares or determine the designations and
relative rights, preferences and limitations of a class or series of shares,
except that the board of directors may authorize a committee or officer to do
so within limits specifically prescribed by the board of directors. The
committee shall then have full power within the limits set by the board of
directors to adopt any final resolution setting forth all preferences,
limitations and relative rights of such class or series and to authorize an
amendment of the articles of incorporation stating the preferences, limitations
and relative rights of a class or series for filing with the Secretary of State
under the Colorado Business Corporation Act.
Sections 4, 5, 6, 7, 8 and 12 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the board of directors, shall apply to committees and their members
appointed under this Section 11.
Neither the designation of any such committee, the delegation of
authority to such committee, nor any action by such committee pursuant to its
authority shall alone constitute compliance by any member of the board of
directors or a member of the committee in question with his responsibility to
conform to the standard of care set forth in Article III, Section 14 of these
bylaws.
SECTION 12. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at a meeting of the directors or any committee designated
by the board of directors may be taken without a meeting if a written consent
(or counterparts thereof) that sets forth the action so taken is signed by all
of the directors or committee members entitled to vote with respect to the
action taken. Such consent shall have the same force and effect as a unanimous
vote of the directors or committee members and may be stated as such in any
document. Unless the consent specifies a different effective date, action taken
under this Section 12 is effective at the time the last director signs a
writing describing the action taken, unless, before such time, any director has
revoked his consent by a writing signed by the director and received by the
president or the secretary of the corporation.
SECTION 13. TELEPHONIC MEETINGS. The board of directors may permit any
director (or any member of a committee designated by the board of directors) to
participate in a regular or
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special meeting of the board of directors or a committee thereof through the
use of any means of communication by which all directors participating in the
meeting can hear each other during the meeting. A director participating in a
meeting in this manner is deemed to be present in person at the meeting.
SECTION 14. STANDARD OF CARE. A director shall perform his duties as a
director, including without limitation his duties as a member of any committee
of the board of directors, in good faith, in a manner he reasonably believes to
be in the best interests of the corporation, and with the care an ordinarily
prudent person in a like position would exercise under similar circumstances.
In performing his duties, a director shall be entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by the persons herein
designated. However, he shall not be considered to be acting in good faith if
he has knowledge concerning the matter in question that would cause such
reliance to be unwarranted. A director shall not be liable to the corporation
or its shareholders for any action he takes or omits to take as a director if,
in connection with such action or omission, he performs his duties in
compliance with this Section 14.
The designated persons on whom a director is entitled to rely are (i)
one or more officers or employees of the corporation whom the director
reasonably believes to be reliable and competent in the matters presented, (ii)
legal counsel, public accountant, or other person as to matters which the
director reasonably believes to be within such person's professional or expert
competence, or (iii) a committee of the board of directors on which the
director does not serve if the director reasonably believes the committee
merits confidence.
ARTICLE IV
OFFICERS AND AGENTS
SECTION 1. GENERAL. The officers of the corporation shall be a
president, a secretary and a treasurer, each of whom shall be a natural person
eighteen years of age or older. The board of directors or an officer or
officers authorized by the board of directors may appoint such other officers,
assistant officers, committees and agents, assistant secretaries and assistant
treasurers, as they may consider necessary. The board of directors or the
officer or officers authorized by the board of directors shall from time to
time determine the procedure for the appointment of officers, their term of
office, their authority and duties and their compensation. One person may hold
more than one office. In all cases where the duties of any officer, agent or
employee are not prescribed by the bylaws or by the board of directors, such
officer, agent or employee shall follow the orders and instructions of the
president of the corporation.
SECTION 2. APPOINTMENT AND TERM OF OFFICE. The officers of the
corporation shall be appointed by the board of directors at each annual meeting
of the board of directors held after each annual meeting of the shareholders.
If the appointment of officers is not made at such meeting or if an officer or
officers are to be appointed by another officer or officers of the
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corporation, such appointments shall be made as soon thereafter as conveniently
possible. Each officer shall hold office until the first of the following
occurs: his successor shall have been duly appointed and qualified, his death,
his resignation, or his removal in the manner provided in Article IV, Section
3.
SECTION 3. RESIGNATION AND REMOVAL. An officer may resign at any time
by giving written notice of resignation to the corporation. The resignation is
effective when the notice is received by the corporation unless the notice
specifies a later effective date.
Any officer or agent may be removed at any time with or without cause
by the board of directors or an officer or officers authorized by the board of
directors or by the shareholders. Such removal does not affect the contract
rights, if any, of the corporation or of the person so removed. The appointment
of an officer or agent shall not in itself create contract rights.
SECTION 4. VACANCIES. A vacancy in any office, however occurring, may
be filled by the board of directors, or by the officer or officers authorized
by the board of directors, for the unexpired portion of the officer's term. If
an officer resigns and his resignation is made effective at a later date, the
board of directors, or officer or officers authorized by the board of
directors, may permit the officer to remain in office until the effective date
and may fill the pending vacancy before the effective date if the board of
directors or officer or officers authorized by the board of directors provide
that the successor shall not take office until the effective date. In the
alternative, the board of directors, or officer or officers authorized by the
board of directors, may remove the officer at any time before the effective
date and may fill the resulting vacancy.
SECTION 5. CHAIRMAN OF THE BOARD. The chairman of the board of
directors, if elected and if available, or if not elected or not available, the
president, shall preside at all meetings of the stockholders and of the board
of directors.
SECTION 6. PRESIDENT. Subject to the direction and supervision of the
board of directors, the president shall have general and active control of the
corporation's affairs and business and general supervision of its officers,
agents and employees. Unless otherwise directed by the board of directors, the
president shall attend in person or by substitute appointed by him, or shall
execute on behalf of the corporation written instruments appointing a proxy or
proxies to represent the corporation at, all meetings of the stockholders of
any other corporation in which the corporation holds any stock. On behalf of
the corporation, the president may in person or by substitute or by proxy
execute written waivers of notice and consents with respect to any such
meetings. At all such meetings and otherwise, the president, in person or by
substitute or proxy, may vote the stock held by the corporation, execute
written consents and other instruments with respect to such stock, and exercise
any and all rights and powers incident to the ownership of said stock, subject
to the instructions, if any, of the board of directors. The president shall
have custody of the treasurer's bond, if any.
SECTION 7. VICE PRESIDENTS. If elected, the vice presidents shall
assist the chairman of
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the board and the president and shall perform such duties as may be assigned to
them by the chairman of the board and the president or by the board of
directors. In the absence of the chairman of the board and the president, the
vice president, if any (or, if more than one, the vice presidents in the order
designated by the board of directors, or if the board of directors makes no
such designation, then the vice president designated by the chairman of the
board or by the president, or if neither the board of directors, the chairman
of the board nor the president makes any such designation, the senior vice
president as determined by first election to that office), shall have the
powers and perform the duties of the chairman of the board and the president.
SECTION 8. SECRETARY. The secretary shall (i) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
board of directors, a record of all actions taken by the shareholders or board
of directors without a meeting, a record of all actions taken by a committee of
the board of directors in place of the board of directors on behalf of the
corporation, and a record of all waivers of notice of meetings of shareholders
and of the board of directors or any committee thereof, (ii) see that all
notices are duly given in accordance with the provisions of these bylaws and as
required by law, (iii) serve as custodian of the corporate records and of the
seal of the corporation and affix the seal to all documents when authorized by
the board of directors, (iv) keep at the corporation's registered office or
principal place of business a record containing the names and addresses of all
shareholders in a form that permits preparation of a list of shareholders
arranged by voting group and by class or series of shares within each voting
group, that is alphabetical within each class or series and that shows the
address of, and the number of shares of each class or series held by, each
shareholder, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar, (v) maintain at the corporation's
principal office the originals or copies of the corporation's articles of
incorporation, bylaws, minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three years, all
written communications within the past three years to shareholders as a group
or to the holders of any class or series of shares as a group, a list of the
names and business addresses of the current directors and officers, a copy of
the corporation's most recent corporate report filed with the Secretary of
State, and financial statements showing in reasonable detail the corporation's
assets and liabilities and results of operations for the last three years, (vi)
have general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (vii) authenticate records of the
corporation, and (viii) in general, perform all duties incident to the office
of secretary and such other duties as from time to time may be assigned to him
by the president or by the board of directors. Assistant secretaries, if any,
shall have the same duties and powers as the secretary, subject to supervision
by the secretary. The directors and/or shareholders may however respectively
designate a person other than the secretary or assistant secretary to keep the
minutes of their respective meetings.
Any books, records, or minutes of the corporation may be in written
form or in any form capable of being converted into written form within a
reasonable time.
SECTION 9. TREASURER. The treasurer shall be the principal financial
officer of the
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corporation, shall have the care and custody of all funds, securities,
evidences of indebtedness and other personal property of the corporation and
shall deposit the same in accordance with the instructions of the board of
directors. He shall receive and give receipts and acquittances for money paid
in on account of the corporation, and shall pay out of the corporation's funds
on hand all bills, payrolls and other just debts of the corporation of whatever
nature upon maturity. He shall perform all other duties incident to the office
of the treasurer and, upon request of the board of directors, shall make such
reports to it as may be required at any time. He shall, if required by the
board of directors, give the corporation a bond in such sums and with such
sureties as shall be satisfactory to the board of directors, conditioned upon
the faithful performance of his duties and for the restoration to the
corporation of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation. He shall have such other powers and perform such other duties as
may from time to time be prescribed by the board of directors or the president.
The assistant treasurers, if any, shall have the same powers and duties as the
treasurer, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Colorado Business Corporation Act, prepare and file all local,
state and federal tax returns, prescribe and maintain an adequate system of
internal audit and prepare and furnish to the president and the board of
directors statements of account showing the financial position of the
corporation and the results of its operations.
ARTICLE V
STOCK
SECTION 1. CERTIFICATES. The board of directors shall be authorized to
issue any of its classes of shares with or without certificates. The fact that
the shares are not represented by certificates shall have no effect on the
rights and obligations of shareholders. If the shares are represented by
certificates, such shares shall be represented by consecutively numbered
certificates signed, either manually or by facsimile, in the name of the
corporation by the president and secretary or by one or more other persons
designated by the board of directors. In case any officer who has signed or
whose facsimile signature has been placed upon such certificate shall have
ceased to be such officer before such certificate is issued, such certificate
may nonetheless be issued by the corporation with the same effect as if he were
such officer at the date of its issue. Certificates of stock shall be in such
form and shall contain such information consistent with the law as shall be
prescribed by the board of directors. If shares are not represented by
certificates, within a reasonable time following the issue or transfer of such
shares, the corporation shall send the shareholder a complete written statement
of all of the information required to be provided to holders of uncertificated
shares by the Colorado Business Corporation Act.
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SECTION 2. CONSIDERATION FOR SHARES. Certificated or uncertificated
shares shall not be issued until the shares represented thereby are fully paid.
The board of directors may authorize the issuance of shares for consideration
consisting of any tangible or intangible property or benefit to the
corporation, including cash, promissory notes, services performed or other
securities of the corporation. Future services shall not constitute payment or
partial payment for shares of the corporation. The promissory note of a
subscriber or an affiliate of a subscriber shall not constitute payment or
partial payment for shares of the corporation unless the note is negotiable and
is secured by collateral, other than the shares being purchased, having a fair
market value at least equal to the principal amount of the note. For purposes
of this Section 2, "promissory note" means a negotiable instrument on which
there is an obligation to pay independent of collateral and does not include a
non-recourse note.
SECTION 3. LOST CERTIFICATES. In case of the alleged loss, destruction
or mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as the board of directors may prescribe. The board of
directors may in its discretion require an affidavit of lost certificate and/or
a bond in such form and amount and with such surety as it may determine before
issuing a new certificate.
SECTION 4. TRANSFER OF SHARES. Upon surrender to the corporation or to
a transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and receipt of such documentary stamps as may be required by law and
evidence of compliance with all applicable securities laws and other
restrictions, the corporation shall issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such transfer of stock
shall be entered on the stock books of the corporation which shall be kept at
its principal office or by the person and the place designated by the board of
directors.
Except as otherwise expressly provided in Article II, Sections 7 and
11, and except for the assertion of dissenters' rights to the extent provided
in Article 113 of the Colorado Business Corporation Act, the corporation shall
be entitled to treat the registered holder of any shares of the corporation as
the owner thereof for all purposes, and the corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such shares or
rights deriving from such shares on the part of any person other than the
registered holder, including without limitation any purchaser, assignee or
transferee of such shares or rights deriving from such shares, unless and until
such other person becomes the registered holder of such shares, whether or not
the corporation shall have either actual or constructive notice of the claimed
interest of such other person.
SECTION 5. TRANSFER AGENT, REGISTRARS AND PAYING AGENTS. The board of
directors may at its discretion appoint one or more transfer agents, registrars
and agents for making payment upon any class of stock, bond, debenture or other
security of the corporation. Such agents and registrars may be located either
within or outside Colorado. They shall have such
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rights and duties and shall be entitled to such compensation as may be agreed.
ARTICLE VI
INDEMNIFICATION OF CERTAIN PERSONS
SECTION 1. INDEMNIFICATION. For purposes of Article VI, a "Proper
Person" means any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, and whether formal or
informal, by reason of the fact that he is or was a director, officer,
employee, fiduciary or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, partner, trustee, employee,
fiduciary or agent of any foreign or domestic profit or nonprofit corporation
or of any partnership, joint venture, trust, profit or nonprofit unincorporated
association, limited liability company, or other enterprise or employee benefit
plan. The corporation shall indemnify any Proper Person against reasonably
incurred expenses (including attorneys' fees), judgments, penalties, fines
(including any excise tax assessed with respect to an employee benefit plan)
and amounts paid in settlement reasonably incurred by him in connection with
such action, suit or proceeding if it is determined by the groups set forth in
Section 4 of this Article VI that he conducted himself in good faith and that
he reasonably believed (i) in the case of conduct in his official capacity with
the corporation, that his conduct was in the corporation's best interests, or
(ii) in all other cases (except criminal cases), that his conduct was at least
not opposed to the corporation's best interests, or (iii) in the case of any
criminal proceeding, that he had no reasonable cause to believe his conduct was
unlawful. A Proper Person will be deemed to be acting in his official capacity
while acting as a director, officer, employee or agent on behalf of this
corporation and not while acting on this corporation's behalf for some other
entity.
No indemnification shall be made under this Article VI to a Proper
Person with respect to any claim, issue or matter in connection with a
proceeding by or in the right of a corporation in which the Proper Person was
adjudged liable to the corporation or in connection with any proceeding
charging that the Proper Person derived an improper personal benefit, whether
or not involving action in an official capacity, in which he was adjudged
liable on the basis that he derived an improper personal benefit. Further,
indemnification under this Section in connection with a proceeding brought by
or in the right of the corporation shall be limited to reasonable expenses,
including attorneys' fees, incurred in connection with the proceeding.
SECTION 2. RIGHT TO INDEMNIFICATION. The corporation shall indemnify
any Proper Person who was wholly successful, on the merits or otherwise, in
defense of any action, suit, or proceeding as to which he was entitled to
indemnification under Section l of this Article VI against expenses (including
attorneys' fees) reasonably incurred by him in connection with the proceeding
without the necessity of any action by the corporation other than the
determination in good faith that the defense has been wholly successful.
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SECTION 3. EFFECT OF TERMINATION OF ACTION. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person seeking indemnification did not meet the standards
of conduct described in Section l of this Article VI. Entry of a judgment by
consent as part of a settlement shall not be deemed an adjudication of
liability, as described in Section 2 of this Article VI.
SECTION 4. GROUPS AUTHORIZED TO MAKE INDEMNIFICATION DETERMINATION.
Except where there is a right to indemnification as set forth in Sections 1 or
2 of this Article VI or where indemnification is ordered by a court in Section
5 of this Article VI, any indemnification shall be made by the corporation only
as authorized in the specific case upon a determination by a proper group that
indemnification of the Proper Person is permissible under the circumstances
because he has met the applicable standards of conduct set forth in Section l
of this Article VI. This determination shall be made by the board of directors
by a majority vote of those present at a meeting at which a quorum is present,
which quorum shall consist of directors not parties to the proceeding
("Quorum"). If a Quorum cannot be obtained, the determination shall be made by
a majority vote of a committee of the board of directors designated by the
board, which committee shall consist of two or more directors not parties to
the proceeding, except that directors who are parties to the proceeding may
participate in the designation of directors for the committee. If a Quorum of
the board of directors cannot be obtained and the committee cannot be
established, or even if a Quorum is obtained or the committee is designated and
a majority of the directors constituting such Quorum or committee so directs,
the determination shall be made by (i) independent legal counsel selected by a
vote of the board of directors or the committee in the manner specified in this
Section 4 or, if a Quorum of the full board of directors cannot be obtained and
a committee cannot be established, by independent legal counsel selected by a
majority vote of the full board of directors (including directors who are
parties to the action) or (ii) a vote of the shareholders.
SECTION 5. COURT-ORDERED INDEMNIFICATION. Any Proper Person may apply
for indemnification to the court conducting the proceeding or to another court
of competent jurisdiction for mandatory indemnification under Section 2 of this
Article VI, including indemnification for reasonable expenses incurred to
obtain court-ordered indemnification. If the court determines that such Proper
Person is fairly and reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not he met the standards of conduct set
forth in Section l of this Article VI or was adjudged liable in the proceeding,
the court may order such indemnification as the court deems proper except that
if the Proper Person has been adjudged liable, indemnification shall be limited
to reasonable expenses incurred in connection with the proceeding and
reasonable expenses incurred to obtain court-ordered indemnification.
SECTION 6. ADVANCE OF EXPENSES. Reasonable expenses (including
attorneys' fees) incurred in defending an action, suit or proceeding as
described in Section 1 of this Article VI may be paid by the corporation to any
Proper Person in advance of the final disposition of such action, suit or
proceeding upon receipt of (i) a written affirmation of such Proper Person's
good
18
<PAGE> 19
faith belief that he has met the standards of conduct prescribed by Section l
of this Article VI, (ii) a written undertaking, executed personally or on the
Proper Person's behalf, to repay such advances if it is ultimately determined
that he did not meet the prescribed standards of conduct (the undertaking shall
be an unlimited general obligation of the Proper Person but need not be secured
and may be accepted without reference to financial ability to make repayment),
and (iii) a determination is made by the proper group (as described in Section
4 of this Article VI) that the facts as then known to the group would not
preclude indemnification. Determination and authorization of payments shall be
made in the same manner specified in Section 4 of this Article VI.
SECTION 7. WITNESS EXPENSES. The sections of this Article VI do not
limit the corporation's authority to pay or reimburse expenses incurred by a
director in connection with an appearance as a witness in a proceeding at a
time when he has not been made a named defendant or respondent in the
proceeding.
SECTION 8. REPORT TO SHAREHOLDERS. Any indemnification of or advance
of expenses to a director in accordance with this Article VI, if arising out of
a proceeding by or on behalf of the corporation, shall be reported in writing
to the shareholders with or before the notice of the next shareholders'
meeting. If the next shareholder action is taken without a meeting at the
instigation of the board of directors, such notice shall be given to the
shareholders at or before the time the first shareholder signs a writing
consenting to such action.
ARTICLE VII
PROVISION OF INSURANCE
By action of the board of directors, notwithstanding any interest of
the directors in the action, the corporation may purchase and maintain
insurance, in such scope and amounts as the board of directors deems
appropriate, on behalf of any person who is or was a director, officer,
employee, fiduciary or agent of the corporation, or who, while a director,
officer, employee, fiduciary or agent of the corporation, is or was serving at
the request of the corporation as a director, officer, partner, trustee,
employee, fiduciary or agent of any other foreign or domestic corporation or of
any partnership, joint venture, trust, profit or nonprofit unincorporated
association, limited liability company or other enterprise or employee benefit
plan, against any liability asserted against, or incurred by, him in that
capacity or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of Article VI or applicable law. Any such insurance may be procured
from any insurance company designated by the board of directors of the
corporation, whether such insurance company is formed under the laws of
Colorado or any other jurisdiction of the United States or elsewhere, including
any insurance company in which the corporation has an equity interest or any
other interest, through stock ownership or otherwise.
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<PAGE> 20
ARTICLE VIII
MISCELLANEOUS
SECTION 1. SEAL. The corporate seal of the corporation shall be
circular in form and shall contain the name of the corporation and the words,
"Seal, Colorado."
SECTION 2. FISCAL YEAR. The fiscal year of the corporation shall be as
established by the board of directors.
SECTION 3. AMENDMENTS. The board of directors shall have power, to the
maximum extent permitted by the Colorado Business Corporation Act, to make,
amend and repeal the bylaws of the corporation at any regular or special
meeting of the board of directors unless the shareholders, in making, amending
or repealing a particular bylaw, expressly provide that the directors may not
amend or repeal such bylaw. The shareholders also shall have the power to make,
amend or repeal the bylaws of the corporation at any annual meeting or at any
special meeting called for that purpose.
SECTION 4. GENDER. The masculine gender is used in these bylaws as a
matter of convenience only and shall be interpreted to include the feminine and
neuter genders as the circumstances indicate.
SECTION 5. CONFLICTS. In the event of any irreconcilable conflict
between these bylaws and either the corporation's articles of incorporation or
applicable law, the latter shall control.
SECTION 6. DEFINITIONS. Except as otherwise specifically provided in
these bylaws, all terms used in these bylaws shall have the same definition as
in the Colorado Business Corporation Act.
[END OF BYLAWS]
20
<PAGE> 1
EXHIBIT 4.0
THE REPRESENTATIVE'S WARRANTS EVIDENCED AND REPRESENTED BY THIS CERTIFICATE (THE
"REPRESENTATIVE'S WARRANTS") AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
(THE "WARRANT SHARES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, PURSUANT TO A REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION AND WITH THE SECURITIES ADMINISTRATORS OF CERTAIN STATES
UNDER THE SECURITIES ("BLUE SKY") LAWS OF SUCH STATES. HOWEVER, NEITHER THE
REPRESENTATIVE'S WARRANTS NOR SUCH WARRANT SHARES MAY BE SOLD, TRANSFERRED,
PLEDGED, OR HYPOTHECATED EXCEPT PURSUANT TO (I) A POST-EFFECTIVE AMENDMENT TO
SUCH REGISTRATION STATEMENT, (II) A SEPARATE REGISTRATION STATEMENT UNDER SUCH
ACT, OR (III) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND UNDER THE
APPLICABLE BLUE SKY LAWS.
THIS REPRESENTATIVE'S WARRANT MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT AS
OTHERWISE PROVIDED HEREIN AND THE HOLDER OF THIS REPRESENTATIVE'S WARRANT, BY
ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS
REPRESENTATIVE'S WARRANT EXCEPT AS OTHERWISE PROVIDED HEREIN.
LEISURE TIME CASINOS & RESORTS, INC.
Representative's Warrant for the Purchase of Common Stock
No. UW-001 110,000 Representative's Warrants
THIS CERTIFIES that, for receipt in hand of $10 and other value
received, SCHNEIDER SECURITIES, INC. (the "Holder"), is entitled to subscribe
for and purchase from LEISURE TIME CASINOS & RESORTS, INC., a Colorado
corporation (the "Company"), upon the terms and conditions set forth herein, at
any time, or from time to time, after ______,1999, and before 5:00 p.m. Mountain
time on _______, 2004 (the "Exercise Period"), 110,000 shares of Common Stock
(the "Warrant Shares"), at a price of $______ per Warrant Share (the "Exercise
Price"), or 120% of the offering price of Common Stock to be sold by the Company
in a public offering (the "Public Offering") at or prior to the date hereof.
The term the "Holder" as used herein shall include any transferee to
whom this Representative's Warrant has been transferred in accordance with the
above. As used herein the term "this Representative's Warrant" shall mean and
include this Representative's Warrant and any Representative's Warrant or
Representative's Warrants hereafter issued as a consequence of the exercise or
transfer of this Representative's Warrant in whole or in part, and the term
"Common Stock" shall mean and include the Company's Common Stock with ordinary
voting power, which class at the date hereof is publicly traded.
1. This Representative's Warrant may not be sold, transferred, assigned, pledged
or hypothecated until ________, 2000 (12 months from the Effective Date of the
Registration Statement on which it is initially registered) except that it may
be transferred, in whole or in part, (i) to one or more officers, employees or
partners of the Holder (or the officers or
<PAGE> 2
partners of any such partner); (ii) to a member of the underwriting syndicate
and/or its officers, employees or partners; or (iii) by operation of law. After
_______, 2000, this Representative's Warrant may be sold, transferred, assigned
or hypothecated in accordance with applicable law.
a. This Representative's Warrant may be exercised during the Exercise
Period as to the whole or any lesser number of Warrant Shares, by the
surrender of this Representative's Warrant (with the election attached
hereto duly executed) to the Company at its office at 4258
Communications Drive, Norcross, Georgia 30093, or such other place as
is designated in writing by the Company, together with a certified or
bank cashier's check payable to the order of the Company in an amount
equal to the Exercise Price multiplied by the number of Warrant Shares
for which this Representative's Warrant is being exercised.
b. Upon written request of the Holder, and in lieu of payment for the
Warrant Shares by check in accordance with paragraph 2(a) hereof, the
Holder may exercise the Representative's Warrant (or any portion
thereof) for and receive the number of Warrant Shares equal to a
fraction, the numerator of which equals (i) the amount by which the
Current Market Price of the Common Stock for the ten (10) trading days
preceding the date of exercise exceeds the Exercise Price per Share,
multiplied by (ii) the number of Warrant Shares to be purchased; the
denominator of which equals the Current Market Price.
c. For the purposes of any computation under this Representative's
Warrant, the "Current Market Price" at any date shall be the closing
price of the Common Stock on the business day next preceding the event
requiring an adjustment hereunder. If the principal trading market for
such securities is an exchange, the closing price shall be the reported
last sale price on such exchange on such day provided if trading of
such Common Stock is listed on any consolidated tape, the closing price
shall be the reported last sale price set forth on such consolidated
tape. If the principal trading market for such securities is the
over-the-counter market, the closing price shall be the last reported
sale price on such date as set forth by The Nasdaq Stock Market, Inc.,
or, if the security is not quoted on such market, the average closing
bid and asked prices as set forth in the National Quotation Bureau pink
sheets or the Electronic Bulletin Board System for such day.
Notwithstanding the foregoing, if there is no reported last sale price
or average closing bid and asked prices, as the case may be, on a date
prior to the event requiring an adjustment hereunder, then the current
market price shall be
2
<PAGE> 3
determined as of the latest date prior to such day for which such last
sale price or average closing bid and asked price is available.
2. Upon each exercise of this Representative's Warrant, the Holder shall be
deemed to be the holder of record of the Warrant Shares issuable upon such
exercise, notwithstanding that the transfer books of the Company shall then be
closed or certificates representing such Warrant Shares shall not then have been
actually delivered to the Holder. As soon as practicable after each such
exercise of this Representative's Warrant, the Company shall issue and deliver
to the Holder a certificate or certificates for the Warrant Shares issuable upon
such exercise, registered in the name of the Holder or its designee. If this
Representative's Warrant should be exercised in part only, the Company shall,
upon surrender of this Representative's Warrant for cancellation, execute and
deliver a new Representative's Warrant evidencing the right of the Holder to
purchase the balance of the Warrant Shares (or portions thereof) subject to
purchase hereunder.
3. The Representative's Warrants shall be registered in a Representative's
Warrant Register as they are issued. The Company shall be entitled to treat the
registered holder of any Representative's Warrant on the Representative's
Warrant Register as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such
Representative's Warrant on the part of any other person. The Representative's
Warrants shall be transferable only on the books of the Company upon delivery
thereof duly endorsed by the Holder or by its duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by an attorney, executor,
administrator, guardian or other legal representative, duly authenticated
evidence of his or its authority shall be produced. Upon any registration of
transfer, the Company shall deliver a new Representative's Warrant or
Representative's Warrants to the person entitled thereto. The Representative's
Warrants may be exchanged, at the option of the Holder thereof, for another
Representative's Warrant, or other Representative's Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares (or portions thereof) upon surrender to
the Company or its duly authorized agent. Notwithstanding the foregoing, the
Company shall have no obligation to cause the Representative's Warrants to be
transferred on its books to any person if, in the opinion of counsel to the
Company, such transfer does not comply with the provisions of the Securities Act
of 1933, as amended (the "Act"), or applicable state blue sky laws and the rules
and regulations thereunder.
4. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of this
3
<PAGE> 4
Representative's Warrant, such number of shares of Common Stock as shall, from
time to time, be sufficient therefor. The Company covenants that all Warrant
Shares issuable upon exercise of this Representative's Warrant shall be validly
issued, fully paid, nonassessable, and free of preemptive rights.
a. 6. If the Company shall at any time subdivide its outstanding Common
Stock by recapitalization, reclassification or split-up thereof, the
number of Warrant Shares subject to this Representative's Warrant
immediately prior to such subdivision shall be proportionately
increased, and if the Company shall at any time combine the outstanding
Common Stock by recapitalization, reclassification or combination
thereof, the number of Warrant Shares subject to this Representative's
Warrant immediately prior to such combination shall be proportionately
decreased. Any corresponding adjustment to the Exercise Price shall
become effective at the close of business on the record date for such
subdivision or combination.
b. If the Company after the date hereof shall distribute to the holders
of its Common Stock any securities or other assets (other than a
distribution of Common Stock or a cash distribution made as a dividend
payable out of earnings or out of any earned surplus legally available
for dividends under the laws of the jurisdiction of incorporation of
the Company), the Board of Directors shall be required to make such
equitable adjustment in the Exercise Price in effect immediately prior
to the record date of such distribution as may be necessary to preserve
the rights substantially proportionate to those enjoyed hereunder by
the Holder immediately prior to such distribution. Any such adjustment
made in good faith by the Board of Directors shall be final and binding
upon the Holder and shall become effective as of the record date for
such distribution.
c. No adjustment in the number of Warrant Shares subject to this
Representative's Warrant shall be required unless such adjustment would
require an increase or decrease in such number of Warrant Shares of at
least 1% of the then adjusted number of Warrant Shares issuable upon
exercise of this Representative's Warrant, provided, however, that any
adjustments which by reason of the foregoing are not required at the
time to be made shall be carried forward and taken into account and
included in determining the amount of any subsequent adjustment; and
provided further, however, that in case the Company shall at any time
subdivide or combine the outstanding Common Stock or issue any
additional Common Stock as a dividend, said percentage shall forthwith
be proportionately increased in the case of a combination or decreased
in the case of a subdivision or dividend of Common Stock so as to
appropriately reflect the same. If the Company shall make a record
4
<PAGE> 5
of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or distribution and legally abandon its plan to
pay or deliver such dividend or distribution then no adjustment in the
number of Warrant Shares subject to this Representative's Warrant shall
be required by reason of the making of such record.
d. Whenever the number of Warrant Shares purchasable upon the exercise
of this Representative's Warrant is adjusted as provided herein, the
Exercise Price shall be adjusted (to the nearest one tenth of a cent)
by respectively multiplying such Exercise Price immediately prior to
such adjustment by a fraction, the numerator of which shall be the
number of Warrant Shares purchasable upon the exercise of this
Representative's Warrant immediately prior to such adjustment, and the
denominator of which shall be the number of Warrant Shares purchasable
immediately thereafter.
e. In case of any reclassification of the outstanding Common Stock
(other than a change covered by (a) hereof or which solely affects the
par value of such Common Stock) or in the case of any merger or
consolidation of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or
capital reorganization of the outstanding Common Stock), or in the case
of any sale or conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety in connection
with which the Company is dissolved, the Holder of this
Representative's Warrant shall have the right thereafter (until the
expiration of the right of exercise of this Representative's Warrant)
to receive upon the exercise hereof, for the same aggregate Exercise
Price payable hereunder immediately prior to such event, the kind and
amount of shares of stock or other securities or property receivable
upon such reclassification, capital reorganization, merger or
consolidation, or upon the dissolution following any sale or other
transfer, by a holder of the number of Warrant Shares obtainable upon
the exercise of this Representative's Warrant immediately prior to such
event; and if any reclassification also results in a change in Common
Stock covered by (a) above, then such adjustment shall be made pursuant
to both this paragraph (e) and paragraph (a). The provisions of this
paragraph (e) shall similarly apply to successive re-classifications,
or capital reorganizations, mergers or consolidations, sales or other
transfers.
If the Company after the date hereof shall issue or agree to
issue Common Stock, Options or Convertible Securities, other than as
described herein, and such issuance or agreement would in the opinion
of the Board of Directors of the
5
<PAGE> 6
Company materially affect the rights of the Holders of the
Representative's Warrants, the Exercise Price and the number of Warrant
Shares purchasable upon exercise of the Representative's Warrants shall
be adjusted in such matter, if any, and at such time as the Board of
Directors of the Company, in good faith, may determine to be equitable
in the circumstances. The minutes or unanimous consent approving such
action shall set forth the Board of Director's determination as to
whether an adjustment is warranted and the manner of such adjustment.
In the absence of such determination, any Holder may request in writing
that the Board of Directors make such determination. Any such
determination made in good faith by the Board of Directors shall be
final and binding upon the Holders. If the Board fails, however, to
make such determination within sixty (60) days after such request, such
failure shall be deemed a determination that an adjustment is required.
i. Upon occurrence of each event requiring an adjustment of the
Exercise Price and of the number of Warrant Shares purchasable upon
exercise of this Representative's Warrant in accordance with, and
as required by, the terms hereof, the Company shall forthwith
employ a firm of certified public accountants (who may be the
regular accountants for the Company) who shall compute the adjusted
Exercise Price and the adjusted number of Warrant Shares
purchasable at such adjusted Exercise Price by reason of such event
in accordance herewith. The Company shall give to each Holder of
the Representative's Warrants a copy of such computation which
shall be conclusive and shall be binding upon such Holders unless
contested by Holders by written notice to the Company within thirty
(30) days after receipt thereof.
ii. In case the Company after the date hereof shall propose (A) to
pay any dividend payable in stock to the holders of its Common
Stock or to make any other distribution (other than cash dividends)
to the holders of its Common Stock or to grant rights to subscribe
to or purchase any additional shares of any class or any other
rights or options, (B) to effect any reclassification involving
merely the subdivision or combination of outstanding Common Stock,
or (C) any capital reorganization or any consolidation or merger,
or any sale, transfer or other disposition of its property, assets
and business substantially as an entirety, or the liquidation,
dissolution or winding up of the Company, then in each such case,
the Company shall obtain the computation described above and if an
adjustment
6
<PAGE> 7
to the Exercise Price is required, the Company shall notify the
Holders of the Representative's Warrants of such proposed action,
which shall specify the record date for any such action or if no
record date is established with respect thereto, the date on which
such action shall occur or commence, or the date of participation
therein by the holders of Common Stock if any such date is to be
fixed, and shall also set forth such facts with respect thereto as
shall be reasonably necessary to indicate the effect of such action
on the Exercise Price and the number, or kind, or class of shares
or other securities or property obtainable upon exercise of this
Representative's Warrant after giving effect to any adjustment
which will be required as a result of such action. Such notice
shall be given at least twenty (20) days prior to the record date
for determining holders of the Common Stock for purposes of any
such action, and in the case of any action for which a record date
is not established then such notice shall be mailed at least twenty
(20) days prior to the taking of such proposed action.
iii. Failure to file any certificate or notice or to give any
notice, or any defect in any certificate or notice, shall not
effect the legality or validity of the adjustment in the Exercise
Price or in the number, or kind, or class of shares or other
securities or property obtainable upon exercise of the
Representative's Warrants or of any transaction giving rise
thereto.
b. The Company shall not be required to issue fractional Warrant Shares
upon any exercise of the Representative's Warrants. As to any final
fraction of a Share which the Holder of a Representative's Warrant
would otherwise be entitled to purchase upon such exercise, the Company
shall pay a cash adjustment in respect of such final fraction in an
amount equal to the same fraction of the market price of a share of
such stock on the business day preceding the day of exercise. The
Holder of a Representative's Warrant, by his acceptance of a
Representative's Warrant, expressly waives any right to receive any
fractional Warrant Shares.
c. Regardless of any adjustments pursuant to this section in the
Exercise Price or in the number, or kind, or class of shares or other
securities or other property obtainable upon exercise of a
Representative's Warrant, a Representative's Warrant may continue to
express the Exercise Price and the number of Warrant Shares obtainable
upon exercise at the same price and number of Warrant Shares as are
stated herein.
7
<PAGE> 8
d. The number of Warrant Shares, the Exercise Price and all other terms
and provisions of the Company's agreement with the Holder of this
Representative's Warrant shall be determined exclusively pursuant to
the provisions hereof.
e. The above provisions of this section 6 shall similarly apply to
successive transactions which require adjustments.
f. Notwithstanding any other language to the contrary herein, (i) the
anti-dilution terms of this Representative's Warrant will not be
enforced so as to provide the Holder the right to receive, or for the
accrual of, cash dividends prior to the exercise of this
Representative's Warrant, and (ii) the anti-dilution terms of this
Representative's Warrant will not be enforced in such a manner as to
provide the Holder with disproportionate rights, privileges and
economic benefits not provided to purchasers of the Common Stock in the
Public Offering.
7. The issuance of any Warrant Shares or other securities upon the
exercise of this Representative's Warrant and the delivery of certificates or
other instruments representing such securities, or other securities, shall be
made without charge to the Holder for any tax or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder and the Company shall not be
required to issue or deliver any such certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
8. a. If, at any time after ______, 1999 (the Effective Date of the
Registration Statement), and ending ______, 2006 (seven years after the
Effective Date of the Registration Statement), the Company shall file a
registration statement (other than on Form S-4, Form S-8, or any
successor form) with the Securities and Exchange Commission (the
"Commission") while Warrant Shares are available for purchase upon
exercise of this Representative's Warrant or while any Warrant Shares
(collectively, the Representative's Warrants and the underlying Warrant
Shares, the "Representative's Securities") are outstanding, the Company
shall, on two occasions only, give the Holder and all the then holders
of such Representative's Securities at least 30 days prior written
notice of the filing of such registration statement. If requested by
the Holder or by any such holder in writing within 20 days after
receipt of any such notice, the Company shall, at the Company's sole
expense (other than the fees and disbursements of counsel for the
Holder or such holder and the underwriting discounts, if any, payable
in respect of
8
<PAGE> 9
the securities sold by the Holder or any such holder), register or
qualify the Representative's Securities of the Holder or any such
holders who shall have made such request concurrently with the
registration of such other securities, all to the extent requisite to
permit the public offering and sale of the Representative's Securities
requested to be registered, and will use its best efforts through its
officers, directors, auditors and counsel to cause such registration
statement to become effective as promptly as practicable.
Notwithstanding the foregoing, if the managing underwriter of any such
offering shall advise the Company in writing that, in its opinion, the
distribution of all or a portion of the Representative's Securities
requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely
affect the distribution of such securities by the Company for its own
account, then the Holder or any such holder who shall have requested
registration of his or its Representative's Securities shall delay the
offering and sale of such Representative's Securities (or the portions
thereof so designated by such managing underwriter) for such period,
not to exceed 90 days, as the managing underwriter shall request,
provided that no such delay shall be required as to any
Representative's Securities if any securities of the Company are
included in such registration statement for the account of any person
other than the Company and the Holder unless the securities included in
such registration statement for such other person shall have been
reduced pro rata to the reduction of the Representative's Securities
which were requested to be included in such registration.
b. If at any time after _______, 1999 (the Effective Date of
the Registration Statement), and before _______, 2004 (five years after
the Effective Date of the Registration Statement), the Company shall
receive a written request from holders of Representative's Securities
who, in the aggregate, own (or upon exercise of all Representatives
Warrants will own) a majority of the total number of Warrant Shares,
the Company shall, as promptly as practicable, prepare and file with
the Commission a registration statement sufficient to permit the public
offering and sale of the Representative's Securities, and will use its
best efforts through its officers, directors, auditors and counsel to
cause such registration statement to become effective as promptly as
practicable; provided, however, that the Company shall only be
obligated to file and obtain effectiveness of one such registration
statement for which all expenses incurred in connection with such
registration (other than the fees and disbursements of counsel for the
Holder or such holders and underwriting discounts, if any, payable in
respect of the Representative's
9
<PAGE> 10
Securities sold by the Holder or any such holder) shall be borne by the
Company. In addition to the one demand registration provided for
hereinabove, the holders of the Representative's Securities who, in the
aggregate, own (or upon exercise of all Representative's Warrants will
own) a majority of the total number of Warrant Shares issued or
issuable upon exercise of the Representative's Warrants may request
that the Company prepare and file a registration statement to permit
the public offering and sale of the Representative's Securities on two
additional occasions only, but the costs of preparation and filing of
such additional registration statements shall be at the then holders'
cost and expense unless the Company elects to register additional
shares of Common Stock, in which case the cost and expense of such
registration statements will be prorated between the Company and the
holders of the Representative's Securities according to the aggregate
sales price of the securities being issued.
c. In the event of a registration pursuant to the provisions
of this paragraph 8, the Company shall use its best efforts to cause
the Representative's Securities so registered to be registered or
qualified for sale under the securities or blue sky laws of such
jurisdictions as the Holder or such holders may reasonably request;
provided, however, that the Company shall not be required to qualify to
do business in any state by reason of this paragraph 8(c) in which it
is not otherwise required to qualify to do business and provided
further, that the Company has no obligation to qualify the
Representative's Securities where such qualification would cause any
unreasonable delay or expenditure by the Company.
d. The Company shall keep effective any registration or
qualification contemplated by this paragraph 8 and shall from time to
time amend or supplement each applicable registration statement,
preliminary prospectus, final prospectus, application, document and
communication for such period of time as shall be required to permit
the Holder or such holders to complete the offer and sale of the
Representative's Securities covered thereby. The Company shall in no
event be required to keep any such registration or qualification in
effect for a period in excess of nine months from the date on which the
Holder and such holders are first free to sell such Representative's
Securities; provided, however, that if the Company is required to keep
any such registration or qualification in effect with respect to
securities other than the Representative's Securities beyond such
period, the Company shall keep such registration or qualification in
effect as it relates to the Representative's Securities for so long as
such registration or qualification remains or is required to remain in
effect in respect of such other securities.
10
<PAGE> 11
e. In the event of a registration pursuant to the provisions
of this paragraph 8, the Company shall furnish to the Holder and to
each such holder such reasonable number of copies of the registration
statement and of each amendment and supplement thereto (in each case,
including all exhibits), such reasonable number of copies of each
prospectus contained in such registration statement and each supplement
or amendment thereto (including each preliminary prospectus), all of
which shall conform to the requirements of the Act and the rules and
regulations thereunder, and such other documents as the Holder or such
holders may reasonably request in order to facilitate the disposition
of the Representative's Securities included in such registration.
f. In the event of a registration pursuant to the provisions
of this paragraph 8, the Company shall furnish the Holder and each
holder of any Representative's Securities so registered with an opinion
of its counsel to the effect that (i) the registration statement has
become effective under the Act and no order suspending the
effectiveness of the registration statement, preventing or suspending
the use of the registration statement, any preliminary prospectus, any
final prospectus, or any amendment or supplement thereto has been
issued, nor to such counsel's actual knowledge has the Securities and
Exchange Commission or any securities or blue sky authority of any
jurisdiction instituted or threatened to institute any proceedings with
respect to such an order and (ii) the registration statement and each
prospectus forming a part thereof (including each preliminary
prospectus), and any amendment or supplement thereto, complies as to
form with the Act and the rules and regulations thereunder. Such
counsel shall also provide a Blue Sky Memorandum setting forth the
jurisdictions in which the Representative's Securities have been
registered or qualified for sale pursuant to the provisions of
paragraph 8(c).
g. The Company agrees that until all the Representative's
Securities have been sold under a registration statement or pursuant to
Rule 144 under the Act, it shall keep current in filing all reports,
statements and other materials required to be filed with the Commission
to permit holders of the Representative's Securities to sell such
securities under Rule 144.
h. The Holder and any holders who propose to register their
Representative's Securities under the Act shall execute and deliver to
the Company a selling stockholder questionnaire on a form to be
provided by the Company.
9. a. Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Holder, any holder of any of the
Representative's
11
<PAGE> 12
Securities, their officers, directors, partners, employees, agents and
counsel, and each person, if any, who controls any such person within
the meaning of Section 15 of the Act or Section 20(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), from and against
any and all loss, liability, charge, claim, damage and expense
whatsoever (which shall include, for all purposes of this Section 9,
but not be limited to, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), as
and when incurred, arising out of, based upon, or in connection with
(i) any untrue statement or alleged untrue statement of a material fact
contained (A) in any registration statement, preliminary prospectus or
final prospectus (as from time to time amended and supplemented), or
any amendment or supplement thereto, or (B) in any application or other
document or communication (in this Section 9 collectively called an
"application") executed by or on behalf of the Company or based upon
written information furnished by or on behalf of the Company filed in
any jurisdiction in order to register or qualify any of the
Representative's Securities under the securities or blue sky laws
thereof or filed with the Commission or any securities exchange; or any
omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, unless such statement or omission was made in reliance upon
and in conformity with written information furnished to the Company
with respect to the Holder or any holder of any of the Representative's
Securities by or on behalf of such person expressly for inclusion in
any registration statement, preliminary prospectus, or final
prospectus, or any amendment or supplement thereto, or in any
application, as the case may be, or (ii) any breach of any
representation, warranty, covenant or agreement of the Company
contained in this Representative's Warrant. The foregoing agreement to
indemnify shall be in addition to any liability the Company may
otherwise have, including liabilities arising under this
Representative's Warrant.
If any action is brought against the Holder or any holder of
any of the Representative's Securities or any of its officers,
directors, partners, employees, agents or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which
indemnity may be sought against the Company pursuant to the foregoing
paragraph, such indemnified party or parties shall promptly notify the
Company in writing of the institution of such action (but the failure
so to notify shall not relieve the Company from any liability it may
otherwise have to Holder or
12
<PAGE> 13
any holder of any of the Representative's Securities) and the Company
shall promptly assume the defense of such action, including the
employment of counsel (reasonably satisfactory to such indemnified
party or parties) and payment of expenses. Such indemnified party or
parties shall have the right to employ its or their own counsel in any
such case, but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless the employment of
such counsel shall have been authorized in writing by the Company in
connection with the defense of such action or the Company shall not
have promptly employed counsel reasonably satisfactory to such
indemnified party or parties to have charge of the defense of such
action or such indemnified party or parties shall have reasonably
concluded that there may be one or more legal defenses available to it
or them or to other indemnified parties which are different from or
additional to those available to the Company, in any of which events
such fees and expenses shall be borne by the Company and the Company
shall not have the right to direct the defense of such action on behalf
of the indemnified party or parties. Anything in this paragraph to the
contrary notwithstanding, the Company shall not be liable for any
settlement of any such claim or action effected without its written
consent.
b. The Holder and each holder agrees to indemnify and hold
harmless the Company, each director of the Company, each officer of the
Company who shall have signed any registration statement covering the
Representative's Securities held by the Holder and each holder and each
other person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, to the same
extent as the foregoing indemnity from the Company to the Holder and
each holder in paragraph 9(a), but only with respect to statements or
omissions, if any, made in any registration statement, preliminary
prospectus, or final prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any
application, in reliance upon and in conformity with written
information furnished to the Company with respect to the Holder and
each holder by or on behalf of the Holder and each holder expressly for
inclusion in any such registration statement, preliminary prospectus,
or final prospectus, or any amendment or supplement thereto, or in any
application, as the case may be. If any action shall be brought against
the Company or any other person so indemnified based on any such
registration statement, preliminary prospectus, or final prospectus, or
any amendment or supplement thereto, or in any application, and in
respect of which indemnity may be sought against the Holder and each
holder pursuant to this paragraph 9(b), the Holder and each holder
shall
13
<PAGE> 14
have the rights and duties given to the Company, and the Company and
each other person so indemnified shall have the rights and duties given
to the indemnified parties, by the provisions of paragraph 9(a).
c. To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to
paragraph 9(a) or 9(b) (subject to the limitations thereof) but it is
found in a final judicial determination, not subject to further appeal,
that such indemnification may not be enforced in such case, even though
this Agreement expressly provides for indemnification in such case, or
(ii) any indemnified or indemnifying party seeks contribution under the
Act, the Exchange Act or otherwise because the indemnification provided
for in this Section 9 is for any reason held to be unenforceable by the
Company and the Holder and any holder, then the Company (including for
this purpose any contribution made by or on behalf of any director of
the Company, any officer of the Company who signed any such
registration statement and any controlling person of the Company), as
one entity, and the Holder and any holder of any of the
Representative's Securities included in such registration in the
aggregate (including for this purpose any contribution by or on behalf
of the Holder or any holder), as a second entity, shall contribute to
the losses, liabilities, claims, damages and expenses whatsoever to
which any of them may be subject, on the basis of relevant equitable
considerations such as the relative fault of the Company and the Holder
or any such holder in connection with the facts which resulted in such
losses, liabilities, claims, damages and expenses. The relative fault,
in the case of an untrue statement, alleged untrue statement, omission
or alleged omission, shall be determined by, among other things,
whether such statement, alleged statement, omission or alleged omission
relates to information supplied by the Company, by the Holder or by any
holder of Representative's Securities included in such registration,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement, alleged statement,
omission or alleged omission. The Company and the Holder agree that it
would be unjust and inequitable if the respective obligations of the
Company and the Holder for contribution were determined by pro rata or
per capita allocation of the aggregate losses, liabilities, claims,
damages and expenses (even if the Holder and the other indemnified
parties were treated as one entity for such purpose) or by any other
method of allocation that does not reflect the equitable considerations
referred to in this paragraph 9(c). No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty
14
<PAGE> 15
of such fraudulent misrepresentation. For purposes of this paragraph
9(c), each person, if any, who controls the Holder or any holder of any
of the Representative's Securities within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act and each officer,
director, partner, employee, agent and counsel of each such person,
shall have the same rights to contribution as such person and each
person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, each officer of the
Company who shall have signed any such registration statement, and each
director of the Company shall have the same rights to contribution as
the Company, subject in each case to the provisions of this paragraph
9(c). Anything in this paragraph 9(c) to the contrary notwithstanding,
no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent.
This paragraph 9(c) is intended to supersede any right to contribution
under the Act, the Exchange Act or otherwise.
10. Unless the Representative's Securities have been registered or an
exemption from such registration is available, the Warrant Shares issued upon
exercise of the Representative's Warrants shall be subject to a stop transfer
order and the certificate or certificates evidencing any such Warrant Shares
shall bear the following legend:
15
<PAGE> 16
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, NOR HAVE THEY BEEN REGISTERED UNDER THE SECURITIES ("BLUE SKY")
LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, OR HYPOTHECATED UNLESS THEY HAVE FIRST BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND UNDER THE APPLICABLE STATE SECURITIES
("BLUE SKY") LAWS OR UNLESS THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND LAWS IS ESTABLISHED TO THE SATISFACTION
OF THE COMPANY, WHICH MAY NECESSITATE A WRITTEN OPINION OF SELLER'S
COUNSEL SATISFACTORY TO COMPANY COUNSEL.
11. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Representative's Warrant (and upon
surrender of any Representative's Warrant if mutilated), and upon reimbursement
of the Company's reasonable incidental expenses, the Company shall execute and
deliver to the Holder thereof a new Representative's Warrant of like date, tenor
and denomination.
12. The Holder of any Representative's Warrant shall not have, solely
on account of such status, any rights of a stockholder of the Company, either at
law or in equity, or to any notice of meetings of stockholders or of any other
proceedings of the Company, except as provided in this Representative's Warrant.
13. This Representative's Warrant shall be construed in accordance with
the laws of the State of Colorado, without giving effect to conflict of laws.
Dated: _____, 1999
LEISURE TIME CASINOS & RESORTS, INC.
By:
------------------------------------
[SEAL] Alan N. Johnson, President
16
<PAGE> 17
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Representative's Warrant.)
FOR VALUE RECEIVED, ___________________________________ hereby sells,
assigns and transfers unto ________________________ Representative's Warrants to
purchase __________ shares of Common Stock of Leisure Time Casinos & Resorts,
Inc. (the "Company"), together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ____________________________
attorney to transfer such Representative's Warrants on the books of the Company,
with full power of substitution.
Dated:
-----------------------
Signature:
------------------------------------
Signature Guaranteed:
NOTICE
The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Representative's Warrant in every particular,
without alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by an eligible guarantor institution which is a participant in a
Securities Transfer Association recognized program.
17
<PAGE> 18
ELECTION TO EXERCISE
(To be executed by the holder if such holder desires to
exercise the attached Representative's Warrant)
The undersigned hereby exercises his or its rights to subscribe for
__________ shares of Common Stock covered by the within Representative's Warrant
(each as defined in the within Representative's Warrant) and tenders payment
herewith in the amount of $__________ in accordance with the terms thereof, and
requests that certificates for such Warrants be issued in the name of, and
delivered to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print Name, Address and Social Security or
Tax Identification Number)
and, if such number of Warrants (or portions thereof) shall not be all the
Warrants covered by the within Representative's Warrant, that a new
Representative's Warrant for the balance of the Representative's Warrants (or
portions thereof) covered by the within Representative's Warrant be registered
in the name of, and delivered to, the undersigned at the address stated below.
Name:
---------------------------------------------------------------------------
(Print)
Address:
------------------------------------------------------------------------
- -------------------------------
(Signature)
Dated: Signature Guaranteed:
-------------------------
NOTICE
The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Representative's Warrant in every particular,
without alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by an eligible guarantor institution which is a participant in a
Securities Transfer Association recognized program.
18
<PAGE> 1
EXHIBIT 10.0
LEISURE TIME CASINOS & RESORTS, INC.
1997 INCENTIVE AND NONSTATUTORY
STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. The purposes of this 1997 Incentive and
Nonstatutory Stock Option Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to the Employees and Consultants of the Company and to promote the
success of the Company's business. Options granted hereunder may be either
"incentive stock options," as defined in Section 422 of the Internal Revenue
Code of 1986, as amended, or "nonstatutory stock options," at the discretion of
the Board and as reflected in the terms of the written stock option agreement.
2. DEFINITIONS. As used herein, the following definitions shall apply:
a. "BOARD" shall mean the Committee, if one has been
appointed, or the Board of Directors of the Company if no Committee is
appointed.
b. "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
c. "COMMON STOCK" shall mean the $0.001 par value common stock
of the Company.
d. "COMPANY" shall mean Leisure Time Casinos & Resorts, Inc.,
a Colorado corporation.
e. "COMMITTEE" shall mean the Committee appointed by the Board
in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed, or the Board if no committee is appointed.
f. "CONSULTANT" shall mean any person who is engaged by the
Company or any Subsidiary to render consulting services and is
compensated for such consulting services, but does not include a
director of the Company who is compensated for services as a director
only with the payment of a director's fee by the Company.
g. "CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence
of any interruption or termination of service as an Employee.
Continuous Status as an Employee shall not be considered interrupted in
the case of sick leave, military leave, or any other leave of absence
approved by the Board; provided that such leave is for a period of not
more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
<PAGE> 2
h. "EMPLOYEE" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient to constitute "employment" by the Company.
i. "INCENTIVE STOCK OPTION" shall mean an Option which is
intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code and which shall be clearly identified as such
in the written Stock Option Agreement provided by the Company to each
Optionee granted an Incentive Stock Option under the Plan.
j. "NON-EMPLOYEE DIRECTOR" shall mean a director who:
(i) Is not currently an officer (as defined in
Section 16a-1(f) of the Securities Exchange Act of 1934, as
amended) of the Company or a Parent or Subsidiary of the
Company, or otherwise currently employed by the Company or a
Parent or Subsidiary of the Company.
(ii) Does not receive compensation, either directly
or indirectly, from the Company or a Parent or Subsidiary of
the Company, for services rendered as a Consultant or in any
capacity other than as a director, except for an amount that
does not exceed the dollar amount for which disclosure would
be required pursuant to Item 404(a) of Regulation S-K adopted
by the United States Securities and Exchange Commission.
(iii) Does not possess an interest in any other
transaction for which disclosure would be required pursuant to
Item 404(a) of Regulation S-K adopted by the United States
Securities and Exchange Commission.
k. "NONSTATUTORY STOCK OPTION" shall mean an Option granted
under this Plan which does not qualify as an Incentive Stock Option and
which shall be clearly identified as such in the written Stock Option
Agreement provided by the Company to each Optionee granted a
Nonstatutory Stock Option under this Plan. To the extent that the
aggregate fair market value of Optioned Stock to which Incentive Stock
Options granted under Options to an Employee are exercisable for the
first time during any calendar year (under the Plan and all plans of
the Company or any Parent or Subsidiary) exceeds $100,000, such Options
shall be treated as Nonstatutory Stock Options under the Plan. The
aggregate fair market value of the Optioned Stock shall be determined
as of the date of grant of each Option and the determination of which
Incentive Stock Options shall be treated as qualified incentive stock
options under Section 422 of the Code and which Incentive Stock Options
exercisable for the first time in a particular year in excess of the
$100,000 limitation shall be treated as Nonstatutory Stock Options
shall be determined based on the order in which such Options were
granted in accordance with Section 422(d) of the Code.
2
<PAGE> 3
l. "OPTION" shall mean an Incentive Stock Option, a
Nonstatutory Stock Option or both as identified in a written Stock
Option Agreement representing such stock option granted pursuant to the
Plan.
m. "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.
n. "OPTIONEE" shall mean an Employee or other person who is
granted an Option.
o. "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
p. "PLAN" shall mean this 1996 Incentive and Nonstatutory
Stock Option Plan.
q. "SHARE" shall mean a share of the Common Stock of the
Company, as adjusted in accordance with Section 11 of the Plan.
r. "STOCK OPTION AGREEMENT" shall mean the agreement to be
entered into between the Company and each Optionee which shall set
forth the terms and conditions of each Option granted to each Optionee,
including the number of Shares underlying such Option and the exercise
price of each Option granted to such Optionee under such agreement.
s. "SUBSIDIARY" shall mean a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 1,000,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should expire
or become unexercisable for any reason without having been exercised in full,
the unpurchased Shares which were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
a. PROCEDURE. The Plan shall be administered by the Board or a
Committee appointed by the Board consisting of two or more Non-Employee
Directors to administer the Plan on behalf of the Board, subject to
such terms and conditions as the Board may prescribe.
(i) Once appointed, the Committee shall continue to
serve until otherwise directed by the Board (which for
purposes of this paragraph (a)(i) of
3
<PAGE> 4
this Section 4 shall be the Board of Directors of the
Company). From time to time the Board may increase the size of
the Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in
substitution therefor, fill vacancies however caused, or
remove all members of the Committee and thereafter directly
administer the Plan.
(ii) Members of the Board who are granted, or have
been granted, Options may vote on any matters affecting the
administration of the Plan or the grant of any Options
pursuant to the Plan.
b. POWERS OF THE BOARD. Subject to the provisions of the Plan,
the Board shall have the authority, in its discretion:
(i) To grant Incentive Stock Options, in accordance
with Section 422 of the Code, and Nonstatutory Stock Options
or both as provided and identified in a separate written Stock
Option Agreement to each Optionee granted such Option or
Options under the Plan; provided however, that in no event
shall an Incentive Stock Option and a Nonstatutory Stock
Option granted to any Optionee under a single Stock Option
Agreement be subject to a "tandem" exercise arrangement such
that the exercise of one such Option affects the Optionee's
right to exercise the other Option granted under such Stock
Option Agreement;
(ii) To determine, upon review of relevant
information and in accordance with Section 8(b) of the Plan,
the fair market value of the Common Stock;
(iii) To determine the exercise price per Share of
Options to be granted, which exercise price shall be
determined in accordance with Section 8(a) of the Plan;
(iv) To determine the Employees or other persons to
whom, and the time or times at which, Options shall be granted
and the number of Shares to be represented by each Option;
(v) To interpret the Plan;
(vi) To prescribe, amend and rescind rules and
regulations relating to the Plan;
(vii) To determine the terms and provisions of each
Option granted (which need not be identical) and, with the
consent of the holder thereof, modify or amend each Option;
4
<PAGE> 5
(viii) To accelerate or defer (with the consent of
the Optionee) the exercise date of any Option, consistent with
the provisions of Section 7 of the Plan;
(ix) To authorize any person to execute on behalf of
the Company any instrument required to effectuate the grant of
an Option previously granted by the Board; and
(x) To make all other determinations deemed necessary
or advisable for the administration of the Plan.
c. EFFECT OF BOARD'S DECISION. All decisions, determinations
and interpretations of the Board shall be final and binding on all
Optionees and any other permissible holders of any Options granted
under the Plan.
5. ELIGIBILITY.
a. PERSONS ELIGIBLE. Options may be granted to any person
selected by the Board. Incentive Stock Options may be granted only to
Employees. An Employee, who is also a director of the Company, its
Parent or a Subsidiary, shall be treated as an Employee for purposes of
this Section 5. An Employee or other person who has been granted an
Option may, if he is otherwise eligible, be granted an additional
Option or Options.
b. NO EFFECT ON RELATIONSHIP. The Plan shall not confer upon
any Optionee any right with respect to continuation of employment or
other relationship with the Company nor shall it interfere in any way
with his right or the Company's right to terminate his employment or
other relationship at any time.
6. TERM OF PLAN. The Plan became effective on March 7, 1997. It shall
continue in effect until March 6, 2007, unless sooner terminated under Section
13 of the Plan.
7. TERM OF OPTION. The term of each Option shall be 10 years from the
date of grant thereof or such shorter term as may be provided in the Stock
Option Agreement. However, in the case of an Option granted to an Optionee who,
at the time the Option is granted, owns stock representing more than 10% of the
total combined voting power of all classes of stock of the Company or any Parent
or Subsidiary, if the Option is an Incentive Stock Option, the term of the
Option shall be five years from the date of grant thereof or such shorter time
as may be provided in the Stock Option Agreement.
5
<PAGE> 6
8. EXERCISE PRICE AND CONSIDERATION.
a. EXERCISE PRICE. The per Share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be such price as
is determined by the Board, but the per Share exercise price under an
Incentive Stock Option shall be subject to the following:
(i) If granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing
more than 10% of the voting power of all classes of stock of
the Company or any Parent or Subsidiary, the per Share
exercise price shall not be less than 110% of the fair market
value per Share on the date of grant.
(ii) If granted to any other Employee, the per Share
exercise price shall not be less than 100% of the fair market
value per Share on the date of grant.
b. DETERMINATION OF FAIR MARKET VALUE. The fair market value
per Share on the date of grant shall be determined as follows:
(i) If the Common Stock is listed on the New York
Stock Exchange, the American Stock Exchange or such other
securities exchange designated by the Board, or admitted to
unlisted trading privileges on any such exchange, or if the
Common Stock is quoted on a National Association of Securities
Dealers, Inc. system that reports closing prices, the fair
market value shall be the closing price of the Common Stock as
reported by such exchange or system on the day the fair market
value is to be determined, or if no such price is reported for
such day, then the determination of such closing price shall
be as of the last immediately preceding day on which the
closing price is so reported;
(ii) If the Common Stock is not so listed or admitted
to unlisted trading privileges or so quoted, the fair market
value shall be the average of the last reported highest bid
and the lowest asked prices quoted on the National Association
of Securities Dealers, Inc. Automated Quotations System or, if
not so quoted, then by the National Quotation Bureau, Inc. on
the day the fair market value is determined; or
(iii) If the Common Stock is not so listed or
admitted to unlisted trading privileges or so quoted, and bid
and asked prices are not reported, the fair market value shall
be determined in such reasonable manner as may be prescribed
by the Board.
c. CONSIDERATION AND METHOD OF PAYMENT. The consideration to
be paid for the Shares to be issued upon exercise of an Option,
including the method of payment, shall be determined by the Board and
may consist entirely of cash, check, other shares of Common Stock
having a fair market value on the date of exercise equal to the
aggregate
6
<PAGE> 7
exercise price of the Shares as to which said Option shall be
exercised, or any combination of such methods of payment, or such other
consideration and method of payment for the issuance of Shares to the
extent permitted under the Colorado Business Corporation Act.
9. EXERCISE OF OPTION.
a. PROCEDURE FOR EXERCISE: RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria
with respect to the Company and/or the Optionee, and as shall be
permissible under the terms of the Plan.
In the sole discretion of the Board, at the time of the grant
of an Option or subsequent thereto but prior to the exercise of an
Option, an Optionee may be provided with the right to exchange, in a
cashless transaction, all or part of the Option for Common Stock of the
Company on terms and conditions determined by the Board.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and
full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment, as authorized
by the Board, may consist of a consideration and method of payment
allowable under Section 8(c) and this Section 9(a) of the Plan. Until
the issuance (as evidenced by the appropriate entry on the books of the
Company or of the duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. No
adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued,
except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.
b. TERMINATION OF STATUS AS AN EMPLOYEE. In the case of an
Incentive Stock Option, if any Employee ceases to serve as an Employee,
he may, but only within such period of time not exceeding three months
as is determined by the Board at the time of grant of the Option after
the date he ceases to be an Employee of the Company, exercise his
Option to the extent that he was entitled to exercise it at the date of
such termination. To the extent that he was not entitled to exercise
the Option at the date of such termination, or if he does not exercise
such Option (which he was entitled to exercise) within the time
specified herein, the Option shall terminate.
7
<PAGE> 8
c. DISABILITY OF OPTIONEE. In the case of an Incentive Stock
Option, notwithstanding the provisions of Section 9(b) above, in the
event an Employee is unable to continue his employment with the Company
as a result of his total and permanent disability (as defined in
Section 22(e)(3) of the Code), he may, but only within such period of
time not exceeding 12 months as is determined by the Board at the time
of grant of the Option from the date of termination, exercise his
Option to the extent he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the
Option at the date of termination, or if he does not exercise such
Option (which he was entitled to exercise) within the time specified
herein, the Option shall terminate.
d. DEATH OF OPTIONEE. In the case of an Incentive Stock
Option, in the event of the death of the Optionee:
(i) During the term of the Option if the Optionee was
at the time of his death an Employee the Company and had been
in Continuous Status as an Employee or Consultant since the
date of grant of the Option, the Option may be exercised, at
any time within 12 months following the date of death, by the
Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that would have accrued had
the Optionee continued living and remained in Continuous
Status as an Employee 12 months after the date of death; or
(ii) Within such period of time not exceeding three
months as is determined by the Board at the time of grant of
the Option after the termination of Continuous Status as an
Employee, the Option may be exercised, at any time within 12
months following the date of death, by the Optionee's estate
or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right
to exercise that had accrued at the date of termination.
10. NONTRANSFERABILITY OF OPTIONS. Unless permitted by the Code, in the
case of an Incentive Stock Option, the Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent and distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to
any required action by the shareholders of the Company, the number of Shares
covered by each outstanding Option, and the number of Shares which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of any Option, as well as the price per Share covered by
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<PAGE> 9
each such outstanding Option, shall be proportionately adjusted for any increase
or decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
the Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. In the event
of the proposed sale of all or substantially all of the assets of the Company,
or the merger of the Company with or into another corporation in a transaction
in which the Company is not the survivor, the Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
that the Optionee shall have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of such a merger or sale of assets, the
Board shall notify the Optionee that the Option shall be fully exercisable for a
period of 30 days from the date of such notice, and the Option will terminate
upon the expiration of such period.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each Employee or
other person to whom an Option is so granted within a reasonable time after the
date of such grant. Within a reasonable time after the date of the grant of an
Option, the Company shall enter into and deliver to each Employee or other
person granted such Option a written Stock Option Agreement as provided in
Sections 2(r) and 16 hereof, setting forth the terms and conditions of such
Option and separately identifying the portion of the Option which is an
Incentive Stock Option and/or the portion of such Option which is a Nonstatutory
Stock Option.
13. AMENDMENT AND TERMINATION OF THE PLAN.
a. AMENDMENT AND TERMINATION. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem
advisable; provided that,
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<PAGE> 10
the following revisions or amendments shall require approval of the
shareholders of the Company in the manner described in Section 17 of
the Plan:
(i) An increase in the number of Shares subject to
the Plan above 1,000,000 Shares, other than in connection with
an adjustment under Section 11 of the Plan;
(ii) Any change in the designation of the class of
Employees eligible to be granted Incentive Stock Options; or
(iii) Any material amendment under the Plan that
would have to be approved by the shareholders of the Company
for the Board to continue to be able to grant Incentive Stock
Options under the Plan.
b. EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and
such Options shall remain in full force and effect as if the Plan had
not been amended or terminated, unless mutually agreed otherwise
between the Optionee and the Board, which agreement must be in writing
and signed by the Optionee and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and
regulations promulgated thereunder, applicable state securities laws, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of legal counsel for the Company with
respect to such compliance.
As a condition to the existence of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares and such other
representations and warranties which in the opinion of legal counsel for the
Company, are necessary or appropriate to establish an exemption from the
registration requirements under applicable federal and state securities laws
with respect to the acquisition of such Shares.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. Inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's legal counsel to be necessary for the lawful issuance
and sale of any Share hereunder, shall relieve the Company of any liability
relating to the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
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<PAGE> 11
16. OPTION AGREEMENT. Each Option granted to an Employee or other
persons shall be evidenced by a written Stock Option Agreement in such form as
the Board shall approve.
17. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company on or before March 6, 1998. Such
shareholder approval and any shareholder approval required under Section 13 of
the Plan, may be obtained at a duly held shareholders meeting by the affirmative
vote of the holders of a majority of the outstanding shares of the voting stock
of the Company, who are present or represented and entitled to vote thereon, or
by unanimous written consent of the shareholders in accordance with the
provisions of the Colorado Business Corporation Act.
18. INFORMATION TO OPTIONEES. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company. The Company shall not be required
to provide such information if the issuance of Options under the Plan is limited
to key employees whose duties in connection with the Company assure their access
to equivalent information.
19. GENDER. As used herein, the masculine, feminine and neuter genders
shall be deemed to include the others in all cases where they would so apply.
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<PAGE> 12
20. CHOICE OF LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY
AND INTERPRETATION OF THIS PLAN AND THE INSTRUMENTS EVIDENCING OPTIONS WILL BE
GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF
COLORADO.
IN WITNESS WHEREOF, the Company has caused its duly authorized officer
to execute this Plan effective as of March 7, 1997.
LEISURE TIME CASINOS & RESORTS, INC.,
a Colorado corporation
By: /s/
------------------------------------------
Alan N. Johnson, President
12
<PAGE> 1
EXHIBIT 10.2
LEISURE TIME CASINOS & RESORTS, INC.
11% CONVERTIBLE PROMISSORY NOTE DUE SEPTEMBER 1, 1999
$ ______ _______________
FOR VALUE RECEIVED, Leisure Time Casinos & Resorts, Inc., a corporation
duly organized and existing under the laws of the State of Colorado (the
"Company"), hereby promises to pay to the order of _________ ("Holder") the
principal sum of $__________ on September 1, 1999 (the "Maturity Date") and to
pay interest on the unpaid principal amount hereof at the rate of 11% per annum
from the date hereof until the principal sum hereof and all accrued and unpaid
interest hereon shall have been paid in full.
Payments of interest on the unpaid principal amount hereof shall be due
and payable by the Company to the Holder on December 1, 1996, March 1, 1997 and
June 1, 1997.
Commencing on September 1, 1997 and continuing on the same day in each
consecutive month thereafter until the Maturity Date, the Company shall pay to
the Holder payments of principal in the amount that equals 1/24 of the original
principal sum of this Convertible Promissory Note ("Note") and interest on the
unpaid principal amount hereof
The unpaid principal amount of this Note and all accrued and unpaid
interest hereon shall be due and payable by the Company to the Holder on the
Maturity Date.
The Holder shall have the right, exercisable at his option at any time
and from time to time up to and including the Maturity Date (except that, if
this Note or a portion hereof shall be called for prepayment by either the
Holder or the Company and the Company shall not thereafter default in the making
of the prepayment, such right shall terminate at the close of business on the
business day next preceding the date fixed for prepayment), to convert the
unpaid principal amount hereof or any portion thereof into (i) fully paid and
non-assessable shares of Common Stock of the Company, (ii) Warrants for the
purchase of shares of Common Stock of the Company at the warrant exercise price
of $1.75 per share in the form attached hereto as Exhibit A (the "$1.75
Warrants") and (iii) Warrants for the purchase of shares of Common Stock of the
Company at the warrant exercise price per share equal to 120% of the initial
public offering price of the Company's shares of Common Stock in the form
attached hereto as Exhibit B (the "120% Warrants") at the conversion price
("Conversion Price") of $1.25 for one share, one $1.75 Warrant and one 120%
Warrant (collectively, a "Unit") upon surrender of this Note to the Company at
its principal place of business. If so required by the Company, this Note, upon
surrender for conversion as aforesaid, shall be duly endorsed by or accompanied
by instruments of transfer, in form satisfactory to the Company, duly executed
by the Holder or by his duly authorized attorney. The Company shall not be
required to issue fractional Units, but shall make adjustment therefor in cash
at the rate of $1.25 for one full Unit.
<PAGE> 2
In addition to his other rights and remedies under this Note, the
Holder shall have the additional right, exercisable at his option at any time
and from time to time up to and including the Maturity Date (except that, if
this Note or a portion hereof shall be called for prepayment by either the
Holder or the Company and the Company shall not thereafter default in the making
of the prepayment, such right shall terminate at the close of business on the
business day next preceding the date fixed for prepayment) to purchase Units for
a purchase price payable in cash equal to the Conversion Price per Unit in an
aggregate amount not to exceed the aggregate amount of all payments of principal
previously made by the Company to the Holder on this Note.
In addition to his other rights and remedies under this Note, the
Holder is hereby granted the following preemptive rights: Subject to the
satisfaction of the condition specified in paragraph F. below, if and on each
such occasion thereafter up to and including the Maturity Date, the Company
shall issue additional shares of Common Stock, it shall issue to the Holder an
additional warrant ("Preemptive Warrant") to purchase the number of shares set
forth hereafter but at the same price per share received by the Company on such
issuance. The number of shares covered by each Preemptive Warrant granted to the
Holder shall be that number that, together with all shares of Common Stock
issued or at the time issuable pursuant to the conversion of this Note and the
exercise of the $1.75 Warrants and the 120% Warrants issuable upon the
conversion of this Note, plus those shares previously subjected to Preemptive
Warrants pursuant to this paragraph, would equal the same percentage of the
outstanding Common Stock of the Company after the issuance of the Common Stock
which has given rise to the grant of a Preemptive Warrant pursuant to this
paragraph, and assuming conversion of the original unpaid principal amount
hereof into Units and exercise of all Warrants issued pursuant to this Note into
shares of Common Stock, as the percentage of the outstanding Common Stock of the
Company which, based on such assumption, would be owned by the Holder on a fully
diluted basis on the date the Company shall have issued and outstanding a total
of 10,000,000 shares of its Common Stock on a fully diluted basis as provided
for in paragraph F. below.
A. In the event of an issuance of additional shares of Common Stock as
described in the preceding paragraph for a consideration other than cash, the
consideration per share payable by the Holder pursuant to the Preemptive Warrant
issued pursuant to the preceding paragraph shall be the cash equivalent of such
consideration, as determined in good faith by the Company's Board of Directors.
The Holder may request an appraisal of such cash equivalent, at his expense,
which shall be reviewed by the Company's Board of Directors prior to making its
final determination
B. After the satisfaction of the condition specified in paragraph F.
below, whenever the Company shall issue additional shares of Common Stock, it
shall give written notice thereof to the Holder and shall thereafter issue to
the Holder a Preemptive Warrant for the number of shares of Common Stock at the
price specified above, with the form of Preemptive Warrant being in
substantially the form attached hereto as Exhibit A of this Agreement modified
to reflect the actual
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<PAGE> 3
number of shares issued, issue date and price called for hereby. None of the
Preemptive Warrants may be exercised by the Holder unless and until the Holder
shall have converted this Note into Units as provided above. If this Note shall
be converted by the Holder in part only, the Preemptive Warrants shall, after
any such partial conversion, be exercisable to the extent of the same percentage
amount that the amount of any such partial conversion bears to the original
unpaid principal amount hereof.
C. For purposes of these preemptive rights, the issuance by the Company
of convertible securities, rights or options for Common Stock or rights or
options for convertible securities shall be deemed to be an issuance of the same
number of shares of Common Stock that would be deemed to be issued as a result
of the conversion or exercise, as the case may be, of such securities into
shares of Common Stock.
D. The preemptive rights granted hereby shall not require the grant of
a Preemptive Warrant as a result of the issuance of any additional shares of
Common Stock upon exercise of the $1.75 Warrants or the 120% Warrants issued
upon conversion of this Note or upon exercise of any of the Preemptive Warrants
issued to the Holder pursuant to these preemptive rights.
E. The preemptive rights granted hereby shall terminate on the Maturity
Date (except that, if this Note or a portion hereof shall be called for
prepayment by either the Holder or the Company and the Company shall not
thereafter default in the making of the prepayment, such preemptive rights shall
terminate at the close of business on the business day next preceding the date
fixed for prepayment).
F. Notwithstanding the foregoing provisions of this Note relating to
the Holder's preemptive rights, the Holder agrees by his acceptance hereof that
the preemptive rights granted hereby shall not be applicable to any issuances of
shares of Common Stock by the Company until after the Company shall have issued
and outstanding a total of 10,000,000 shares of its Common Stock on a fully
diluted basis which shall take into account all shares, convertible securities,
rights and options now and hereafter issued by the Company.
The shares of the Company's Common Stock issuable upon conversion of
this Note and upon exercise of the $1.75 Warrants, the 120% Warrants and the
Warrants issued to the Holder pursuant to the preemptive rights granted hereby
are entitled to the benefits of a Registration Rights Agreement of even date
herewith among the Company, the Holder and certain other persons holding Notes
substantially identical to this Note.
If any payment of interest or any payment of principal and interest, as
the case may be, is not paid by the Company within five (5) business days after
the date on which such payment shall have become due and payable under this Note
or upon the bankruptcy or receivership of the Company (each, an "Event of
Default"), the Holder may, by giving written notice to the Company, declare the
unpaid principal amount hereof and all accrued and unpaid interest hereon to be
3
<PAGE> 4
immediately due and payable and upon such declaration, the unpaid principal
amount hereof and all accrued and unpaid interest hereon shall be and become
immediately due and payable. Upon the occurrence and continuance of an Event of
Default and upon notice from Holder to the Company, the rate of interest on this
Note shall increase from 11% per annum to 13% per annum.
In addition to his other rights and remedies under this Note, the
Holder shall have the additional right, exercisable at his option at any time
between April 1, 1997 and July 1, 1997, to declare the unpaid principal amount
hereof and all accrued and unpaid interest hereon to be immediately due and
payable if by at least April 1, 1997, the Company shall not have obtained and
furnished to the Holder a commitment from a recognized investment banking firm
providing for the initial public offering of the Company's Common Stock
containing only terms and conditions usual and customary for initial public
offerings.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceedings (whether at the trial or appellate level), or should this Note be
placed in the hands of attorneys for collection upon the occurrence of an Event
of Default, the Company agrees to pay, in addition to the principal and interest
due and payable hereon, all costs of collection, including reasonable attorneys'
fees.
The Company agrees to furnish to the Holder hereof on or before the
15th day of each calendar month during which any part of the principal amount
hereof or accrued interest herein shall remain unpaid with copies of its
internally prepared financial statements for the preceding calendar month in
form reasonably acceptable to the Holder commencing in the month following the
month after the closing of Company's acquisition of U.S. Games, Inc., a Georgia
corporation.
This Note may be prepaid, at the option of the Company, at any time
during the period beginning on the date that is 30 days prior to the closing
date of the Company's initial public offering of its Common Stock ("IPO") and
ending on the date that is 30 days after the closing date of the Company's IPO
upon not less than 30 nor more than 60 days prior notice of prepayment to the
Holder, without premium or penalty, together with accrued interest to the date
fixed for prepayment.
This Note is transferable in the manner authorized by law. Upon
surrender of this Note for transfer, accompanied by a written instrument of
transfer in form satisfactory to the Company, a new Note or Notes, for a like
aggregate principal amount, will be issued to the transferee.
Prior to the transfer of this Note, the Company may deem and treat the
Holder hereof as the absolute owner hereof (whether or not this Note shall be
overdue) for the purpose of receiving payment of or on account of the principal
hereof and interest hereon, and for all other purposes, and the Company shall
not be affected by any notice to the contrary.
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<PAGE> 5
Except as expressly provided for herein, the Company hereby waives
presentment, demand, notice of demand, protest, notice of protest and notice of
dishonor and any other notice required to be given by law in connection with the
delivery, acceptance, performance, default or enforcement.
No recourse shall be had for the payment of the principal of or the
interest on this Note, or for any claim base hereon, or otherwise in respect,
hereof, against any incorporator, shareholder, officer or director, as such,
past, present or future, of the Company or of any successor corporation, whether
by virtue of any constitution, statute or rule of law or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue thereof, expressly waived and released. The preceding sentence shall
not be deemed to apply to any person's liability arising out of or related to
any conversion of the Company's assets or properties, breach of fiduciary duty
owned to the Company or fraud perpetrated on the Company or its shareholders.
This Note is one of the 11% Convertible Promissory Notes of the Company
referred to in the Escrow Agreement dated as of May 28, 1996, between the
Company and Keating, Muething & Klekamp, P.L.L., 1800 Provident Tower, One East
Fourth Street, Cincinnati, Ohio 45202, Escrow Agent, and the Holder is hereby
entitled to the benefits of the Escrow Agreement.
This Note shall be governed by and construed in accordance with the
laws of the State Of Ohio.
In Witness Whereof, Leisure Time Casinos & Resorts, Inc. has caused
this Convertible Promissory Note to be signed by its President on the date first
above written.
LEISURE TIME CASINOS & RESORTS, INC.
By:/s/
---------------------------------
Alan N. Johnson, President
(This note supersedes any and all other notes.)
5
<PAGE> 6
EXHIBIT A TO 11% CONVERTIBLE
PROMISSORY NOTE DUE SEPTEMBER 1, 1999
The Securities represented hereby have been acquired for investment have not
been registered under the Securities Act of 1933 or state securities laws, and
may not be sold, exchanged or transferred in any manner, except in compliance
with Section 4 hereof.
Warrant Certificate No.: Warrants for Shares
---------------- ------------------
Original Issue Date: Purchase Price $1.75 Per Share
--------------------
WARRANT TO PURCHASE COMMON STOCK
OF
LEISURE TIME CASINOS & RESORTS, INC.
This certifies that ____________, or registered assigns, is entitled,
subject to the terms set forth below, at any time from the Original Issue Date
set forth above until 5:00 P.M., Eastern time, on the third anniversary of such
date, to purchase from Leisure Time Casinos & Resorts, Inc., (the "Company"), a
Colorado corporation, up to ___________ fully paid and non-assessable shares of
the Company's Common Stock upon surrender hereof, at the principal office of the
Company, with the subscription form annexed hereto duly executed, and
simultaneous payment therefor, at the purchase price per share set forth above
(the "Purchase Price"). The number and character of such shares of Common Stock
are subject to adjustment as provided below, and the term "Common Stock" shall
mean, unless the context otherwise requires, the stock and other securities and
property at the time receivable upon the exercise of this Warrant.
1. THE WARRANTS. This Warrant was issued in connection with the
conversion of the 11% Convertible Promissory Note (the "11% Convertible
Promissory Note") dated August 22, 1996, in the original principal amount of
$______ made by the Company and payable to the order of__________. The term
"Warrants" as used herein shall include all of the $1.75 Warrants issued
pursuant to the 11% Convertible Promissory Note and also any warrants delivered
in substitution or exchange therefor as provided herein. This Warrant does not
entitle the holder to any rights as a stockholder of the Company.
2. EXERCISE. This Warrant may be exercised, during the period of
exercise specified above, at any time or from time to time, on any business day,
for the full number of shares of Common Stock called for hereby, by surrendering
it at the principal office of the Company, P.O. Box 276, 1284 Miller Road, Avon,
Ohio 44011, with the subscription form fully executed, together with payment in
cash or immediately available funds of the sum obtained by multiplying (a) the
number of shares of Common Stock called for on the face of this Warrant (without
giving effect to any adjustment therein) by (b) the Purchase Price (without
giving effect to any adjustment therein).
<PAGE> 7
All or any part of such payment may be made by the surrender by such
holder to the Company, at the aforesaid office of any instrument evidencing
indebtedness of the Company, or any other corporation of which the Company owns
at least 50% of the voting stock, which at the date of issue thereof had a
maturity of one year or more. All indebtedness so surrendered shall be credited
against such purchase price in an amount equal to the outstanding principal
amount thereof plus accrued interest to the date of surrender.
The exercise price may also be paid by surrendering the right to a
number of shares issuable upon exercise of the Warrant that have a fair market
value equal to or greater than the required exercise price. The fair market
value shall be the last reported price on the most recent date of trading in the
Common Stock. If the Common Stock is not traded, fair market value shall be as
determined by the Board of Directors of the Company.
If the Warrant is exercised at a time when the Common Stock issuable
upon such exercise has not been registered under the Securities Act of 1933 and
applicable state securities laws, the Common Stock issued upon such exercise
shall contain a legend to that effect.
A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the shares of Common Stock issuable
upon such exercise shall be treated for all purposes as the holder of such
shares of record as of the close of business on such date. As soon as
practicable on or after such date, the Company shall issue and deliver to the
person or persons entitled to receive the same certificate or certificates for
the number of full shares of Common Stock issuable upon such exercise, together
with cash, in lieu of any fraction of a share, equal to such fraction of the
then current market value of one full share.
2.1 PARTIAL EXERCISE. This Warrant may be exercised for less
than the full number of shares of Common Stock at the time called for
hereby in the manner set forth in Section 2, provided that any exercise
of this Warrant must be for at least the lesser of (a) 10,000 shares of
Common Stock, or (b) the full number of shares of Common Stock for
which all Warrants held by the person exercising the Warrants are
exercisable. Upon any partial exercise, the number of shares receivable
upon the exercise of this Warrant as a whole, and the sum payable upon
the exercise of this Warrant as a whole, shall be proportionately
reduced. Upon such partial exercise, this Warrant shall be surrendered
and a new Warrant with the same terms and for the purchase of the
number of such shares not purchased upon such exercise shall be issued
by the Company to the registered holder hereof.
3. PAYMENT OF TAXES. All shares of Common Stock issued upon the
exercise of a Warrant shall be validly issued, fully paid and non-assessable and
free of claims of preemptive rights,
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<PAGE> 8
and the Company shall pay all issuance taxes and similar governmental charges
that may be imposed in respect of the issue or delivery thereof, but in no event
shall the Company pay a tax on or measured by the net income or gain
attributable to such exercise. The Company shall not be required, however, to
pay any tax or other charge imposed in connection with any transfer of a Warrant
or any transfer involved in the issue of any certificate for shares of Common
Stock in any name other than that of the registered holder of the Warrant
surrendered in connection with the purchase of such shares, and in such case the
Company shall not be required to issue or deliver any stock certificate until
such tax or other charge has been paid or it has been established to the
Company's satisfaction that no tax or other charge is due.
4. TRANSFER AND EXCHANGE. This Warrant shall be transferable in whole
or in part, except that the holder hereof represents that it is acquiring the
Warrants for its own account and for the purpose of investment and not with a
view to any distribution or resale thereof within the meaning of the Securities
Act of 1933. The holder further agrees that it will not sell, assign or transfer
any of the Warrants so acquired in violation of the Securities Act of 1933 or
any applicable state securities law unless the Warrants shall have been
registered for sale under such securities laws or until the Company shall have
received from counsel for the holder reasonably satisfactory to the Company or
its counsel an opinion to the effect that the proposed sale or other transfer of
the Warrants by the holder may be effected without such violation. The holder
acknowledges that, in taking unregistered Warrants, it must continue to bear the
economic risk of its investment for an indefinite period of time because of the
fact that such Warrants have not so been registered and further realizes that
such Warrants cannot be sold unless they are subsequently registered under the
Securities Act of 1933 and applicable state securities laws or an exception from
such registration requirements is available. The holder also acknowledges that
appropriate legends reflecting the status of the Warrants under securities laws
may be placed on the face of the Warrant certificates at the time of their
transfer and delivery to the holder hereof.
4.1 EXCHANGES. This Warrant is exchangeable at the principal
office of the Company for Warrants for the same aggregate number of
shares of Common Stock, each new Warrant to represent the right to
purchase such number of shares as the holder shall designate at the
time of such exchange.
5. ADJUSTMENTS.
5.1 ADJUSTMENTS FOR ISSUES OF COMMON STOCK. In case at any
time or from time to time on or after the Original Issue Date, the
Company shall issue shares of its Common Stock in any of the
circumstances described in Section 5.1.1, then and in each such case
the holder of this Warrant, upon the exercise hereof as provided in
Section 2 and payment of the Adjusted Purchase Price, shall be entitled
to receive, in lieu of the shares of Common Stock theretofore
receivable upon the exercise of this Warrant, a number of shares of
Common Stock determined by (a) dividing the Purchase Price by an
adjusted purchase price ("Adjusted Purchase Price") to be computed as
provided below in this
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Section 5.1, and (b) multiplying the resulting quotient by the number
of shares of Common Stock called for on the face of this Warrant. Such
Adjusted Purchase Price shall be computed (to the nearest cent, a half
cent or more being considered a full cent) by dividing:
(i) the sum of (x) the result obtained by multiplying
the number of shares of Common Stock of the Company
outstanding immediately prior to such issue by the Purchase
Price (or, if an Adjusted Purchase Price shall be in effect by
reason of a previous adjustment under this Section 5.1, by
such Adjusted Purchase Price), and (y) the consideration, if
any, received by the Company upon such issue; by
(ii) the number of shares of Common Stock of the
Company outstanding immediately after such issue or sale.
No adjustment of the Warrant Purchase Price, or Adjusted Purchase Price
if in effect, however, shall be made in an amount less than $.01 per
share, but any such lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent
adjustment which together with any adjustments as so carried forward
shall amount to $.01 per share or more.
For the purpose of this Section 5.1, the following Sections
5.1.1 to 5.1.6 shall be applicable:
5.1.1 (A) DIVIDENDS IN COMMON STOCK. In case at any
time on or after the Original Issue Date, the Company shall
declare any dividend or order any other distribution, upon any
stock of the Company of any class payable in Common Stock,
such declaration or distribution shall be deemed to be an
issue, without consideration, of such Common Stock.
(B) RECLASSIFICATION. In case at any time on
or after the Original Issue Date, the Company shall order any
distribution of any stock of the Company (including Common
Stock) or other securities or property (including cash) by way
of stock split, spin-off, split-up, reclassification, reverse
stock split, combination of shares or similar corporate
rearrangement, such distribution shall be deemed an issue,
without consideration, of shares of Common Stock in the amount
of said distribution.
5.1.2 DILUTION IN CASE OF OTHER STOCK OR SECURITIES.
In case any shares of stock or other securities, other than
Common Stock of the Company, shall at the time be receivable
upon the exercise of this Warrant, and in case any additional
shares of such stock or any additional such securities (or any
stock or other securities convertible into or exchangeable for
any such stock or securities) shall be
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<PAGE> 10
issued or sold for a consideration per share such as to dilute
the purchase rights evidenced by this Warrant, then and in
each such case the Adjusted Purchase Price and the number of
shares of Common Stock receivable upon the exercise of this
Warrant, as the case may be, shall forthwith be adjusted in
the manner provided for above in this Section 5.1, so as to
protect the holders of the Warrants against the effect of such
dilution.
5.1.3 RECORD DATE DEEMED ISSUE DATE. In case the
Company shall take a record of the holders of shares of its
stock of any class for the purpose of entitling them to
receive a dividend or a distribution payable in Common Stock,
then such record date shall be deemed to be the date of the
issue of the Common Stock issued or deemed to have been issued
upon the declaration of such dividend or the making of such
other distribution.
5.1.4 SHARES CONSIDERED OUTSTANDING. The number of
shares of Common Stock outstanding at any given time shall
exclude shares held in the treasury of the Company or by
subsidiaries of the Company.
5.1.5 DURATION OF ADJUSTMENT PURCHASE PRICE.
Following each computation or readjustment of an Adjusted
Purchase Price as provided in this Section 5.1, the new
Adjusted Purchase Price shall remain in effect until a further
computation or readjustment thereof is required by this
Section 5.1.
5.1.6 EXCEPTED ISSUES. No adjustments pursuant to
this Section 5.1 shall be made until and unless the Company
shall have issued and outstanding a total of 10,000,000 shares
of its Common Stock on a fully diluted basis which shall take
into account all shares of Common Stock, shares issuable upon
conversion of convertible securities and shares issuable upon
exercise of rights and options now and hereafter issued by the
Company.
5.2 REORGANIZATION, CONSOLIDATION, MERGER. In case of any
reorganization of the Company (or any other corporation the stock or
other securities of which are at the time receivable on the exercise of
this Warrant) after the Original Issue Date, or in case, after such
date, the Company (or any such other corporation) shall consolidate
with or merge into another corporation or convey all or substantially
all of its assets to another corporation, then and in each such case
the holder of this Warrant, upon the exercise hereof as provided in
Section 2, at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the
exercise of this Warrant prior to such consummation, the stock or other
securities or property to which such holder would have been entitled
upon such consummation if such holder had exercised this Warrant
immediately prior thereto, all subject to further adjustment as
provided in Section 5. In each
5
<PAGE> 11
such case the terms of this Warrant shall be applicable to the shares
of stock or other securities or property receivable upon the exercise
of this Warrant after such consummation; provided, however, that if
such reorganization, consolidation or merger is with any entity
affiliated with the Company or any of its officers or directors, and
would result in the elimination of all or substantially all of the
rights to voting interests of the holder in the surviving corporation,
such holder upon exercise hereof after such reorganization,
consolidation, or merger shall be entitled to receive, at the holder's
option, in lieu of the stock or other securities or property to which
such holder would have been entitled upon such consummation if such
holder had exercised this Warrant immediately prior thereto, cash or
voting securities in the proportions that the holder may elect in the
surviving corporation in an amount equivalent to the fair market value
of the voting interest in the Company that such holder would have
received had the Warrant been exercised prior to such consummations.
5.3 OTHER ADJUSTMENTS. In case at any time conditions arise by
reason of action taken by the Company which, in the opinion of its
Board of Directors or in the opinion of the holders of Warrants
representing a majority of the shares of Common Stock issuable upon
exercise of such Warrants, are not adequately covered by the other
provisions of this Section 5 and which might materially and adversely
affect the exercise rights of the holders of the Warrants, then the
Board of Directors of the Company shall appoint a firm of independent
certified public accountants of recognized national standing, who may
be the accountants then auditing the books of the Company. Such
accountant shall determine the adjustment, if any, on a basis
consistent with the standards established in the other provisions of
this Section 5, necessary with respect to the purchase price or
adjusted purchase price as so to preserve, without dilution, the
exercise rights of the holders of the Warrants. Upon receipt of such
opinion, the Board of Directors of the Company shall forthwith make the
adjustments described in such report. In this regard, the Company shall
be deemed to have undertaken a fiduciary duty with respect to the
holders of the Warrants.
5.4 NO DILUTION OR IMPAIRMENT. The Company will not, by
amendment of its certificate of incorporation or through
reorganization, consolidation, merger, dissolution, issue or sale of
securities, sale of assets or any other voluntary action, 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 actions as may be
necessary or appropriate in order to protect the rights of the holders
of the Warrants against dilution or other impairment. Without limiting
the generality of the foregoing, the Company (a) will take all such
actions as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and non-assessable shares upon
the exercise of all Warrants at the time outstanding, and (b) will take
no action to amend its certificate of incorporation or by-laws which
would change to the detriment of the holders of Common Stock (whether
or not any Common Stock be at the time outstanding) the dividend or
voting rights of the Company's Common Stock; provided that nothing
herein
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<PAGE> 12
contained shall prohibit the issuance and sale of Preferred Stock of
the Company at fair market value. In this regard, the Company shall be
deemed to have undertaken a fiduciary duty with respect to the holders
of the Warrants.
5.5 ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case
of an adjustment in the shares of Common Stock or other stock,
securities or property receivable on the exercise of the Warrants, the
Company at its expense shall cause a firm of independent certified
public accountants of recognized standing selected by the Company (who
may be the accountants then auditing the books of the Company) to
compute such adjustment in accordance with the terms of the Warrants
and prepare a certificate setting forth such adjustment and showing in
detail the facts upon which such adjustment is based, including a
statement of: (a) the consideration received or to be received by the
Company for any additional shares of Common Stock issued or sold or
deemed to have been sold; (b) the number of shares of Common Stock
outstanding or deemed to be outstanding; and (c) the Adjusted Purchase
Price. The Company will forthwith mail a copy of each certificate to
each holder of a Warrant at the time outstanding.
5.6 NOTICES OF RECORD DATE. In case:
(a) the Company shall take a record of the holders of
its Common Stock (or other stock or securities at the time
receivable upon the exercise of the Warrants) for the purpose
of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any
shares of stock of any class or any securities, or to receive
any other right, or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another
corporation, except for mergers into the Company of
subsidiaries whose assets are less than 15% of the total
assets of the Company and its consolidated subsidiaries, or
any conveyance of all or substantially all of the assets of
the Company to another corporation, or
(c) of any voluntary dissolution, liquidation or
winding-up of the Company;
then, and in each such case, the Company will mail or cause to be
mailed, to each holder of a Warrant at the time outstanding a notice
specifying, as the case may be, the date on which a record is to be
taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or
right, or the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or
winding-up is to take place, and the time, if any, to be fixed as of
which the holders of record of Common Stock (or such stock or
securities at the time receivable upon the
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<PAGE> 13
exercise of the Warrants) shall be entitled to exchange their shares of
Common Stock (or such other stock or securities) for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 30 days prior to the
date therein specified. The rights to notice provided in this Section
are in addition to the rights provided elsewhere herein.
6. LOSS OR MUTILATION. Upon receipt by the Company of evidence
satisfactory to it in the exercise of reasonable discretion, of the ownership of
and the loss, theft, destruction or mutilation of any Warrant and, in the case
of loss, theft or destruction, of indemnity satisfactory to it in the exercise
of reasonable discretion, and, in the case of mutilation, upon surrender and
cancellation thereof, the Company will execute and deliver in lieu thereof a new
Warrant of like tenor.
7. RESERVATION OF COMMON STOCK. The Company shall at all times reserve
and keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants.
8. INFORMATION. The Company shall furnish each holder of Warrants and
Common Stock issued upon the exercise thereof with copies of all reports, proxy
statements, and similar materials that it furnishes to holders of its Common
Stock.
9. NOTICES. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by first-class registered or
certified mail, postage prepaid, to the address furnished to the Company in
writing by the last holder of this Warrant who shall have furnished an address
to the Company in writing.
10. CHANGE, WAIVER. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement by the change, waiver,
discharge or termination is sought.
11. HEADINGS. The headings in this Warrant are for purposes of
convenience of reference only and shall not be deemed to constitute a part
hereof.
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<PAGE> 14
12. LAW GOVERNING. This Warrant is delivered in the State of Ohio and
shall be construed and enforced in accordance with and governed by the laws of
such State.
LEISURE TIME CASINOS & RESORTS, INC.
By:/s/
------------------------------
Alan N. Johnson, President
9
<PAGE> 15
WARRANT EXERCISE FORM
(To Be Executed Only Upon Exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchase the number of shares of Common Stock of Leisure
Time Casinos & Resorts, Inc., a Colorado corporation, purchasable with this
Warrant, and herewith makes payment therefor, all at the price and on the terms
and conditions specified in this Warrant.
Date:
----------------
--------------------------------------------
(Signature of Registered Owner)
--------------------------------------------
(Street Address)
--------------------------------------------
City (State)
(Zip)
10
<PAGE> 16
WARRANT FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under and within Warrant, with respect to the number
of shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
---------------- ------- -------------
and does hereby irrevocably constitute and appoint_________________________
attorney to make such transfer on the books of________________________
maintained for the purpose, with full power of substitution ln the premises.
Date: Signature:
-------------------------------- ------------------------
Witness:
-----------------------------------
The securities represented hereby have been acquired for investment,
have not been registered under the act and may not be sold, exchanged or
transferred in any manner, except in compliance with Section 4 hereof.
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<PAGE> 17
EXHIBIT B TO 11% CONVERTIBLE
PROMISSORY NOTE DUE SEPTEMBER 1, 1999
The Securities represented hereby have been acquired for investment, have not
been registered under the Securities Act of 1933 or state securities laws, and
may not be sold, exchanged or transferred in any manner, except in compliance
with Section 4 hereof.
Warrant Certificate No.: Warrants for Shares
----------------- --------------------
Original Issue Date: Purchase Price Per Share Shall Be
---------------------
Equal to 120% of the Initial Public Offering Price of the Company's Common
Stock
WARRANT TO PURCHASE COMMON STOCK
OF
LEISURE TIME CASINOS & RESORTS, INC.
This certifies that___________________ , or registered assigns, is
entitled, subject to the terms set forth below, at any time from the Original
Issue Date set forth above until 5:00 P.M., Eastern time, on the fifth
anniversary of the closing date of the initial public offering of the Company's
Common Stock, to purchase from Leisure Time Casinos & Resorts, Inc., (the
"Company"), a Colorado corporation, up to_____________________ fully paid and
non-assessable shares of the Company's Common Stock upon surrender hereof, at
the principal office of the Company, with the subscription form annexed hereto
duly executed, and simultaneous payment therefor, at the purchase price per
share set forth above (the "Purchase Price"). The number and character of such
shares of Common Stock are subject to adjustment as provided below, and the term
"Common Stock" shall mean, unless the context otherwise requires, the stock and
other securities and property at the time receivable upon the exercise of this
Warrant.
1. THE WARRANTS. This Warrant was issued in connection with the
conversion of the 11% Convertible Promissory Note (the "11% Convertible
Promissory Note") dated August 22, 1996 in the original principal amount of
$_____ made by the Company and payable to the order of_________. The term
"Warrants" as used herein shall include all of the 120% Warrants issued pursuant
to the 11% Convertible Promissory Note and also any warrants delivered in
substitution or exchange therefor as provided herein. This Warrant does not
entitle the holder to any rights as a stockholder of the Company.
<PAGE> 18
2. EXERCISE. This Warrant may be exercised, during the period of
exercise specified above, at any time or from time to time, on any business day,
for the full number of shares of Common Stock called for hereby, by surrendering
it at the principal office of the Company, P.O. Box 276, 1284 Miller Road, Avon,
Ohio 44011, with the subscription form fully executed, together with payment in
cash or immediately available funds of the sum obtained by multiplying (a) the
number of shares of Common Stock called for on the face of this Warrant (without
giving effect to any adjustment therein) by (b) the Purchase Price (without
giving effect to any adjustment therein).
All or any part of such payment may be made by the surrender by such
holder to the Company, at the aforesaid office of any instrument evidencing
indebtedness of the Company, or any other corporation of which the Company owns
at least 50% of the voting stock, which at the date of issue thereof had a
maturity of one year or more. All indebtedness so surrendered shall be credited
against such purchase price in an amount equal to the outstanding principal
amount thereof plus accrued interest to the date of surrender.
The exercise price may also be paid by surrendering the right to a
number of shares issuable upon exercise of the Warrant that have a fair market
value equal to or greater than the required exercise price. The fair market
value shall be the last reported price on the most recent date of trading in the
Common Stock. If the Common Stock is not traded, fair market value shall be as
determined by the Board of Directors of the Company.
If the Warrant is exercised at the time when the Common Stock issuable
upon such exercise has not been registered under the Securities Act of 1933 and
applicable state securities laws, the Common Stock issued upon such exercise
shall contain a legend to that effect.
A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the shares of Common Stock issuable
upon such exercise shall be treated for all purposes as the holder of such
shares of record as of the close of business on such date. As soon as
practicable on or after such date, the Company shall issue and deliver to the
person or persons entitled to receive the same certificate or certificates for
the number of full shares of Common Stock issuable upon such exercise, together
with cash, in lieu of any fraction of a share, equal to such fraction of the
then current market value of one full share.
2.1 PARTIAL EXERCISE. This Warrant may be exercised for less
than the full number of shares of Common Stock at the time called for
hereby in the manner set forth in Section 2, provided that any exercise
of this Warrant must be for at least the lesser of (a) 10,000 shares of
Common Stock, or (b) the full number of shares of Common Stock for
which all Warrants held by the person exercising the Warrants are
exercisable. Upon any partial exercise, the number of shares receivable
upon the exercise of this Warrant as a whole, and the sum payable upon
the exercise of this Warrant as a whole, shall be proportionately
reduced. Upon such partial exercise, this Warrant shall be surrendered
and
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<PAGE> 19
a new Warrant with the same terms and for the purchase of the number of
such shares not purchased upon such exercise shall be issued by the
Company to the registered holder hereof.
3. PAYMENT OF TAXES. All shares of Common Stock issued upon the
exercise of a Warrant shall be validly issued, fully paid and non-assessable and
free of claims of pre-emptive rights, and the Company shall pay all issuance
taxes and similar governmental charges that may be imposed in respect of the
issue or delivery thereof, but in no event shall the Company pay a tax on or
measured by the net income or gain attributable to such exercise. The Company
shall not be required, however, to pay any tax or other charge imposed in
connection with any transfer of a Warrant or any transfer involved in the issue
of any certificate for shares of Common Stock in any name other than that of the
registered holder of the Warrant surrendered in connection with the purchase of
such shares, and in such case the Company shall not be required to issue or
deliver any stock certificate until such tax or other charge has been paid or it
has been established to the Company's satisfaction that no tax or other charge
is due.
4. TRANSFER AND EXCHANGE. This Warrant shall be transferable in whole
or in part, except that the holder hereof represents that it is acquiring the
Warrants for its own account and for the purpose of investment and not with a
view to any distribution or resale thereof within the meaning of the Securities
Act of 1933. The holder further agrees that it will not sell, assign or transfer
any of the Warrants so acquired in violation of the Securities Act of 1933 or
any applicable state securities law unless the Warrants shall have been
registered for sale under such securities laws or until the Company shall have
received from counsel for the holder reasonably satisfactory to the Company or
its counsel an opinion to the effect that the proposed sale or other transfer of
the Warrants by the holder may be effected without such violation. The holder
acknowledges that, in taking unregistered Warrants, it must continue to bear the
economic risk of its investment for an indefinite period of time because of the
fact that such Warrants have not so been registered and further realizes that
such Warrants cannot be sold unless they are subsequently registered under the
Securities Act of 1933 and applicable state securities laws or an exception from
such registration requirements is available. The holder also acknowledges that
appropriate legends reflecting the status of the Warrants under securities laws
may be placed on the face of the Warrant certificates at the time of their
transfer and delivery to the holder hereof.
4.1 EXCHANGES. This Warrant is exchangeable at the principal
office of the Company for Warrants for the same aggregate number of
shares of Common Stock, each new Warrant to represent the right to
purchase such number of shares as the holder shall designate at the
time of such exchange.
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<PAGE> 20
5. ADJUSTMENTS.
5.1 ADJUSTMENTS FOR ISSUES OF COMMON STOCK. In case at any
time or from time to time on or after the Original Issue Date, the
Company shall issue shares of its Common Stock in any of the
circumstances described in Section 5.1.1, then and in each such case
the holder of this Warrant, upon the exercise hereof as provided in
Section 2 and payment of the Adjusted Purchase Price, shall be entitled
to receive, in lieu of the shares of Common Stock theretofore
receivable upon the exercise of this Warrant, a number of shares of
Common Stock determined by (a) dividing the Purchase Price by an
adjusted purchase price ("Adjusted Purchase Price") to be computed as
provided below in this Section 5.1, and (b) multiplying the resulting
quotient by the number of shares of Common Stock called for on the face
of this Warrant. Such Adjusted Purchase Price shall be computed (to the
nearest cent, a half cent or more being considered a full cent) by
dividing:
(i) the sum of (x) the result obtained by multiplying
the number of shares of Common Stock of the Company
outstanding immediately prior to such issue by the Purchase
Price (or, if an Adjusted Purchase Price shall be in effect by
reason of a previous adjustment under this Section 5.1, by
such Adjusted Purchase Price), and (y) the consideration, if
any, received by the Company upon such issue; by
(ii) the number of shares of Common Stock of the
Company outstanding immediately after such issue or sale.
No adjustment of the Warrant Purchase Price, or Adjusted Purchase Price
if in effect, however, shall be made in an amount less than $.01 per
share, but any such lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent
adjustment which together with any adjustments as so carried forward
shall amount to $.01 per share or more.
For the purpose of this Section 5.1, the following Sections 5.1.1 to
5.1.6 shall be applicable:
5.1.1 (a) DIVIDENDS IN COMMON STOCK. In case at any
time on or after the Original Issue Date, the Company shall
declare any dividend or order any other distribution, upon any
stock of the Company of any class payable in Common Stock,
such declaration or distribution shall be deemed to be an
issue, without consideration, of such Common Stock.
(b) RECLASSIFICATION. In case at any time on
or after the Original Issue Date, the Company shall order any
distribution of any stock of the Company (including Common
Stock) or other securities or property (including cash) by way
of stock split, spin-off, split-up, reclassification, reverse
stock split,
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<PAGE> 21
combination of shares or similar corporate rearrangement, such
distribution shall be deemed an issue, without consideration,
of shares of Common Stock in the amount of said distribution.
5.1.2 DILUTION IN CASE OF OTHER STOCK OR SECURITIES.
In case any shares of stock or other securities, other than
Common Stock of the Company, shall at the time be receivable
upon the exercise of this Warrant, and in case any additional
shares of such stock or any additional such securities (or any
stock or other securities convertible into or exchangeable for
any such stock or securities) shall be issued or sold for a
consideration per share such as to dilute the purchase rights
evidenced by this Warrant, then and in each such case the
Adjusted Purchase Price and the number of shares of Common
Stock receivable upon the exercise of this Warrant, as the
case may be, shall forthwith be adjusted in the manner
provided for above in this Section 5.1, so as to protect the
holders of the Warrants against the effect of such dilution.
5.1.3 RECORD DATE DEEMED ISSUE DATE. In case the
Company shall take a record of the holders of shares of its
stock of any class for the purpose of entitling them to
receive a dividend or a distribution payable in Common Stock,
then such record date shall be deemed to be the date of the
issue of the Common Stock issued or deemed to have been issued
upon the declaration of such dividend or the making of such
other distribution.
5.1.4 SHARES CONSIDERED OUTSTANDING. The number of
shares of Common Stock outstanding at any given time shall
exclude shares held in the treasury of the Company or by
subsidiaries of the Company.
5.1.5 DURATION OF ADJUSTMENT PURCHASE PRICE.
Following each computation or readjustment of an Adjusted
Purchase Price as provided in this Section 5.1, the new
Adjusted Purchase Price shall remain in effect until a further
computation or readjustment thereof is required by this
Section 5.1.
5.1.6 EXCEPTED ISSUES. No adjustments pursuant to
this Section 5.1 shall be made until and unless the Company
shall have issued and outstanding a total of 10,000,000 shares
of its Common Stock on a fully diluted basis which shall take
into account all shares of Common Stock, shares issuable upon
conversion of convertible securities and shares issuable upon
exercise of rights and options now and hereafter issued by the
Company.
5.2 REORGANIZATION, CONSOLIDATION MERGER. In case of any
reorganization of the Company (or any other corporation the stock or
other securities of which are at the time receivable on the exercise of
this Warrant) after the Original Issue Date, or in case, after
5
<PAGE> 22
such date, the Company (or any such other corporation) shall
consolidate with or merge into another corporation or convey all or
substantially all of its assets to another corporation, then and in
each such case the holder of this Warrant, upon the exercise hereof as
provided in Section 2, at any time after the consummation of such
reorganization, consolidation, merger or conveyance, shall be entitled
to receive, in lieu of the stock or other securities and property
receivable upon the exercise of this Warrant prior to such
consummation, the stock or other securities or property to which such
holder would have been entitled upon such consummation if such holder
had exercised this Warrant immediately prior thereto, all subject to
further adjustment as provided in Section 5. In each such case the
terms of this Warrant shall be applicable to the shares of stock or
other securities or property receivable upon the exercise of this
Warrant after such consummation; provided, however, that if such
reorganization, consolidation or merger is with any entity affiliated
with the Company or any of its officers or directors, and would result
in the elimination of all or substantially all of the rights to voting
interests of the holder in the surviving corporation, such holder upon
exercise hereof after such reorganization, consolidation, or merger
shall be entitled to receive, at the holder's option, in lieu of the
stock or other securities or property to which such holder would have
been entitled upon such consummation if such holder had exercised this
Warrant immediately prior thereto, cash or voting securities in the
proportions that the holder may elect in the surviving corporation in
an amount equivalent to the fair market value of the voting interest in
the Company that such holder would have received had the Warrant been
exercised prior to such consummations.
5.3 OTHER ADJUSTMENTS. In case at any time conditions arise by
reason of action taken by the Company which, in the opinion of its
Board of Directors or in the opinion of the holders of Warrants
representing a majority of the shares of Common Stock issuable upon
exercise of such Warrants, are not adequately covered by the other
provisions of this Section 5 and which might materially and adversely
affect the exercise rights of the holders of the Warrants, then the
Board of Directors of the Company shall appoint a firm of independent
certified public accountants of recognized national standing, who may
be the accountants then auditing the books of the Company. Such
accountant shall determine the adjustment, if any, on a basis
consistent with the standards established in the other provisions of
this Section 5, necessary with respect to the purchase price or
adjusted purchase price, as so to preserve, without dilution, the
exercise rights of the holders of the Warrants. Upon receipt of such
opinion, the Board of Directors of the Company shall forthwith make the
adjustments described in such report. In this regard, the Company shall
be deemed to have undertaken a fiduciary duty with respect to the
holders of the Warrants.
5.4 NO DILUTION OR IMPAIRMENT. The Company will not, by
amendment of its certificate of incorporation or through
reorganization, consolidation, merger, dissolution, issue or sale of
securities, sale of assets or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of the
Warrants, but will at all times in
6
<PAGE> 23
good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate in order
to protect the rights of the holders of the Warrants against dilution
or other impairment. Without limiting the generality of the foregoing,
the Company (a) will take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares upon the exercise of all Warrants
at the time outstanding, and (b) will take no action to amend its
certificate of incorporation or by-laws which would change to the
detriment of the holders of Common Stock (whether or not any Common
Stock be at the time outstanding) the dividend or voting rights of the
Company's Common Stock; provided that nothing herein contained shall
prohibit the issuance and sale of Preferred Stock of the Company at
fair market value. In this regard, the Company shall be deemed to have
undertaken a fiduciary duty with respect to the holders of the
Warrants.
5.5 ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case
of an adjustment in the shares of Common Stock or other stock,
securities or property receivable on the exercise of the Warrants, the
Company at its expense shall cause a firm of independent certified
public accountants of recognized standing selected by the Company (who
may be the accountants then auditing the books of the Company) to
compute such adjustment in accordance with the terms of the Warrants
and prepare a certificate setting forth such adjustment and showing in
detail the facts upon which such adjustment is based, including a
statement of: (a) the consideration received or to be received by the
Company for any additional shares of Common Stock issued or sold or
deemed to have been sold; (b) the number of shares of Common Stock
outstanding or deemed to be outstanding; and (c) the Adjusted Purchase
Price. The Company will forthwith mail a copy of each certificate to
each holder of a Warrant at the time outstanding.
5.6 NOTICES OF RECORD DATE. In case:
(a) the Company shall take a record of the holders of
its Common Stock (or other stock or securities at the time
receivable upon the exercise of the Warrants) for the purpose
of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any
shares of stock of any class or any securities, or to receive
any other right, or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another
corporation, except for mergers into the Company of
subsidiaries whose assets are less than 15% of the total
assets of the Company and its consolidated subsidiaries, or
any conveyance of all or substantially all of the assets of
the Company to another corporation, or
(c) of any voluntary dissolution, liquidation or
winding-up of the Company;
7
<PAGE> 24
then, and in each such case, the Company will mail or cause to be
mailed, to each holder of a Warrant at the time outstanding a notice
specifying, as the case may be, the date on which a record is to be
taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or
right, or the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or
winding-up is to take place, and the time, if any, to be fixed as of
which the holders of record of Common Stock (or such stock or
securities at the time receivable upon the exercise of the Warrants)
shall be entitled to exchange their shares of Common Stock (or such
other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up. Such notice shall
be mailed at least 30 days prior to the date therein specified. The
rights to notice provided in this Section are in addition to the rights
provided elsewhere herein.
6. LOSS OR MUTILATION. Upon receipt by the Company of evidence
satisfactory to it in the exercise of reasonable discretion, of the ownership of
and the loss, theft, destruction or mutilation of any Warrant and, in the case
of loss, theft or destruction, of indemnity satisfactory to it in the exercise
of reasonable discretion, and, in the case of mutilation, upon surrender and
cancellation thereof, the Company will execute and deliver in lieu thereof a new
Warrant of like tenor.
7. RESERVATION OF COMMON STOCK. The Company shall at all times reserve
and keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants.
8. INFORMATION. The Company shall furnish each holder of Warrants and
Common Stock issued upon the exercise thereof with copies of all reports, proxy
statements, and similar materials that it furnishes to holders of its Common
Stock.
9. NOTICES. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by first-class registered or
certified mail, postage prepaid, to the address furnished to the Company in
writing by the last holder of this Warrant who shall have furnished an address
to the Company in writing.
10. CHANGE, WAIVER. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement by the change, waiver,
discharge or termination is sought.
11. HEADINGS. The headings in this Warrant are for purposes of
convenience of reference only and shall not be deemed to constitute a part
hereof.
8
<PAGE> 25
12. LAW GOVERNING. This Warrant is delivered in the State of Ohio and
shall be construed and enforced in accordance with and governed by the laws of
such State.
LEISURE TIME CASINOS & RESORTS, INC.
By:
--------------------------------
Alan N. Johnson, President
9
<PAGE> 26
WARRANT EXERCISE FORM
(To Be Executed Only Upon Exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchase the number of shares of Common Stock of Leisure
Time Casinos & Resorts, Inc., a Colorado corporation, purchasable with this
Warrant, and herewith makes payment therefor, all at the price and on the terms
and conditions specified in this Warrant.
Date:
--------------
--------------------------------------------
(Signature of Registered Owner)
--------------------------------------------
(Street Address)
--------------------------------------------
City (State) (Zip)
10
<PAGE> 27
WARRANT FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under and within Warrant, with respect to the number
of shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
---------------- ------- -------------
and does hereby irrevocably constitute and appoint__________________________
attorney to make such transfer on the books of_________________________
maintained for the purpose, with full power of substitution ln the premises.
Date: Signature:
------------------- --------------------
Witness:
-------------------------------
The securities represented hereby have been acquired for investment,
have not been registered under the act, and may not be sold, exchanged or
transferred in any manner, except in compliance with Section 4 hereof.
11
<PAGE> 1
EXHIBIT 10.3
LEISURE TIME CASINOS & RESORTS, INC.
11% Convertible Promissory Note Due May 30, 1999
$ 100,000.00 May 29, 1996
FOR VALUE RECEIVED, Leisure Time Casinos & Resorts, Inc., a corporation
duly organized and existing under the laws of the State of Colorado (the
"Company"), hereby promises to pay to the order of ABCD & Associates, Inc.
("Holder") the principal sum of $100,000 on May 29, 1999 (the "Maturity Date;")
and to pay interest on the unpaid principal amount hereof at the rate of 11% per
annum from the date hereof until the principal sum hereof and all accrued and
unpaid interest hereon shall have been paid in full.
Payments of interest on the unpaid principal amount hereof shall be due
and payable by the Company to the Holder on August 1, 1996, November 30, 1996,
February 28, 1997 and May 31, 1997.
Commencing on June 29, 1997 and continuing on the same day in each
consecutive month thereafter until the Maturity Date, the Company shall pay to
the Holder payments of principal in the amount that equals 1/24 of the original
principal sum of this Convertible Promissory Note ("Note") and interest on the
unpaid principal amount hereof.
The unpaid principal amount of this Note and all accrued and unpaid
interest hereon shall be due and payable by the Company to the Holder on the
Maturity Date.
The Holder shall have the right, exercisable at his option at any time
and from time to time up to and including the Maturity Date (except that, if
this Note or a portion hereof shall be called for prepayment and the Company
shall not thereafter default in the making of the prepayment, such right shall
terminate at the close of business on the business day next preceding the date
fixed for prepayment), to convert the unpaid principal amount hereof or any
portion thereof into (i) fully paid and non-assessable shares of Common Stock of
the Company and (ii) Warrants for the purchase of shares of Common Stock of the
Company in the form attached hereto ("Warrants") at the conversion price of
S2.50 for one share and one Warrant ("Unit") upon surrender of this Note to the
Company at its principal place of business. If so required by the Company, this
Note, upon surrender for conversion as aforesaid, shall be duly endorsed by or
accompanied by instruments of transfer, in form satisfactory to the Company,
duly executed by the Holder or by his duly authorized attorney. The conversion
price provided for herein shall not be subject to adjustment. The Company shall
not be required to issue fractional shares or Warrants upon any such conversion,
but shall make adjustment therefor in cash at the rate of $2.50 for one full
Unit.
If any payment of interest or any payment of principal and interest as
the case may be, is not paid by the Company within five (5) business days after
the date on which such payment shall have
<PAGE> 2
become due and payable under this Note or upon the bankruptcy or receivership of
the Company (each, an "Event of Default"), the Holder may, by giving written
notice to the Company, declare the unpaid principal amount hereof and all
accrued and unpaid interest hereon to be immediately due and payable and upon
such declaration, the unpaid principal amount hereof and all accrued and unpaid
interest hereon shall be and become immediately due and payable. Upon the
occurrence and continuance of an Event of Default and upon notice from Holder of
the Company, the rate of interest on this Note shall increase from 11% per annum
to 13% per annum.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceedings (whether at the trial or appellate level), or should this Note be
placed in the hands of attorneys for collection upon the occurrence of an Event
of Default, the Company agrees to pay, in addition to the principal and interest
due and payable hereon, all costs of collection, including reasonable attorneys'
fees.
This Note may be prepaid, at the option for the Company, as a whole at
any time or in part from time to time, at any time prior to the Maturity Date,
upon not less than 30 nor more than 60 days' prior notice of prepayment to the
Holder, without premium or penalty, together with accrued interest to the date
fixed for prepayment.
This note is transferable in the manner authorized by law. Upon
surrender of this Note for transfer, accompanied by a written instrument of
transfer in form satisfactory to the Company, a new Note or Notes, for all like
aggregate principal amount, will be issued to the transferee.
Prior to the transfer of this Note, the Company may deem and treat the
Holder hereof as the absolute owner hereof (whether or not this Note shall be
overdue) for the purpose of receiving payment of or on account of the principal
hereof and interest hereon, and for all other purposes, and the Company shall
not be affected by any notice to the contrary.
Except as expressly provided for herein, the Company hereby waives
presentment, demand, notice of demand, protest, notice of protest and notice of
dishonor and any other notice required to be given by law in connection with the
deliver acceptance, performance, default or enforcement of this Note.
No recourse shall be had for the payment of the principal of or the
interest on this Note, or for any claim based hereon, or otherwise in respect
hereof against any incorporator, shareholder, officer or director, as such,
past, present or future, of the Company or of any successor corporation, whether
by virtue of any constitution, statute or rule of law or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.
This Note is one of the 11% Convertible Promissory Notes due May, 1999
of the Company referred to in the Escrow Agreement dated as of May 28, 1996,
between the Company and Keating, Muething & Klekamp, 1800 Provident Tower, One
East Fourth Street, Cincinnati, Ohio 45202, Escrow Agent, and the Holder is
hereby entitled to the benefits of the Escrow Agreement.
2
<PAGE> 3
This Note shall be governed by and construed in accordance with the
laws of the State of Ohio.
IN WITNESS WHEREOF, Leisure Time Casinos & Resorts, Inc. has caused
this Convertible Promissory Note to be signed by its President on the date first
above written.
LEISURE TIME CASINOS & RESORTS, INC.
By:
--------------------------------------
Name: Alan N. Johnson
Title: President
3
<PAGE> 4
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT, HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, EXCHANGED OR TRANSFERRED IN ANY MANNER
EXCEPT IN COMPLIANCE WITH SECTION 4 HEREOF.
Warrant Certificate No. Warrant for 1,666 Shares
---------
Original Issue Date: Purchase Price $2.50 Per Share
-------------------------
WARRANT TO PURCHASE COMMON STOCK
OF
LEISURE TIME CASINOS & RESORTS, INC.
This certifies that ABCD & Associates, Ltd., or registered assigns, is
entitled, subject to the terms set forth below, at any time from the Original
Issue Date set forth above until 5:00 P.M., Eastern time, on the second
anniversary of such date, to purchase from Leisure Time Casinos & Resorts, Inc.
(the "Company"), a Colorado corporation, up to 1,666 fully paid and
non-assessable shares of the Company's Common Stock upon surrender hereof, at
the principal office of the Company, with the subscription form annexed hereto
duly executed, and simultaneous payment therefor, at the purchase price per
share set forth above (the "Purchase Price"). The number and character of such
shares of Common Stock are subject to adjustment as provided below, and the term
"Common Stock" shall mean, unless the context otherwise requires, the stock and
other securities and property at the time receivable upon the exercise of this
Warrant.
1. THE WARRANTS. This Warrant was issued in connection with the
conversion of the 11% Convertible Promissory Note (the "11% Convertible
Promissory Note") dated May 29, 1996, in the original principal amount of
$100,000 made by the Company and payable to the order of ABCD & Associates, Ltd.
The term "Warrants" as used herein shall include all of the Warrants issued
pursuant to conversion of the 11% Convertible Promissory Note and also any
warrants delivered in substitution or exchange therefor as provided herein. This
Warrant does not entitle the holder to any rights as a stockholder of the
Company.
2. EXERCISE. This Warrant may be exercised, during the period of
exercise specified above, at any time or from time to time, on any business day,
for the full number of shares of Common Stock called for hereby, by surrendering
it at the principal office of the Company, P.O. Box 276, 1284 Miller Road, Avon,
Ohio 44011, with the subscription form fully executed, together with payment in
cash or immediately available funds of the sum obtained by multiplying (a) the
number of shares of Common Stock called for on the face of this Warrant (without
giving effect to any adjustment therein) by (b) the Purchase Price (without
giving effect to any adjustment therein).
<PAGE> 5
All or any part of such payment may be made by the surrender by such
holder to the Company, at the aforesaid office of any instrument evidencing
indebtedness of the Company, or any other corporation of which the Company owns
at least 50% of the voting stock, which at the date of issue thereof had a
maturity of one year or more. All indebtedness so surrendered shall be credited
against such purchase price in an amount equal to the outstanding principal
amount thereof plus accrued interest to the date of surrender.
The exercise price may also be paid by surrendering the right to a
number of shares issuable upon exercise of this Warrant that have a fair market
value equal to or greater than the required exercise price. The fair market
value shall be the last reported price on the most recent date of trading in the
Common Stock. If the Common Stock is not traded, fair market value shall be as
determined by the Board of Directors of the Company.
If this Warrant is exercised at a time when the Common Stock issuable
upon such exercise has not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws, the Common Stock issued upon such
exercise shall contain a legend to that effect.
This Warrant shall be deemed to have been exercised immediately prior
to the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the shares of Common Stock issuable
upon such exercise shall be treated for all purposes as the holder of such
shares of record as of the close of business on such date As soon as practicable
on or after such date, the Company shall issue and deliver to the person or
persons entitled to receive the same certificate or certificates for the number
of full shares of Common Stock issuable upon such exercise, together with cash,
in lieu of any fraction of a share, equal to such fraction of the then current
market value of one full share.
2.1. PARTIAL EXERCISE. This Warrant may be exercised for less
than the full number of shares of Common Stock at the time called for
hereby in the manner set forth in Section 2, provided that any exercise
of this Warrant must be for at least the lesser of (a) 1,000 shares of
Common Stock, or (b) the full number of shares of Common Stock for
which all Warrants held by the person exercising this Warrant are
exercisable. Upon any partial exercise, the number of shares receivable
upon the exercise of this Warrant as a whole, and the sum payable upon
the exercise of this Warrant as a whole, shall be proportionately
reduced. Upon such partial exercise, this Warrant shall be surrendered
and a new Warrant with the same terms and for the purchase of the
number of such shares not purchased upon such exercise shall be issued
by the Company to the registered holder hereof.
3. PAYMENT OF TAXES. All shares of Common Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid and non-assessable
and free of claims of pre-emptive rights, and the Company shall pay all issuance
taxes and similar governmental charges that may be imposed in respect of the
issue or delivery thereof, but in no event shall the Company pay a tax on or
measured by the net income or gain attributable to such exercise. The Company
shall not be
2
<PAGE> 6
required, however, to pay any tax or other charge imposed in connection with any
transfer of this Warrant or any transfer involved in the issue of any
certificate for shares of Common Stock in any name other than that of the
registered holder of this Warrant surrendered in connection with the purchase of
such shares, and in such case the Company shall not be required to issue or
deliver any stock certificate until such tax or other charge has been paid or it
has been established to the Company's satisfaction that no tax or other charge
is due.
4. TRANSFER AND EXCHANGE. This Warrant shall be transferable in whole
or in part, except that the holder hereof represents that the holder is
acquiring this Warrant for the holder's own account and for the purpose of
investment and not with a view to any distribution or resale thereof within the
meaning of the Securities Act of 1933, as amended. The holder further agrees
that the holder will not sell, assign or transfer this Warrant in violation of
the Securities Act of 1933, as amended, or any applicable state securities law
unless this Warrant shall have been registered for sale under such securities
laws or until the Company shall have received from counsel for the holder
reasonably satisfactory to the Company or its counsel an opinion to the effect
that the proposed sale or other transfer of this Warrant by the holder may be
effected without such violation. The holder acknowledges that, in taking an
unregistered Warrant, the holder must continue to bear the economic risk of the
holder's investment for an indefinite period of time because of the fact that
this Warrant has not so been registered and further realizes that this Warrant
cannot be sold unless it is subsequently registered under the Securities Act of
1933, as amended, and applicable state securities laws or an exemption from such
registration requirements is available. The holder also acknowledges that
appropriate legends reflecting the status of this Warrant under the securities
laws may be placed on the face of this Warrant at the time of its transfer and
delivery to the holder hereof.
4.1. EXCHANGES. This Warrant is exchangeable at the principal
office of the Company for Warrants for the same aggregate number of
shares of Common Stock, each new Warrant to represent the right to
purchase such number of shares as the holder shall designate at the
time of such exchange.
5. ADJUSTMENTS.
5.1. ADJUSTMENTS FOR ISSUES OF COMMON STOCK. In case at any
time or from time to time on or after the Original Issue Date, the
Company shall issue shares of its Common Stock in any of the
circumstances described in Section 5.1.1, then and in each such case
the holder of this Warrant, upon the exercise hereof as provided in
Section 2 and payment of the Adjusted Purchase Price, shall be entitled
to receive, in lieu of the shares of Common Stock theretofore
receivable upon the exercise of this Warrant, a number of shares of
Common Stock determined by (a) dividing the Purchase Price by an
adjusted purchase price ("Adjusted Purchase Price") to be computed as
provided below in this Section 5.1, and (b) multiplying the resulting
quotient by the number of shares of Common Stock called for on the face
of this Warrant. Such Adjusted Purchase Price shall be computed (to the
nearest cent, a half cent or more being considered a full cent) by
dividing:
3
<PAGE> 7
i. the sum of (x) the result obtained by multiplying
the number of shares of Common Stock of the Company
outstanding immediately prior to such issue by the Purchase
Price (or, if an Adjusted Purchase Price shall be in effect by
reason of a previous adjustment under this Section 5.1, by
such Adjusted Purchase Price), and (y) the consideration, if
any, received by the Company upon such issue; by
ii. the number of shares of Common Stock of the
Company outstanding immediately after such issue or sale.
No adjustment of the Purchase Price, or Adjusted Purchase Price if in
effect, however, shall be made in an amount less than $.01 per share,
but any such lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which
together with any adjustments as so carried forward shall amount to
$.01 per share or more.
For the purpose of this Section 5.1, the following Sections
5.1.1 to 5.1.6 shall be applicable:
5.1.1. (A) DIVIDENDS IN COMMON STOCK. In case at any
time on or after the Original Issue Date, the Company shall
declare any dividend or order any other distribution, upon any
stock of the Company of any class payable in Common Stock,
such declaration or distribution shall be deemed to be an
issue, without consideration, of such Common Stock.
(b) RECLASSIFICATION. In case at any time on or after
the Original Issue Date, the Company shall order any
distribution of any stock of the Company (including Common
Stock) or other securities or property (including cash) by way
of stock split, spin-off, split-up, reclassification, reverse
stock split, combination of shares or similar corporate
rearrangement, such distribution shall be deemed an issue,
without consideration, of shares of Common Stock in the amount
of said distribution.
5.1.2. RECORD DATE DEEMED ISSUE DATE. In case the
Company shall take a record of the holders of shares of its
stock of any class for the purpose of entitling them to
receive a dividend or a distribution payable in Common Stock,
then such record date shall be deemed to be the date of the
issue of the Common Stock issued or deemed to have been issued
upon the declaration of such dividend or the making of such
other distribution.
5.1.3. SHARES CONSIDERED OUTSTANDING. The number of
shares of Common Stock outstanding at any given time shall
exclude shares held in the treasury of the Company or by
subsidiaries of the Company.
4
<PAGE> 8
5.1.4. DURATION OF ADJUSTMENT PURCHASE PRICE.
Following each computation or readjustment of an Adjusted
Purchase Price as provided in this Section 5.1, the new
Adjusted Purchase Price shall remain in effect until a further
computation or readjustment thereof is required by this
Section 5.1.
5.2. REORGANIZATION CONSOLIDATION, MERGER. In case of any
reorganization of the Company (or any other corporation the stock or
other securities of which are at the time receivable on the exercise of
this Warrant) after the Original Issue Date, or in case, after such
date, the Company (or any such other corporation) shall consolidate
with or merge into another corporation or convey all or substantially
all of its assets to another corporation, then and in each such case
the holder of this Warrant, upon the exercise hereof as provided in
Section 2, at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the
exercise of this Warrant prior to such consummation, the stock or other
securities or property to which such holder would have been entitled
upon such consummation if such holder had exercised this Warrant
immediately prior thereto, all subject to further adjustment as
provided in Section 5. In each such case the terms of this Warrant
shall be applicable to the shares of stock or other securities or
property receivable upon the exercise of this Warrant after such
consummation; provided, however, that if such reorganization,
consolidation or merger is with any entity affiliated with the Company
or any of its officers or directors, and would result in the
elimination of all or substantially all of the rights to voting
interests of the holder in the surviving corporation, such holder upon
exercise hereof after such reorganization, consolidation, or merger
shall be entitled to receive, at the holder's option, in lieu of the
stock or other securities or property to which such holder would have
been entitled upon such consummation if such holder had exercised this
Warrant immediately prior thereto, cash or voting securities in the
proportions that the holder may elect in the surviving corporation in
an amount equivalent to the fair market value of the voting interest in
the Company that such holder would have received had the Warrant been
exercised prior to such consummation.
5.3. OTHER ADJUSTMENTS. In case at any time conditions arise
by reason of action taken by the Company which, in the opinion of its
Board of Directors or in the opinion of the holders of Warrants
representing a majority of the shares of Common Stock issuable upon
exercise of such Warrants, are not adequately covered by the other
provisions of this Section 5 and which might materially and adversely
affect the exercise rights of the holders of the Warrants, then the
Board of Directors of the Company shall appoint a firm of independent
certified public accountants of recognized national standing, who may
be the accountants then auditing the books of the Company. Such
accountants shall determine the adjustment, if any, on a basis
consistent with the standards established in the other provisions of
this Section 5, necessary with respect to the purchase price or
adjusted purchase price, as so to preserve, without dilution, the
exercise rights of the holders of the Warrants. Upon receipt of such
opinion, the Board of Directors of the Company shall forthwith make the
adjustments described in such report. In this regard, the Company shall
be deemed to have undertaken a fiduciary duty with respect to the
holders of the Warrants.
5
<PAGE> 9
5.4. NO DILUTION OR IMPAIRMENT. The Company will not, by
amendment of its certificate of incorporation or through
reorganization, consolidation, merger, dissolution, issue or sale of
securities, sale of assets or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be
necessary or appropriate in order to protect the rights of the holder
of this Warrant against dilution or other impairment. Without limiting
the generality of the foregoing, the Company (a) will take all such
actions as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and non-assessable shares upon
the exercise of this Warrant, and (b) will take no action to amend its
certificate of incorporation or by-laws which would change to the
detriment of the holders of Common Stock (whether or not any Common
Stock be at the time outstanding) the dividend or voting rights of the
Company's Common Stock; provided that nothing herein contained shall
prohibit the issuance and sale of Preferred Stock of the Company at
fair market value. In this regard, the Company shall be deemed to have
undertaken a fiduciary duty with respect to the holder of this Warrant.
5.5. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case
of an adjustment in the shares of Common Stock or other stock,
securities or property receivable on the exercise of this Warrant, the
Company at its expense shall cause a firm of independent certified
public accountants of recognized standing selected by the Company (who
may be the accountants then auditing the books of the Company) to
compute such adjustment in accordance with the terms of this Warrant
and prepare a certificate setting forth such adjustment and showing in
detail the facts upon which such adjustment is based, including a
statement of: (a) the consideration received or to be received by the
Company for any additional shares of Common Stock issued or sold or
deemed to have been sold; (b) the number of shares of Common Stock
outstanding or deemed to be outstanding; and (c) the Adjusted Purchase
Price. The Company will forthwith mail a copy of each certificate to
the holder of this Warrant.
5.6. NOTICES OF RECORD DATE. In case:
a. the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time receivable upon
the exercise of this Warrant) for the purpose of entitling the holder
to receive any dividend or other distribution, or any right to
subscribe for or purchase any shares of stock of any class or any
securities, or to receive any other right, or
b. of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation
or merger of the Company with or into another corporation, except for
mergers into the Company of subsidiaries whose assets are less than 15%
of the total assets of the Company and its consolidated subsidiaries,
or any conveyance of all or substantially all of the assets of the
Company to another corporation, or
6
<PAGE> 10
c. of any voluntary dissolution, liquidation or winding-up of
the Company; then, and in each such case, the Company will mail or
cause to be mailed, to the holder of this Warrant at the time
outstanding a notice specifying, as the case may be, the date on which
a record is to be taken for the purpose of such dividend, distribution
or right, and stating the amount and character of such dividend,
distribution or right, or the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding-up is to take place, and the time, if any, to be
fixed as of which the holder of record of Common Stock (or such stock
or securities at the time receivable upon the exercise of this Warrant)
shall be entitled to exchange the holder's shares of Common Stock (or
such other stock or securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up. Such notice
shall be mailed at least 30 days prior to the date therein specified.
The rights to notice provided in this Section are in addition to the
rights provided elsewhere herein.
6. LOSS OR MUTILATION. Upon receipt by the Company of evidence
satisfactory to it in the exercise of reasonable discretion, of the ownership of
and the loss, theft, destruction or mutilation of this Warrant and, in the case
of loss, theft or destruction, of indemnity satisfactory to it in the exercise
of reasonable discretion, and, in the case of mutilation, upon surrender and
cancellation thereof, the Company will execute and deliver in lieu thereof a new
Warrant of like tenor.
7. RESERVATION OF COMMON STOCK. The Company shall at all times reserve
and keep available for issue upon the exercise of this Warrant such number of
its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of this Warrant.
8. INFORMATION. The Company shall furnish the holder of this Warrant
and Common Stock issued upon the exercise thereof with copies of all reports,
proxy statements, and similar materials that it furnishes to holders of its
Common Stock.
9. NOTICES. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, to the address furnished to the Company in
writing by the holder of this Warrant who shall have furnished an address to the
Company in writing.
10. CHANGE, WAIVER. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement by the change, waiver,
discharge or termination is sought.
11. HEADINGS. The headings in this Warrant are for purposes of
convenience of reference only and shall not be deemed to constitute a part
hereof.
7
<PAGE> 11
12. LAW GOVERNING. This Warrant is delivered in the State of Ohio and
shall be construed and enforced in accordance with and governed by the laws of
such State.
Dated: May 29, 1996
----------------------
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/ Alan N. Johnson
--------------------------------------
Alan N. Johnson, President
8
<PAGE> 12
WARRANT EXERCISE FORM
(To Be Executed Only Upon Exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases the number of shares of Common Stock of Leisure
Time Casinos & Resorts, Inc., a Colorado corporation, purchasable with this
Warrant, and herewith makes payment therefor, all at the price and on the terms
and conditions specified in this Warrant.
Date:
-----------------------------
-----------------------------------------
(Signature of Registered Owner)
-----------------------------------------
(Street Address)
-----------------------------------------
City (State) (Zip)
9
<PAGE> 13
WARRANT FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under and within this Warrant, with respect to the
number of shares of Common Stock set forth below:
<TABLE>
<S> <C> <C>
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
---------------- ------- -------------
</TABLE>
and does hereby irrevocably constitute and appoint ____________________ attorney
to make such transfer on the books of ___________________________________
maintained for the purpose, with full power of substitution in the premises.
Date:
------------------------------ -----------------------------------------
Signature
-----------------------------------------
Witness
The securities represented hereby have been acquired for investment,
have not been registered under the Securities Act of 1933, as amended, and may
not be sold, exchanged or transferred in any manner, except in compliance with
Section 4 hereof.
10
<PAGE> 1
EXHIBIT 10.4
LEISURE TIME CASINOS & RESORTS, INC.
11% Convertible Promissory Note Due May 30, 1999
$ 110,000.00 July 31, 1996
FOR VALUE RECEIVED, Leisure Time Casinos & Resorts, Inc., a corporation
duly organized and existing under the laws of the State of Colorado (the
"Company"), hereby promises to pay to the order of Paul F. Frymark ("Holder")
the principal sum of $110,000 on May 30, 1999 (the "Maturity Date;") and to pay
interest on the unpaid principal amount hereof at the rate of 11% per annum from
the date hereof until the principal sum hereof and all accrued and unpaid
interest hereon shall have been paid in full.
Payments of interest on the unpaid principal amount hereof shall be due
and payable by the Company to the Holder on November 30, 1996, February 28, 1997
and May 30, 1997.
Commencing on June 30, 1997 and continuing on the same day in each
consecutive month thereafter until the Maturity Date, the Company shall pay to
the Holder payments of principal in the amount that equals 1/24 of the original
principal sum of this Convertible Promissory Note ("Note") and interest on the
unpaid principal amount hereof.
The unpaid principal amount of this Note and all accrued and unpaid
interest hereon shall be due and payable by the Company to the Holder on the
Maturity Date.
The Holder shall have the right, exercisable at his option at any time
and from time to time up to and including the Maturity Date (except that, if
this Note or a portion hereof shall be called for prepayment and the Company
shall not thereafter default in the making of the prepayment, such right shall
terminate at the close of business on the business day next preceding the date
fixed for prepayment), to convert the unpaid principal amount hereof or any
portion thereof into (i) fully paid and non-assessable shares of Common Stock of
the Company and (ii) Warrants for the purchase of shares of Common Stock of the
Company in the form attached hereto ("Warrants") at the conversion price of
S2.50 for one share and one Warrant ("Unit") upon surrender of this Note to the
Company at its principal place of business. If so required by the Company, this
Note, upon surrender for conversion as aforesaid, shall be duly endorsed by or
accompanied by instruments of transfer, in form satisfactory to the Company,
duly executed by the Holder or by his duly authorized attorney. The conversion
price provided for herein shall not be subject to adjustment. The Company shall
not be required to issue fractional shares or Warrants upon any such conversion,
but shall make adjustment therefor in cash at the rate of $2.50 for one full
Unit.
If any payment of interest or any payment of principal and interest as
the case may be, is not paid by the Company within five (5) business days after
the date on which such payment shall have become due and payable under this Note
or upon the bankruptcy or receivership of the Company
<PAGE> 2
(each, an "Event of Default"), the Holder may, by giving written notice to the
Company, declare the unpaid principal amount hereof and all accrued and unpaid
interest hereon to be immediately due and payable and upon such declaration, the
unpaid principal amount hereof and all accrued and unpaid interest hereon shall
be and become immediately due and payable. Upon the occurrence and continuance
of an Event of Default and upon notice from Holder of the Company, the rate of
interest on this Note shall increase from 11% per annum to 13% per annum.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceedings (whether at the trial or appellate level), or should this Note be
placed in the hands of attorneys for collection upon the occurrence of an Event
of Default, the Company agrees to pay, in addition to the principal and interest
due and payable hereon, all costs of collection, including reasonable attorneys'
fees.
This Note may be prepaid, at the option for the Company, as a whole at
any time or in part from time to time, at any time prior to the Maturity Date,
upon not less than 30 nor more than 60 days' prior notice of prepayment to the
Holder, without premium or penalty, together with accrued interest to the date
fixed for prepayment.
This note is transferable in the manner authorized by law. Upon
surrender of this Note for transfer, accompanied by a written instrument of
transfer in form satisfactory to the Company, a new Note or Notes, for all like
aggregate principal amount, will be issued to the transferee.
Prior to the transfer of this Note, the Company may deem and treat the
Holder hereof as the absolute owner hereof (whether or not this Note shall be
overdue) for the purpose of receiving payment of or on account of the principal
hereof and interest hereon, and for all other purposes, and the Company shall
not be affected by any notice to the contrary.
Except as expressly provided for herein, the Company hereby waives
presentment, demand, notice of demand, protest, notice of protest and notice of
dishonor and any other notice required to be given by law in connection with the
deliver acceptance, performance, default or enforcement of this Note.
No recourse shall be had for the payment of the principal of or the
interest on this Note, or for any claim based hereon, or otherwise in respect
hereof against any incorporator, shareholder, officer or director, as such,
past, present or future, of the Company or of any successor corporation, whether
by virtue of any constitution, statute or rule of law or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.
This Note is one of the 11% Convertible Promissory Notes due May, 1999
of the Company referred to in the Escrow Agreement dated as of May 28, 1996,
between the Company and Keating, Muething & Klekamp, 1800 Provident Tower, One
East Fourth Street, Cincinnati, Ohio 45202, Escrow Agent, and the Holder is
hereby entitled to the benefits of the Escrow Agreement.
2
<PAGE> 3
This Note shall be governed by and construed in accordance with the
laws of the State of Ohio.
IN WITNESS WHEREOF, Leisure Time Casinos & Resorts, Inc. has caused
this Convertible Promissory Note to be signed by its President on the date first
above written.
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/ Alan N. Johnson
-----------------------------------------
Name: Alan N. Johnson
Title: President
This note supersedes note for
$100,000.00 dated July 31, 1996
Paul F. Frymark
3438 RFD (Monitor Lane)
Longrove IL 60047
SS# ###-##-####
Phone # 847-540-5656
3
<PAGE> 4
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT, HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, EXCHANGED OR TRANSFERRED IN ANY MANNER
EXCEPT IN COMPLIANCE WITH SECTION 4 HEREOF.
Warrant Certificate No. Warrant for 1,833 Shares
------
Original Issue Date: Purchase Price $2.50 Per Share
---------------
WARRANT TO PURCHASE COMMON STOCK
OF
LEISURE TIME CASINOS & RESORTS, INC.
This certifies that Paul F. Frymark, or registered assigns, is
entitled, subject to the terms set forth below, at any time from the Original
Issue Date set forth above until 5:00 P.M., Eastern time, on the second
anniversary of such date, to purchase from Leisure Time Casinos & Resorts, Inc.
(the "Company"), a Colorado corporation, up to 1,833 fully paid and
non-assessable shares of the Company's Common Stock upon surrender hereof, at
the principal office of the Company, with the subscription form annexed hereto
duly executed, and simultaneous payment therefor, at the purchase price per
share set forth above (the "Purchase Price"). The number and character of such
shares of Common Stock are subject to adjustment as provided below, and the term
"Common Stock" shall mean, unless the context otherwise requires, the stock and
other securities and property at the time receivable upon the exercise of this
Warrant.
1. THE WARRANTS. This Warrant was issued in connection with the
conversion of the 11% Convertible Promissory Note (the "11% Convertible
Promissory Note") dated July 31, 1996, in the original principal amount of
$110,000 made by the Company and payable to the order of Paul F. Frymark. The
term "Warrants" as used herein shall include all of the Warrants issued pursuant
to conversion of the 11% Convertible Promissory Note and also any warrants
delivered in substitution or exchange therefor as provided herein. This Warrant
does not entitle the holder to any rights as a stockholder of the Company.
2. EXERCISE. This Warrant may be exercised, during the period of
exercise specified above, at any time or from time to time, on any business day,
for the full number of shares of Common Stock called for hereby, by surrendering
it at the principal office of the Company, P.O. Box 276, 1284 Miller Road, Avon,
Ohio 44011, with the subscription form fully executed, together with payment in
cash or immediately available funds of the sum obtained by multiplying (a) the
number of shares of Common Stock called for on the face of this Warrant (without
giving effect to any adjustment therein) by (b) the Purchase Price (without
giving effect to any adjustment therein).
<PAGE> 5
All or any part of such payment may be made by the surrender by such
holder to the Company, at the aforesaid office of any instrument evidencing
indebtedness of the Company, or any other corporation of which the Company owns
at least 50% of the voting stock, which at the date of issue thereof had a
maturity of one year or more. All indebtedness so surrendered shall be credited
against such purchase price in an amount equal to the outstanding principal
amount thereof plus accrued interest to the date of surrender.
The exercise price may also be paid by surrendering the right to a
number of shares issuable upon exercise of this Warrant that have a fair market
value equal to or greater than the required exercise price. The fair market
value shall be the last reported price on the most recent date of trading in the
Common Stock. If the Common Stock is not traded, fair market value shall be as
determined by the Board of Directors of the Company.
If this Warrant is exercised at a time when the Common Stock issuable
upon such exercise has not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws, the Common Stock issued upon such
exercise shall contain a legend to that effect.
This Warrant shall be deemed to have been exercised immediately prior
to the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the shares of Common Stock issuable
upon such exercise shall be treated for all purposes as the holder of such
shares of record as of the close of business on such date As soon as practicable
on or after such date, the Company shall issue and deliver to the person or
persons entitled to receive the same certificate or certificates for the number
of full shares of Common Stock issuable upon such exercise, together with cash,
in lieu of any fraction of a share, equal to such fraction of the then current
market value of one full share.
2.1. PARTIAL EXERCISE. This Warrant may be exercised for less
than the full number of shares of Common Stock at the time called for
hereby in the manner set forth in Section 2, provided that any exercise
of this Warrant must be for at least the lesser of (a) 1,000 shares of
Common Stock, or (b) the full number of shares of Common Stock for
which all Warrants held by the person exercising this Warrant are
exercisable. Upon any partial exercise, the number of shares receivable
upon the exercise of this Warrant as a whole, and the sum payable upon
the exercise of this Warrant as a whole, shall be proportionately
reduced. Upon such partial exercise, this Warrant shall be surrendered
and a new Warrant with the same terms and for the purchase of the
number of such shares not purchased upon such exercise shall be issued
by the Company to the registered holder hereof.
3. PAYMENT OF TAXES. All shares of Common Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid and non-assessable
and free of claims of pre-emptive rights, and the Company shall pay all issuance
taxes and similar governmental charges that may be imposed in respect of the
issue or delivery thereof, but in no event shall the Company pay a tax on or
measured by the net income or gain attributable to such exercise. The Company
shall not be
2
<PAGE> 6
required, however, to pay any tax or other charge imposed in connection with any
transfer of this Warrant or any transfer involved in the issue of any
certificate for shares of Common Stock in any name other than that of the
registered holder of this Warrant surrendered in connection with the purchase of
such shares, and in such case the Company shall not be required to issue or
deliver any stock certificate until such tax or other charge has been paid or it
has been established to the Company's satisfaction that no tax or other charge
is due.
4. TRANSFER AND EXCHANGE. This Warrant shall be transferable in
whole or in part, except that the holder hereof represents that the holder is
acquiring this Warrant for the holder's own account and for the purpose of
investment and not with a view to any distribution or resale thereof within the
meaning of the Securities Act of 1933, as amended. The holder further agrees
that the holder will not sell, assign or transfer this Warrant in violation of
the Securities Act of 1933, as amended, or any applicable state securities law
unless this Warrant shall have been registered for sale under such securities
laws or until the Company shall have received from counsel for the holder
reasonably satisfactory to the Company or its counsel an opinion to the effect
that the proposed sale or other transfer of this Warrant by the holder may be
effected without such violation. The holder acknowledges that, in taking an
unregistered Warrant, the holder must continue to bear the economic risk of the
holder's investment for an indefinite period of time because of the fact that
this Warrant has not so been registered and further realizes that this Warrant
cannot be sold unless it is subsequently registered under the Securities Act of
1933, as amended, and applicable state securities laws or an exemption from such
registration requirements is available. The holder also acknowledges that
appropriate legends reflecting the status of this Warrant under the securities
laws may be placed on the face of this Warrant at the time of its transfer and
delivery to the holder hereof.
4.1. EXCHANGES. This Warrant is exchangeable at the principal
office of the Company for Warrants for the same aggregate number of
shares of Common Stock, each new Warrant to represent the right to
purchase such number of shares as the holder shall designate at the
time of such exchange.
5. ADJUSTMENTS.
5.1. ADJUSTMENTS FOR ISSUES OF COMMON STOCK. In case at any
time or from time to time on or after the Original Issue Date, the
Company shall issue shares of its Common Stock in any of the
circumstances described in Section 5.1.1, then and in each such case
the holder of this Warrant, upon the exercise hereof as provided in
Section 2 and payment of the Adjusted Purchase Price, shall be entitled
to receive, in lieu of the shares of Common Stock theretofore
receivable upon the exercise of this Warrant, a number of shares of
Common Stock determined by (a) dividing the Purchase Price by an
adjusted purchase price ("Adjusted Purchase Price") to be computed as
provided below in this Section 5.1, and (b) multiplying the resulting
quotient by the number of shares of Common Stock called for on the face
of this Warrant. Such Adjusted Purchase Price shall be computed (to the
nearest cent, a half cent or more being considered a full cent) by
dividing:
3
<PAGE> 7
i. the sum of (x) the result obtained by multiplying the
number of shares of Common Stock of the Company outstanding
immediately prior to such issue by the Purchase Price (or, if an
Adjusted Purchase Price shall be in effect by reason of a previous
adjustment under this Section 5.1, by such Adjusted Purchase Price),
and (y) the consideration, if any, received by the Company upon such
issue; by
ii. the number of shares of Common Stock of the Company
outstanding immediately after such issue or sale.
No adjustment of the Purchase Price, or Adjusted Purchase Price if in effect,
however, shall be made in an amount less than $.01 per share, but any such
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any adjustments
as so carried forward shall amount to $.01 per share or more.
For the purpose of this Section 5.1, the following Sections 5.1.1 to
5.1.6 shall be applicable:
5.1.1. (a) DIVIDENDS IN COMMON STOCK. In case at any time on or
after the Original Issue Date, the Company shall declare any dividend
or order any other distribution, upon any stock of the Company of any
class payable in Common Stock, such declaration or distribution shall
be deemed to be an issue, without consideration, of such Common Stock.
(b) RECLASSIFICATION. In case at any time on or after the
Original Issue Date, the Company shall order any distribution of any
stock of the Company (including Common Stock) or other securities or
property (including cash) by way of stock split, spin-off, split-up,
reclassification, reverse stock split, combination of shares or
similar corporate rearrangement, such distribution shall be deemed an
issue, without consideration, of shares of Common Stock in the amount
of said distribution.
5.1.2. RECORD DATE DEEMED ISSUE DATE. In case the Company shall
take a record of the holders of shares of its stock of any class for
the purpose of entitling them to receive a dividend or a distribution
payable in Common Stock, then such record date shall be deemed to be
the date of the issue of the Common Stock issued or deemed to have
been issued upon the declaration of such dividend or the making of
such other distribution.
5.1.3. SHARES CONSIDERED OUTSTANDING. The number of shares of
Common Stock outstanding at any given time shall exclude shares held
in the treasury of the Company or by subsidiaries of the Company.
4
<PAGE> 8
5.1.4. DURATION OF ADJUSTMENT PURCHASE PRICE. Following each
computation or readjustment of an Adjusted Purchase Price as
provided in this Section 5.1, the new Adjusted Purchase Price
shall remain in effect until a further computation or
readjustment thereof is required by this Section 5.1.
5.2. REORGANIZATION CONSOLIDATION, MERGER. In case of any
reorganization of the Company (or any other corporation the stock or
other securities of which are at the time receivable on the exercise
of this Warrant) after the Original Issue Date, or in case, after such
date, the Company (or any such other corporation) shall consolidate
with or merge into another corporation or convey all or substantially
all of its assets to another corporation, then and in each such case
the holder of this Warrant, upon the exercise hereof as provided in
Section 2, at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the
exercise of this Warrant prior to such consummation, the stock or
other securities or property to which such holder would have been
entitled upon such consummation if such holder had exercised this
Warrant immediately prior thereto, all subject to further adjustment
as provided in Section 5. In each such case the terms of this Warrant
shall be applicable to the shares of stock or other securities or
property receivable upon the exercise of this Warrant after such
consummation; provided, however, that if such reorganization,
consolidation or merger is with any entity affiliated with the Company
or any of its officers or directors, and would result in the
elimination of all or substantially all of the rights to voting
interests of the holder in the surviving corporation, such holder upon
exercise hereof after such reorganization, consolidation, or merger
shall be entitled to receive, at the holder's option, in lieu of the
stock or other securities or property to which such holder would have
been entitled upon such consummation if such holder had exercised this
Warrant immediately prior thereto, cash or voting securities in the
proportions that the holder may elect in the surviving corporation in
an amount equivalent to the fair market value of the voting interest
in the Company that such holder would have received had the Warrant
been exercised prior to such consummation.
5.3. OTHER ADJUSTMENTS. In case at any time conditions arise
by reason of action taken by the Company which, in the opinion of its
Board of Directors or in the opinion of the holders of Warrants
representing a majority of the shares of Common Stock issuable upon
exercise of such Warrants, are not adequately covered by the other
provisions of this Section 5 and which might materially and adversely
affect the exercise rights of the holders of the Warrants, then the
Board of Directors of the Company shall appoint a firm of independent
certified public accountants of recognized national standing, who may
be the accountants then auditing the books of the Company. Such
accountants shall determine the adjustment, if any, on a basis
consistent with the standards established in the other provisions of
this Section 5, necessary with respect to the purchase price or
adjusted purchase price, as so to preserve, without dilution, the
exercise rights of the holders of the Warrants. Upon receipt of such
opinion, the Board of Directors of the Company shall forthwith make the
adjustments described in such report. In this regard, the Company shall
be deemed to have undertaken a fiduciary duty with respect to the
holders of the Warrants.
5
<PAGE> 9
5.4. NO DILUTION OR IMPAIRMENT. The Company will not, by
amendment of its certificate of incorporation or through
reorganization, consolidation, merger, dissolution, issue or sale of
securities, sale of assets or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be
necessary or appropriate in order to protect the rights of the holder
of this Warrant against dilution or other impairment. Without limiting
the generality of the foregoing, the Company (a) will take all such
actions as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and non-assessable shares upon
the exercise of this Warrant, and (b) will take no action to amend its
certificate of incorporation or by-laws which would change to the
detriment of the holders of Common Stock (whether or not any Common
Stock be at the time outstanding) the dividend or voting rights of the
Company's Common Stock; provided that nothing herein contained shall
prohibit the issuance and sale of Preferred Stock of the Company at
fair market value. In this regard, the Company shall be deemed to have
undertaken a fiduciary duty with respect to the holder of this Warrant.
5.5. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case
of an adjustment in the shares of Common Stock or other stock,
securities or property receivable on the exercise of this Warrant, the
Company at its expense shall cause a firm of independent certified
public accountants of recognized standing selected by the Company (who
may be the accountants then auditing the books of the Company) to
compute such adjustment in accordance with the terms of this Warrant
and prepare a certificate setting forth such adjustment and showing in
detail the facts upon which such adjustment is based, including a
statement of: (a) the consideration received or to be received by the
Company for any additional shares of Common Stock issued or sold or
deemed to have been sold; (b) the number of shares of Common Stock
outstanding or deemed to be outstanding; and (c) the Adjusted Purchase
Price. The Company will forthwith mail a copy of each certificate to
the holder of this Warrant.
5.6. NOTICES OF RECORD DATE. In case:
a. the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time receivable upon
the exercise of this Warrant) for the purpose of entitling the holder
to receive any dividend or other distribution, or any right to
subscribe for or purchase any shares of stock of any class or any
securities, or to receive any other right, or
b. of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation
or merger of the Company with or into another corporation, except for
mergers into the Company of subsidiaries whose assets are less than 15%
of the total assets of the Company and its consolidated subsidiaries,
or any conveyance of all or substantially all of the assets of the
Company to another corporation, or
6
<PAGE> 10
c. of any voluntary dissolution, liquidation or winding-up
of the Company; then, and in each such case, the Company will mail or
cause to be mailed, to the holder of this Warrant at the time
outstanding a notice specifying, as the case may be, the date on which
a record is to be taken for the purpose of such dividend, distribution
or right, and stating the amount and character of such dividend,
distribution or right, or the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding-up is to take place, and the time, if any, to
be fixed as of which the holder of record of Common Stock (or such
stock or securities at the time receivable upon the exercise of this
Warrant) shall be entitled to exchange the holder's shares of Common
Stock (or such other stock or securities) for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 30 days prior to the
date therein specified. The rights to notice provided in this Section
are in addition to the rights provided elsewhere herein.
6. LOSS OR MUTILATION. Upon receipt by the Company of evidence
satisfactory to it in the exercise of reasonable discretion, of the ownership of
and the loss, theft, destruction or mutilation of this Warrant and, in the case
of loss, theft or destruction, of indemnity satisfactory to it in the exercise
of reasonable discretion, and, in the case of mutilation, upon surrender and
cancellation thereof, the Company will execute and deliver in lieu thereof a new
Warrant of like tenor.
7. RESERVATION OF COMMON STOCK. The Company shall at all times
reserve and keep available for issue upon the exercise of this Warrant such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of this Warrant.
8. INFORMATION. The Company shall furnish the holder of this Warrant
and Common Stock issued upon the exercise thereof with copies of all reports,
proxy statements, and similar materials that it furnishes to holders of its
Common Stock.
9. NOTICES. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, to the address furnished to the Company in
writing by the holder of this Warrant who shall have furnished an address to the
Company in writing.
10. CHANGE, WAIVER. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement by the change, waiver,
discharge or termination is sought.
11. HEADINGS. The headings in this Warrant are for purposes of
convenience of reference only and shall not be deemed to constitute a part
hereof.
7
<PAGE> 11
12. LAW GOVERNING. This Warrant is delivered in the State of Ohio and
shall be construed and enforced in accordance with and governed by the laws of
such State.
Dated: July 31, 1996
--------------------
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/ Alan N. Johnson
---------------------------------
Alan N. Johnson, President
8
<PAGE> 12
WARRANT EXERCISE FORM
(To Be Executed Only Upon Exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases the number of shares of Common Stock of Leisure
Time Casinos & Resorts, Inc., a Colorado corporation, purchasable with this
Warrant, and herewith makes payment therefor, all at the price and on the terms
and conditions specified in this Warrant.
Date:
----------------------
------------------------------------
(Signature of Registered Owner)
------------------------------------
(Street Address)
------------------------------------
City (State) (Zip)
9
<PAGE> 13
WARRANT FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under and within this Warrant, with respect to the
number of shares of Common Stock set forth below:
<TABLE>
<CAPTION>
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
---------------- ------- -------------
<S> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint ____________________ attorney
to make such transfer on the books of ___________________________________
maintained for the purpose, with full power of substitution in the premises.
Date:
------------------------- ---------------------------------------
Signature
---------------------------------------
Witness
The securities represented hereby have been acquired for investment,
have not been registered under the Securities Act of 1933, as amended, and may
not be sold, exchanged or transferred in any manner, except in compliance with
Section 4 hereof.
10
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), effective July 1, 1998, by and
between LEISURE TIME CASINOS & RESORTS, INC., a Colorado corporation (the
"Company"), and ALAN N. JOHNSON (the "Employee"). The Company hereby employs the
Employee and the Employee hereby accepts employment on the terms and conditions
hereinafter set forth.
1. TERM. Subject to the provisions for termination as provided in
Sections 4 and 5 of this Agreement, the term of this Agreement shall commence on
July 1, 1998, and shall terminate on June 30, 2003. Subject to the provisions
for termination as provided in Sections 4 and 5 of this Agreement, this
Agreement shall be renewed automatically after June 30, 2003 for succeeding one
year periods on the same terms and conditions as contained in this Agreement,
unless the Company or Employee shall, at least 180 days prior to the expiration
of any such renewal date, give written notice of nonrenewal of this Agreement.
2. NATURE OF EMPLOYMENT. The Company hereby employs the Employee as the
Chairman of the Board, President and Chief Executive Officer of the Company to
perform such duties and have such powers as Employee substantially performed for
the Company on the date of this Agreement as well as those additional duties and
powers as may be agreed upon between the Company and the Employee. The Company
may not materially change the Employee's duties or positions without Employee's
consent. The Employee accepts such employment, agrees to abide by the Articles
of Incorporation, Bylaws, Company policies and the provisions of this Agreement,
and agrees to devote his time and best efforts to his employment under this
Agreement as is reasonably required. Employee may carry on outside activities so
long as those activities do not conflict with nor compete with Employee's job
responsibilities and corporate duties. The Employee shall, at all times,
faithfully with due diligence and to the best of Employee's ability, experience
and talent, perform all the duties hereunder. Unless otherwise agreed to in
writing by the Employee, those services shall be rendered in the Cleveland,
Ohio, metropolitan area.
3. COMPENSATION, VACATIONS AND EXPENSES.
a. BASIC SALARY. The Company shall pay to the Employee a base
salary during the term of this Agreement in accordance with the amount
set forth on Schedule A hereof. This amount may be increased as
determined by the Company through an amendment to Schedule A.
b. BONUS. In addition to the basic salary, the Employee will
receive a bonus to be set at the discretion of the board of directors
of the Company. Nothing shall obligate the Company, in the future, to
pay any bonus or bonuses to the Employee.
c. VACATIONS, FRINGE BENEFITS, AND LEAVES OF ABSENCE. The
Employee shall be entitled to an annual vacation of at least that
specified on Schedule A, but in no event
<PAGE> 2
less than the minimum vacation time established by the Company for its
employees. The Employee shall further be entitled to participate in
and receive the benefits provided under any employee benefit program
which may be adopted and maintained by the Company (including, without
limitation, those described on Schedule A) and for which the Employee
is eligible by virtue of his employment hereunder, but only as and to
the extent the Employee would otherwise be eligible as provided in any
said program. The Employee shall also bc entitled to leaves of absence
as the Employee deems necessary and the Company, in its sole
discretion, deems reasonable.
d. REIMBURSEMENT OF EXPENSES. The Employee is authorized to incur
reasonable expenses while performing the Employee's duties under this
Agreement, including expenses for entertainment, travel, automobile,
and similar items incurred on behalf of the Company. The Company will
reimburse the Employee upon the presentation by the employee of
itemized accounts of such expenditures. Expenses over $5,000 in any
month must be approved in writing by the Company before being incurred
by the Employee.
4. TERMINATION OF AGREEMENT.
a. TERMINATION OF EMPLOYEE. The Employee may terminate this
Agreement without cause upon 120 days prior written notice to the
Company. In such event, the Employee shall continue to render the
services required under this Agreement and shall be paid on the
regular payment dates the compensation set forth in Schedule A up to
the date of termination.
b. TERMINATION BY THE COMPANY FOR CAUSE. In the event of
Employee's material failure or refusal to observe the provisions of
this Agreement or perform any of the duties required of Employee under
this Agreement, Employee's fraud, misappropriation or embezzlement of
funds, or conviction for any crime punishable as a felony, the Company
may terminate this Agreement upon written notice of such termination
to the Employee and upon payment by the Company to the Employee for
all compensation accrued under this Agreement to the date of
termination. In the event of a termination of Employee's employment
for cause in accordance with this Section 4.b, the Company shall have
no further obligation to the Employee. However, termination of the
Employee's employment for cause shall not terminate or extinguish the
Employee's obligation or liability to pay to the Company or any of its
affiliates any amount owed to them by the Employee, including, but not
limited to, any amounts misappropriated, embezzled or otherwise
obtained by the Employee by reason of any of the occurrences referred
in this Section 4.b without prejudice to any other rights or remedies
of the Company or it affiliates at law or in equity.
c. TERMINATION UPON DEATH OF EMPLOYEE. This Agreement shall
automatically terminate in the event of the Employee's death. In such
case, any accrued compensation or benefits shall inure to the estate
of the Employee, and the payment thereof shall be the only liability
the Company shall have to the Employee's estate.
2
<PAGE> 3
5. ILLNESS AND DISABILITY.
a. ILLNESS. If the Employee is unable to perform the services
required under this Agreement by reason of illness or physical injury
not amounting to disability as defined in Section 5.b, the
compensation otherwise payable to the Employee under this Agreement
shall be continued in full for a period of 60 days after the date
Employee is unable to perform such services.
b. DEFINITION OF DISABILITY. For purposes of this Agreement, the
terms "totally disabled," "disabled" and "disability" shall mean
continuous disability as defined in and for the period necessary to
qualify for benefits under any disability income insurance policies on
the Employee paid for by the Company. If no disability insurance is in
effect on the Employee, such terms shall mean continuous disability
which prevents the Employee from performing Employee's normal duties
pursuant to this Agreement. The Employee or agent of the Employee
shall notify the Company in writing as to the Employee's inability to
perform those duties or the Company shall so notify the Employee. If
they are not able to agree as to the existence of disability in 30
days after receipt of said notice, the determination shall be made by
medical doctors, licensed as such in the State of Ohio, one designated
by the Company and the other by the Employee. If these two physicians
cannot agree, they shall appoint a third licensed medical doctor and
the determination of the majority shall be conclusive and binding on
the Company and the Employee. The fees of all medical doctors shall be
paid by the Company and not by the Employee. For the purposes of this
Agreement, adjudicated mental incompetency shall also be a definition
of disability.
c. SALARY CONTINUATION. If the Employee becomes totally disabled
during the term of this Agreement, the Employee's full salary shall be
continued for a period not to exceed 24 consecutive months, for the
period during which the Employee remains totally disabled or until the
next termination date of the Agreement, whichever is shorter. If the
Company pays premiums on a disability income insurance policy on the
Employee, any proceeds paid to the Employee by reason of disability
under such policy shall be offset against salary continuation payments
due from the Company.
6. CHANGE IN CONTROL. A "change in control" of the Company shall be
deemed to have transpired upon the occurrence after the date hereof of any one
of the following events:
a. at any time any one person (other than Employee), or more than
one person acting as a group, acquires beneficial ownership of the
voting securities of the Company that together with voting securities
beneficially held by such person or group, constitute more than 20% of
the total voting power of the Company's outstanding voting securities;
3
<PAGE> 4
b. the appointment or election of a majority of the members of
the Company's board of directors who are appointed or elected during
any 24 month period but are not endorsed in writing by a majority of
those members of the Company's board of directors who were directors
prior to the date of the appointment or election of the first such new
director comprising the majority; or
c. one person, or more than one person acting as a group,
acquires (or has acquired during the 12 month period ending on the
date of the most recent acquisition by such person or persons) assets
from the Company that have a total fair market value equal to or
greater than one third of the total fair market value of all of the
Company's assets immediately before the acquisition or acquisitions.
At any time after a "change in control" of the Company, the Employee,
at the option of the Employee, shall have the right, upon 30 days' prior written
notice by the Employee to the Company, to cause the Company to repurchase all or
any portion of the common stock of the Company then owned by the Employee at the
higher of (i) the book value thereof as determined by the independent certified
public accountants of the Company based upon the financial statements of the
Company as of the last day of the month prior to the date of such notice, (ii)
the last market value of a share of the Company's common stock established by
the board of directors, or (iii) the last price at which the common stock was
sold by the Company or by a shareholder of the Company to any person (other than
the Employee); provided, however, or if the common stock is listed on a national
securities exchange, is admitted to unlisted trading privileges on such an
exchange, or is listed for trading on a trading system of the National
Association of Securities Dealers, Inc., such as the Nasdaq National Market, the
Nasdaq SmallCap Market or the OTC Bulletin Board, then the value shall be the
last reported sale price of the common stock on such an exchange or system on
the last business day prior to the date of such notice or if no such sale is
made on such day, the average of the closing bid prices for the common stock for
such day on such exchange or such system shall be used. Within 30 days after
receipt of such notice, the Company shall pay the Employee the full amount for
such shares of common stock upon delivery of the stock certificates representing
such shares of common stock. The payment shall be in the form of a cashiers'
check or by wire transfer. Also, upon a "change in control" of the Company, the
Employee shall automatically be granted options to purchase the same number of
shares of the Company's common stock as then are issuable upon exercise of
options to purchase the Company's common stock then owned by the Employee. Such
new options shall be immediately exercisable and shall remain exercisable for
ten years. The exercise price thereof shall be $0.01 per share of common stock.
Such new options shall not replace any other options to purchase the Company's
common stock then owned by Employee.
7. EMPLOYEE ACTIONS.
a. EMPLOYEE SHALL NOT DISCLOSE INFORMATION. The Employee
recognizes and acknowledges that the list of the Company's and its
subsidiaries' and affiliates' customers, as it may exist from time to
time, and any proprietary or confidential
4
<PAGE> 5
information, including, but not limited to financial information and
information pertaining to the Company's, its subsidiaries' and
affiliates' manufacturing, marketing and sales operations, and
potential acquisitions, used by the Company in its business are
valuable and unique assets of the Company. The Employee will not
during or after the term of his employment, disclose the list of the
Company's, its subsidiaries' or affiliates' customers or any part
thereof or any propriety or confidential information to any person,
firm, corporation, association, or other entity for any reason or
purpose whatsoever without the prior written consent or authorization
of the board of directors of the Company. Upon termination of the
Employee's employment by the Company, its subsidiaries or its
affiliates, the Employee shall neither take nor retain any papers,
customer lists, manuals, files, or other document or copies thereof
belonging to the Company, its subsidiaries or its affiliates.
b. NON COMPETE. Employee hereby covenants and agrees that
Employee will not, without the prior written consent of the Company,
directly or indirectly, whether individually or through any entity
controlled by Employee, during the term of this Agreement and for a
period of 3 years from the termination of this Agreement, for any
reason, directly or indirectly, on his own behalf or in the service or
on behalf of others, whether or not for compensation, engage in any
business activity, or have any interest in any person, firm,
corporation or business, through a subsidiary or parent entity or
other entity (whether as a shareholder, agent, joint venturer,
security holder, trustee, partner, consultant, creditor lending credit
or money for the purpose of establishing or operating any such
business, partnership or otherwise) which is competitive with the then
existing business of the Company. Notwithstanding the foregoing,
Employee may own shares of competing companies whose securities are
publicly traded, so long as such securities do not constitute five
percent or more of the outstanding securities of any such company.
c. NON-SOLICITATION. Employee further agrees that as long as this
Agreement remains in effect and for a period of 2 years from its
termination, Employee will not divert any business of the Company
and/or its affiliates or any customers or suppliers of the Company
and/or the Company's and/or its affiliates' business to any other
person, entity or competitor, or induce or attempt to induce, directly
or indirectly, any person to leave his or her employment with the
Company.
d. INTELLECTUAL PROPERTY. Employee shall disclose to the Company
all ideas and business plans developed by the Employee during the term
of Employee's employment which relate to the business of the Company,
its subsidiaries or affiliates or any business conducted by the
Company, its subsidiaries or affiliates. All patents, patent
applications, patent licenses, formulas, inventions, processes,
copyrights, know-how, proprietary information, rights, trademarks, or
trade names, or future improvements thereto developed or conceived of
by the Employee during any period of employment with the Company shall
be promptly disclosed to, and all rights with respect thereto shall be
assigned by the Employee to the Company in consideration of the
remuneration paid or payable to the Employee hereunder.
5
<PAGE> 6
e. REMEDIES. Employee acknowledges and agrees that his
obligations provided in this Section 7 are necessary and reasonable in
order to protect Company and its affiliates and their respective
business and Employee expressly agrees that monetary damages would be
inadequate to compensate Company and/or its affiliates for any breach
by Executive of his covenants and agreements set forth herein.
Accordingly, Employee agrees and acknowledges that any such violation
or threatened violation of this Section 7 will cause irreparable
injury to Company and that, in addition to any other remedies that may
be available, in law, in equity or otherwise, Company and its
affiliates shall be entitled to obtain injunctive relief against the
prospective breach of this Section 7 or the continuation of any such
breach by Employee without the necessity of proving actual damages.
f. CONSTRUCTION. In the event that any provision of this Section
7 should ever be deemed to exceed the time, geographic, or other
limitations permitted by applicable law, then such provision shall be
reformed to the maximum time geographic, or other limitations
permitted by applicable law. The provisions of this Section 7 shall be
applicable for the period indicated and shall survive the termination
of this Agreement
8. GENERAL MATTERS.
a. GOVERNING LAW. This Agreement shall bc governed by the laws of
the State of Ohio and shall be construed in accordance therewith.
b. NO WAIVER. No provision of this Agreement may be waived except
by an Agreement in writing signed by the waiving party. A waiver of
any term or provision shall not be construed as a waiver of any other
term or provision.
c. AMENDMENT. This Agreement may be amended or altered at any
time, in whole or in part, by filing with this Agreement a written
instrument setting forth such changes, signed by all parties.
d. BINDING EFFECT. This Agreement shall be binding upon the
Employee, the Company, and their successors and assigns.
e. CONSTRUCTION. Throughout this Agreement the singular shall
include the plural, the plural shall include the singular, and the
masculine shall include the feminine wherever the context so requires.
f. TEXT TO CONTROL. The headings of Sections are included solely
for convenience of reference. If any conflict between any heading and
the text of this Agreement exists, the text shall control.
6
<PAGE> 7
g. SEVERABILITY. If any provision of this Agreement is declared
by any court of competent jurisdiction to be invalid for any reason,
such invalidity shall not affect the remaining provisions which shall
be fully severable, and the Agreement shall be construed and enforced
as if such invalid provision had never been included.
h. ENTIRE AGREEMENT OF THE PARTIES. The parties agree that this
document contains the entire agreement and understanding between them
in relation to the subject matter hereof, and no representations,
warranties, covenants, understandings, or agreements in relation
thereto exist between the parties except as expressly set forth
herein.
i. NOTICES. Every notice or other communication to be given by
either party to the other party with respect to this Agreement, shall
be in writing and shall not be effective for any purpose unless the
same shall be served personally or by national air courier service, or
United States certified mail, return receipt requested, postage
prepaid, addressed, if to the Company at 1284 Miller Road, Avon, Ohio
44011, Attention, Secretary, and if to the Employee at 1284 Miller
Road, Avon, Ohio 44011, or such other address or addresses as the
Company or the Employee may from time to time designate by notice
given as above provided. Every notice or other communication hereunder
shall be deemed to have been given as of the third business day
following the date of such mailing (or as of any earlier date
evidenced by a receipt from such national air courier service or the
United States Postal Service) or immediately if personally delivered.
Notices not sent in accordance with the foregoing shall be of no force
and effect until received by the foregoing parties as such addresses
specified herein.
j. DUPLICATE ORIGINALS. This Agreement may be executed in several
counterparts, each of which shall be an original but all of which
together shall constitute one and the same instrument.
k. ARBITRATION. Any dispute or controversy of or relating to this
Agreement, or any breach of this Agreement, shall be settled by
arbitration to be held in Cleveland, Ohio, in accordance with the
rules then in effect of the American Arbitration Association or any
successor thereto. The decision of the arbitrator shall be final,
conclusive, and binding on the parties to the arbitration. Judgment
may be entered on the arbitrator's decision in any court having
jurisdiction, and the parties irrevocably consent to the jurisdiction
of the Ohio state courts for this purpose. The Company shall pay the
costs and expenses of such arbitration.
l. ATTORNEYS' FEES. In the event that the Company or the Employee
retains an attorney or attorneys to enforce performance of this
Agreement by the other party or to obtain damages or other relief
because of violation of the terms of this Agreement by the other
party, then all reasonable attorneys' fees and costs of arbitration or
litigation are to be borne and paid by the party determined to have
failed to perform this Agreement or to be liable for damages or
against which other relief is granted.
7
<PAGE> 8
m. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of the Executive's
employment to the extent necessary to the intended preservation of
such rights and obligations.
n. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon a
party by this Agreement is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall
be in addition to any other remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by a party in
exercising any right, remedy or power hereunder or existing at law or
in equity shall be construed as a waiver thereof, and any such right,
remedy or power may be exercised by such party from time to time and
as often as may be deemed expedient or necessary by such party in its
sole discretion.
The parties have executed this Agreement to be effective as of the date
first above written.
LEISURE TIME CASINOS & RESORTS, INC.
By:/s/
------------------------------------------
Gerald J. Boyle, Vice President
Attest:
/s/
- -----------------------------------
Richard D. Sly, Assistant Secretary
EMPLOYEE:
/s/
--------------------------------------------
Alan N. Johnson
8
<PAGE> 9
SCHEDULE A
DESCRIPTION OF DUTIES AND COMPENSATION
EMPLOYEE: Alan N. Johnson
POSITION WITH COMPANY: Chairman of the Board, President and Chief Executive
Officer
COMPENSATION:
Base Salary: $415,000
Bonus: Paid at the discretion of the board of directors of the
Company
BENEFITS:
Insurance:
Medical, dental, disability (long and short term) and
life to the extent available to all of the employees of
the Company and paid in accordance with Company policy
if elected by Employee
Automobile: The Company shall provide the employee with such
automobile as is approved by the Board of Directors of
the Company. All expenses for the operation (including
insurance) and maintenance of such automobile shall be
paid by the Company or reimbursed to the employee by the
Company.
Vacation: Four weeks (20 business days) each calendar year
commencing January 1, 1998. Vacation time will not
accrue from calendar year to calendar year.
401(k) Plan: Available for Employee's election if eligible.
Medical Reimbursement: Available for Employee's election if eligible.
<PAGE> 10
AMENDMENT
TO
EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") effective
September 9, 1998, is by and between LEISURE TIME CASINOS & RESORTS, INC., a
Colorado corporation (the "Company"), and ALAN N. JOHNSON (the "Employee"). The
Company and the Employee previously entered into an Employment Agreement that
was effective July 1, 1998. This Amendment amends the Employment Agreement as
hereinafter set forth.
1. AMENDMENT TO SECTION 7.A. Section 7.a. of the Agreement is amended
so as amended Section 7.a. reads as follows:
"a. EMPLOYEE SHALL NOT DISCLOSE INFORMATION. The Employee
recognizes and acknowledges that the list of the Company's and its
subsidiaries' and affiliates' customers, as it may exist from time to
time, and any proprietary or confidential information, including, but
not limited to financial information and information pertaining to the
Company's, its subsidiaries' and affiliates' manufacturing, marketing
and sales operations, and potential acquisitions, used by the Company
in its business are valuable and unique assets of the Company. Except
as permitted by the next sentence, the Employee will not during or
after the term of his employment, disclose the list of the Company's,
its subsidiaries' or affiliates' customers or any part thereof or any
propriety or confidential information to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever
without the prior written consent or authorization of the board of
directors of the Company. Notwithstanding the prohibitions contained in
the foregoing sentence, the Employee shall be permitted to disclose
such information during the term of his employment to other persons
employed by the Company or its subsidiaries who have a need to know
such information for a proper purpose related to the business of the
Company or its subsidiaries. Upon termination of the Employee's
employment by the Company, its subsidiaries or its affiliates, the
Employee shall neither take nor retain any papers, customer lists,
manuals, files, or other document or copies thereof belonging to the
Company, its subsidiaries or its affiliates."
2. AMENDMENT TO SECTION 7.b. Section 7.b. of the Agreement is amended
to delete the words "3 years" therefrom and substitute the words "2 years"
therefor.
3. AMENDMENT TO SECTION 7.e. Section 7.e. of the Agreement is amended
to delete the word "Executive" therefrom and substitute the word "Employee"
therefor.
<PAGE> 11
Except as amended herein, the Agreement shall remain in full force and
effect without change.
LEISURE TIME CASINOS & RESORTS, INC.
By:/s/
-------------------------------------------
Gerald J. Boyle, Vice President
Attest:
/S/
- -----------------------------------
Richard D. Sly, Assistant Secretary
EMPLOYEE:
/s/
----------------------------------------------
Alan N. Johnson
2
<PAGE> 12
AMENDMENT
TO
EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") effective
February 22, 1999, is by and between LEISURE TIME CASINOS & RESORTS, INC., a
Colorado corporation (the "Company"), and ALAN N. JOHNSON (the "Employee"). The
Company and the Employee previously entered into an Employment Agreement that
was effective July 1, 1998, and that was amended September 9, 1998. This
Amendment amends the Employment Agreement as hereinafter set forth.
Schedule A to the Agreement is deleted and Schedule A that is attached
hereto as Exhibit A and hereby incorporated herein by this reference is
substituted therefor.
Except as amended herein, the Agreement shall remain in full force and
effect without change.
LEISURE TIME CASINOS & RESORTS, INC.
By:/s/
--------------------------------------------
Elden W. Rance, Executive Vice President
Attest:
/s/
- -------------------------------
Gerald J. Boyle, Secretary
EMPLOYEE:
/s/
-----------------------------------------------
Alan N. Johnson
<PAGE> 13
EXHIBIT A
SCHEDULE A
(AS AMENDED FEBRUARY 22, 1999)
DESCRIPTION OF DUTIES AND COMPENSATION
EMPLOYEE: Alan N. Johnson
POSITION WITH COMPANY: Chairman of the Board, President and Chief Executive
Officer
COMPENSATION:
Base Salary: $600,000 per annum (payable in accordance
with Company policy and reduced by all
required withholdings and withholdings
authorized by Employee).
Bonus: Paid at the discretion of the board of
directors of the Company
BENEFITS:
Insurance: Medical, dental, disability (long and short
term) and life to the extent available to
all of the employees of the Company and paid
in accordance with Company policy if elected
by Employee
Automobile: The Company shall provide the employee with
such automobile as is approved by the Board
of Directors of the Company. All expenses
for the operation (including insurance) and
maintenance of such automobile shall be paid
by the Company or reimbursed to the Employee
by the Company.
Vacation: Four weeks (20 business days) each calendar
year. Vacation time will not accrue from
calendar year to calendar year.
401(k) Plan: Available for Employee's election if
eligible.
Flexible Spending
Account: Available for Employee's election if
eligible.
2
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), effective July 1, 1998, by and
between LEISURE TIME CASINOS & RESORTS, INC., a Colorado corporation (the
"Company"), and GERALD J. BOYLE (the "Employee"). The Company hereby employs the
Employee and the Employee hereby accepts employment on the terms and conditions
hereinafter set forth.
1. TERM. Subject to the provisions for termination as provided in
Sections 4 and 5 of this Agreement, the term of this Agreement shall commence on
July 1, 1998, and shall terminate on June 30, 2001. Subject to the provisions
for termination as provided in Sections 4 and 5 of this Agreement, this
Agreement shall be renewed automatically after June 30, 2001, for succeeding one
year periods on the same terms and conditions as contained in this Agreement,
unless the Company or Employee shall, at least 180 days prior to the expiration
of any such renewal date, give written notice of nonrenewal of this Agreement.
2. NATURE OF EMPLOYMENT. The Company hereby employs the Employee as
the Vice President and Secretary of the Company to perform such duties and have
such powers as Employee substantially performed for the Company on the date of
this Agreement as well as those additional duties and powers as may be agreed
upon between the Company and the Employee. The Company may not materially change
the Employee's duties or positions without Employee's consent. The Employee
accepts such employment, agrees to abide by the Articles of Incorporation,
Bylaws, Company policies and the provisions of this Agreement, and agrees to
devote his time and best efforts to his employment under this Agreement as is
reasonably required. Employee may carry on outside activities so long as those
activities do not conflict with nor compete with Employee's job responsibilities
and corporate duties. The Employee shall, at all times, faithfully with due
diligence and to the best of Employee's ability, experience and talent, perform
all the duties hereunder. Unless otherwise agreed to in writing by the Employee,
those services shall be rendered in the Cleveland, Ohio, metropolitan area.
3. COMPENSATION, VACATIONS AND EXPENSES.
a. BASIC SALARY. The Company shall pay to the Employee a base
salary during the term of this Agreement in accordance with the amount
set forth on Schedule A hereof. This amount may be increased as
determined by the Company through an amendment to Schedule A.
b. BONUS. In addition to the basic salary, the Employee will
receive a bonus to be set at the discretion of the board of directors
of the Company. Nothing shall obligate the Company, in the future, to
pay any bonus or bonuses to the Employee.
c. VACATIONS, FRINGE BENEFITS, AND LEAVES OF ABSENCE. The
Employee shall be entitled to an annual vacation of at least that
specified on Schedule A, but in no event less than the minimum
vacation time established by the Company for its employees.
<PAGE> 2
The Employee shall further be entitled to participate in and receive
the benefits provided under any employee benefit program which may be
adopted and maintained by the Company (including, without limitation,
those described on Schedule A) and for which the Employee is eligible
by virtue of his employment hereunder, but only as and to the extent
the Employee would otherwise be eligible as provided in any said
program. The Employee shall also bc entitled to leaves of absence as
the Employee deems necessary and the Company, in its sole discretion,
deems reasonable.
d. REIMBURSEMENT OF EXPENSES. The Employee is authorized to incur
reasonable expenses while performing the Employee's duties under this
Agreement, including expenses for entertainment, travel, automobile,
and similar items incurred on behalf of the Company. The Company will
reimburse the Employee upon the presentation by the employee of
itemized accounts of such expenditures. Expenses over $5,000 in any
month must be approved in writing by the Company before being incurred
by the Employee.
4. TERMINATION OF AGREEMENT.
a. TERMINATION OF EMPLOYEE. The Employee may terminate this
Agreement without cause upon 120 days prior written notice to the
Company. In such event, the Employee shall continue to render the
services required under this Agreement and shall be paid on the
regular payment dates the compensation set forth in Schedule A up to
the date of termination.
b. TERMINATION BY THE COMPANY FOR CAUSE. In the event of
Employee's material failure or refusal to observe the provisions of
this Agreement or perform any of the duties required of Employee under
this Agreement, Employee's fraud, misappropriation or embezzlement of
funds, or conviction for any crime punishable as a felony, the Company
may terminate this Agreement upon written notice of such termination
to the Employee and upon payment by the Company to the Employee for
all compensation accrued under this Agreement to the date of
termination. In the event of a termination of Employee's employment
for cause in accordance with this Section 4.b, the Company shall have
no further obligation to the Employee. However, termination of the
Employee's employment for cause shall not terminate or extinguish the
Employee's obligation or liability to pay to the Company or any of its
affiliates any amount owed to them by the Employee, including, but not
limited to, any amounts misappropriated, embezzled or otherwise
obtained by the Employee by reason of any of the occurrences referred
in this Section 4.b without prejudice to any other rights or remedies
of the Company or it affiliates at law or in equity.
c. TERMINATION UPON DEATH OF EMPLOYEE. This Agreement shall
automatically terminate in the event of the Employee's death. In such
case, any accrued compensation or benefits shall inure to the estate
of the Employee, and the payment thereof shall be the only liability
the Company shall have to the Employee's estate.
2
<PAGE> 3
5. ILLNESS AND DISABILITY.
a. ILLNESS. If the Employee is unable to perform the services
required under this Agreement by reason of illness or physical injury
not amounting to disability as defined in Section 5.b, the
compensation otherwise payable to the Employee under this Agreement
shall be continued in full for a period of 60 days after the date
Employee is unable to perform such services.
b. DEFINITION OF DISABILITY. For purposes of this Agreement, the
terms "totally disabled," "disabled" and "disability" shall mean
continuous disability as defined in and for the period necessary to
qualify for benefits under any disability income insurance policies on
the Employee paid for by the Company. If no disability insurance is in
effect on the Employee, such terms shall mean continuous disability
which prevents the Employee from performing Employee's normal duties
pursuant to this Agreement. The Employee or agent of the Employee
shall notify the Company in writing as to the Employee's inability to
perform those duties or the Company shall so notify the Employee. If
they are not able to agree as to the existence of disability in 30
days after receipt of said notice, the determination shall be made by
medical doctors, licensed as such in the State of Ohio, one designated
by the Company and the other by the Employee. If these two physicians
cannot agree, they shall appoint a third licensed medical doctor and
the determination of the majority shall be conclusive and binding on
the Company and the Employee. The fees of all medical doctors shall be
paid by the Company and not by the Employee. For the purposes of this
Agreement, adjudicated mental incompetency shall also be a definition
of disability.
c. SALARY CONTINUATION. If the Employee becomes totally disabled
during the term of this Agreement, the Employee's full salary shall be
continued for a period not to exceed 24 consecutive months, for the
period during which the Employee remains totally disabled or until the
next termination date of the Agreement, whichever is shorter. If the
Company pays premiums on a disability income insurance policy on the
Employee, any proceeds paid to the Employee by reason of disability
under such policy shall be offset against salary continuation payments
due from the Company.
6. CHANGE IN CONTROL. A "change in control" of the Company shall be
deemed to have transpired upon the occurrence after the date hereof of any one
of the following events:
a. at any time any one person (other than Employee), or more than
one person acting as a group, acquires beneficial ownership of the
voting securities of the Company that together with voting securities
beneficially held by such person or group, constitute more than 20% of
the total voting power of the Company's outstanding voting securities;
b. the appointment or election of a majority of the members of
the Company's board of directors who are appointed or elected during
any 24 month period but are not
3
<PAGE> 4
endorsed in writing by a majority of those members of the Company's
board of directors who were directors prior to the date of the
appointment or election of the first such new director comprising the
majority; or
c. one person, or more than one person acting as a group,
acquires (or has acquired during the 12 month period ending on the
date of the most recent acquisition by such person or persons) assets
from the Company that have a total fair market value equal to or
greater than one third of the total fair market value of all of the
Company's assets immediately before the acquisition or acquisitions.
At any time after a "change in control" of the Company, the Employee,
at the option of the Employee, shall have the right, upon 30 days' prior written
notice by the Employee to the Company, to cause the Company to repurchase all or
any portion of the common stock of the Company then owned by the Employee at the
higher of (i) the book value thereof as determined by the independent certified
public accountants of the Company based upon the financial statements of the
Company as of the last day of the month prior to the date of such notice, (ii)
the last market value of a share of the Company's common stock established by
the board of directors, or the last price at which the common stock was sold be
the Company or by a shareholder of the Company to any person (other than the
Employee); provided, however, or if the common stock is listed on a national
securities exchange, is admitted to unlisted trading privileges on such an
exchange, or is listed for trading on a trading system of the National
Association of Securities Dealers, Inc., such as the Nasdaq National Market, the
Nasdaq SmallCap Market or the OTC Bulletin Board, then the value shall be the
last reported sale price of the common stock on such an exchange or system on
the last business day prior to the date of such notice or if no such sale is
made on such day, the average of the closing bid prices for the common stock for
such day on such exchange or such system shall be used. Within 30 days after
receipt of such notice, the Company shall pay the Employee the full amount for
such shares of common stock upon delivery of the stock certificates representing
such shares of common stock. The payment shall be in the form of a cashiers'
check or by wire transfer. Also, upon a "change in control" of the Company, the
Employee shall automatically be granted options to purchase the same number of
shares of the Company's common stock as then are issuable upon exercise of
options to purchase the Company's common stock then owned by the Employee. Such
new options shall be immediately exercisable and shall remain exercisable for
ten years. The exercise price thereof shall be $0.01 per share of common stock.
Such new options shall not replace any other options to purchase the Company's
remaining stock then owned by Employee.
7. EMPLOYEE ACTIONS.
a. EMPLOYEE SHALL NOT DISCLOSE INFORMATION. The Employee
recognizes and acknowledges that the list of the Company's and its
subsidiaries' and affiliates' customers, as it may exist from time to
time, and any proprietary or confidential information, including, but
not limited to financial information and information pertaining to the
Company's, its subsidiaries' and affiliates' manufacturing, marketing
4
<PAGE> 5
and sales operations, and potential acquisitions, used by the Company
in its business are valuable and unique assets of the Company. The
Employee will not during or after the term of his employment, disclose
the list of the Company's, its subsidiaries' or affiliates' customers
or any part thereof or any propriety or confidential information to
any person, firm, corporation, association, or other entity for any
reason or purpose whatsoever without the prior written consent or
authorization of the board of directors of the Company. Upon
termination of the Employee's employment by the Company, its
subsidiaries or its affiliates, the Employee shall neither take nor
retain any papers, customer lists, manuals, files, or other document
or copies thereof belonging to the Company, its subsidiaries or its
affiliates.
b. NON COMPETE. Employee hereby covenants and agrees that
Employee will not, without the prior written consent of the Company,
directly or indirectly, whether individually or through any entity
controlled by Employee, during the term of this Agreement and for a
period of 3 years from the termination of this Agreement, for any
reason, directly or indirectly, on his own behalf or in the service or
on behalf of others, whether or not for compensation, engage in any
business activity, or have any interest in any person, firm,
corporation or business, through a subsidiary or parent entity or
other entity (whether as a shareholder, agent, joint venturer,
security holder, trustee, partner, consultant, creditor lending credit
or money for the purpose of establishing or operating any such
business, partnership or otherwise) which is competitive with the then
existing business of the Company. Notwithstanding the foregoing,
Employee may own shares of competing companies whose securities are
publicly traded, so long as such securities do not constitute five
percent or more of the outstanding securities of any such company.
c. NON-SOLICITATION. Employee further agrees that as long as this
Agreement remains in effect and for a period of 2 years from its
termination, Employee will not divert any business of the Company
and/or its affiliates or any customers or suppliers of the Company
and/or the Company's and/or its affiliates' business to any other
person, entity or competitor, or induce or attempt to induce, directly
or indirectly, any person to leave his or her employment with the
Company.
d. INTELLECTUAL PROPERTY. Employee shall disclose to the Company
all ideas and business plans developed by the Employee during the term
of Employee's employment which relate to the business of the Company,
its subsidiaries or affiliates or any business conducted by the
Company, its subsidiaries or affiliates. All patents, patent
applications, patent licenses, formulas, inventions, processes,
copyrights, know-how, proprietary information, rights, trademarks, or
trade names, or future improvements thereto developed or conceived of
by the Employee during any period of employment with the Company shall
be promptly disclosed to, and all rights with respect thereto shall be
assigned by the Employee to the Company in consideration of the
remuneration paid or payable to the Employee hereunder.
5
<PAGE> 6
e. REMEDIES. Employee acknowledges and agrees that his
obligations provided in this Section 7 are necessary and reasonable in
order to protect Company and its affiliates and their respective
business and Employee expressly agrees that monetary damages would be
inadequate to compensate Company and/or its affiliates for any breach
by Executive of his covenants and agreements set forth herein.
Accordingly, Employee agrees and acknowledges that any such violation
or threatened violation of this Section 7 will cause irreparable
injury to Company and that, in addition to any other remedies that may
be available, in law, in equity or otherwise, Company and its
affiliates shall be entitled to obtain injunctive relief against the
prospective breach of this Section 7 or the continuation of any such
breach by Employee without the necessity of proving actual damages.
f. CONSTRUCTION. In the event that any provision of this Section
7 should ever be deemed to exceed the time, geographic, or other
limitations permitted by applicable law, then such provision shall be
reformed to the maximum time geographic, or other limitations
permitted by applicable law. The provisions of this Section 7 shall be
applicable for the period indicated and shall survive the termination
of this Agreement
8. GENERAL MATTERS.
a. GOVERNING LAW. This Agreement shall bc governed by the laws of
the State of Ohio and shall be construed in accordance therewith.
b. NO WAIVER. No provision of this Agreement may be waived except
by an Agreement in writing signed by the waiving party. A waiver of
any term or provision shall not be construed as a waiver of any other
term or provision.
c. AMENDMENT. This Agreement may be amended or altered at any
time, in whole or in part, by filing with this Agreement a written
instrument setting forth such changes, signed by all parties.
d. BINDING EFFECT. This Agreement shall be binding upon the
Employee, the Company, and their successors and assigns.
e. CONSTRUCTION. Throughout this Agreement the singular shall
include the plural, the plural shall include the singular, and the
masculine shall include the feminine wherever the context so requires.
f. TEXT TO CONTROL. The headings of Sections are included solely
for convenience of reference. If any conflict between any heading and
the text of this Agreement exists, the text shall control.
g. SEVERABILITY. If any provision of this Agreement is declared
by any court of competent jurisdiction to be invalid for any reason,
such invalidity shall not affect the
6
<PAGE> 7
remaining provisions which shall be fully severable, and the Agreement
shall be construed and enforced as if such invalid provision had never
been included.
h. ENTIRE AGREEMENT OF THE PARTIES. The parties agree that this
document contains the entire agreement and understanding between them
in relation to the subject matter hereof, and no representations,
warranties, covenants, understandings, or agreements in relation
thereto exist between the parties except as expressly set forth
herein.
i. NOTICES. Every notice or other communication to be given by
either party to the other party with respect to this Agreement, shall
be in writing and shall not be effective for any purpose unless the
same shall be served personally or by national air courier service, or
United States certified mail, return receipt requested, postage
prepaid, addressed, if to the Company at 1284 Miller Road, Avon, Ohio
44011, Attention, Secretary, and if to the Employee at 1284 Miller
Road, Avon, Ohio 44011, or such other address or addresses as the
Company or the Employee may from time to time designate by notice
given as above provided. Every notice or other communication hereunder
shall be deemed to have been given as of the third business day
following the date of such mailing (or as of any earlier date
evidenced by a receipt from such national air courier service or the
United States Postal Service) or immediately if personally delivered.
Notices not sent in accordance with the foregoing shall be of no force
and effect until received by the foregoing parties as such addresses
specified herein.
j. DUPLICATE ORIGINALS. This Agreement may be executed in several
counterparts, each of which shall be an original but all of which
together shall constitute one and the same instrument.
k. ARBITRATION. Any dispute or controversy of or relating to this
Agreement, or any breach of this Agreement, shall be settled by
arbitration to be held in Cleveland, Ohio, in accordance with the
rules then in effect of the American Arbitration Association or any
successor thereto. The decision of the arbitrator shall be final,
conclusive, and binding on the parties to the arbitration. Judgment
may be entered on the arbitrator's decision in any court having
jurisdiction, and the parties irrevocably consent to the jurisdiction
of the Ohio state courts for this purpose. The Company shall pay the
costs and expenses of such arbitration.
l. ATTORNEYS' FEES. In the event that the Company or the Employee
retains an attorney or attorneys to enforce performance of this
Agreement by the other party or to obtain damages or other relief
because of violation of the terms of this Agreement by the other
party, then all reasonable attorneys' fees and costs of arbitration or
litigation are to be borne and paid by the party determined to have
failed to perform this Agreement or to be liable for damages or
against which other relief is granted.
7
<PAGE> 8
m. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of the Executive's
employment to the extent necessary to the intended preservation of
such rights and obligations.
n. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon a
party by this Agreement is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall
be in addition to any other remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by a party in
exercising any right, remedy or power hereunder or existing at law or
in equity shall be construed as a waiver thereof, and any such right,
remedy or power may be exercised by such party from time to time and
as often as may be deemed expedient or necessary by such party in its
sole discretion.
The parties have executed this Agreement to be effective as of the
date first above written.
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/
-------------------------------------------
Alan N. Johnson, President
Attest:
/s/
- -----------------------------------
Richard D. Sly, Assistant Secretary
EMPLOYEE:
/s/
-----------------------------------------------
Gerald J. Boyle
8
<PAGE> 9
SCHEDULE A
DESCRIPTION OF DUTIES AND COMPENSATION
EMPLOYEE: Gerald J. Boyle
POSITION WITH COMPANY: Vice President and Secretary
COMPENSATION:
o Base Salary: $165,000
o Bonus: Paid at the discretion of the board of
directors of the Company
BENEFITS:
o Insurance: Medical, dental, disability (long and short
term) and life to the extent available to
all employees of the Company and paid in
accordance with Company policy if elected by
Employee
o Automobile: The Company shall provide the employee with
such automobile as is approved by the
President of the Company. All expenses for
the operation (including insurance) and
maintenance of such automobile shall be
paid by the Company or reimbursed to the
Employee by the Company.
o Vacation: Four weeks (20 business days) each calendar
year commencing January 1, 1998. Such
vacation time is available upon approval by
the President of the Company. Such approval
will not be unreasonably withheld upon at
least two week notice by Employee. Vacation
time will not accrue from calendar year to
calendar year.
o 401(k) Plan: Available for Employee's election if
eligible.
o Medical Reimbursement: Available for Employee's election if
eligible.
<PAGE> 10
AMENDMENT
TO
EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") effective
September 9, 1998, is by and between LEISURE TIME CASINOS & RESORTS, INC., a
Colorado corporation (the "Company"), and GERALD J. BOYLE (the "Employee"). The
Company and the Employee previously entered into an Employment Agreement that
was effective July 1, 1998. This Amendment amends the Employment Agreement as
hereinafter set forth.
1. AMENDMENT TO SECTION 7.a. Section 7.a. of the Agreement is
amended so as amended Section 7.a. reads as follows:
"a. EMPLOYEE SHALL NOT DISCLOSE INFORMATION. The Employee
recognizes and acknowledges that the list of the Company's and its
subsidiaries' and affiliates' customers, as it may exist from time to
time, and any proprietary or confidential information, including, but
not limited to financial information and information pertaining to the
Company's, its subsidiaries' and affiliates' manufacturing, marketing
and sales operations, and potential acquisitions, used by the Company
in its business are valuable and unique assets of the Company. Except
as permitted by the next sentence, the Employee will not during or
after the term of his employment, disclose the list of the Company's,
its subsidiaries' or affiliates' customers or any part thereof or any
propriety or confidential information to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever
without the prior written consent or authorization of the board of
directors of the Company. Notwithstanding the prohibitions contained in
the foregoing sentence, the Employee shall be permitted to disclose
such information during the term of his employment to other persons
employed by the Company or its subsidiaries who have a need to know
such information for a proper purpose related to the business of the
Company or its subsidiaries. Upon termination of the Employee's
employment by the Company, its subsidiaries or its affiliates, the
Employee shall neither take nor retain any papers, customer lists,
manuals, files, or other document or copies thereof belonging to the
Company, its subsidiaries or its affiliates."
2. AMENDMENT TO SECTION 7.b. Section 7.b. of the Agreement is amended
to delete the words "3 years" therefrom and substitute the words "2 years"
therefor.
3. AMENDMENT TO SECTION 7.e. Section 7.e. of the Agreement is amended
to delete the word "Executive" therefrom and substitute the word "Employee"
therefor.
<PAGE> 11
Except as amended herein, the Agreement shall remain in full force and
effect without change.
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/
---------------------------------
Alan N. Johnson, President
Attest:
/s/
- -----------------------------------
Richard D. Sly, Assistant Secretary
EMPLOYEE:
/s/
-------------------------------------
Gerald J. Boyle
2
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), effective July 1, 1998, by and
between LEISURE TIME CASINOS & RESORTS, INC., a Colorado corporation (the
"Company"), and ELDEN W. RANCE (the "Employee"). The Company hereby employs the
Employee and the Employee hereby accepts employment on the terms and conditions
hereinafter set forth.
1. TERM. Subject to the provisions for termination as provided in
Sections 4 and 5 of this Agreement, the term of this Agreement shall commence on
July 1, 1998, and shall terminate on June 30, 2001. Subject to the provisions
for termination as provided in Sections 4 and 5 of this Agreement, this
Agreement shall be renewed automatically after June 30, 2001, for succeeding one
year periods on the same terms and conditions as contained in this Agreement,
unless the Company or Employee shall, at least 180 days prior to the expiration
of any such renewal date, give written notice of nonrenewal of this Agreement.
2. NATURE OF EMPLOYMENT. The Company hereby employs the Employee as the
Executive Vice President Operations, Chief Financial Officer and Treasurer of
the Company to perform such duties and have such powers as Employee
substantially performed for the Company on the date of this Agreement as well as
those additional duties and powers as may be agreed upon between the Company and
the Employee. The Company may not materially change the Employee's duties or
positions without Employee's consent. The Employee accepts such employment,
agrees to abide by the Articles of Incorporation, Bylaws, Company policies and
the provisions of this Agreement, and agrees to devote his time and best efforts
to his employment under this Agreement as is reasonably required. Employee may
carry on outside activities so long as those activities do not conflict with nor
compete with Employee's job responsibilities and corporate duties. The Employee
shall, at all times, faithfully with due diligence and to the best of Employee's
ability, experience and talent, perform all the duties hereunder. Unless
otherwise agreed to in writing by the Employee, those services shall be rendered
in the Atlanta, Georgia, metropolitan area.
3. COMPENSATION, VACATIONS AND EXPENSES.
a. BASIC SALARY. The Company shall pay to the Employee a base
salary during the term of this Agreement in accordance with the amount
set forth on Schedule A hereof. This amount may be increased as
determined by the Company through an amendment to Schedule A.
b. BONUS. In addition to the basic salary, the Employee will
receive a bonus to be set at the discretion of the board of directors
of the Company. Nothing shall obligate the Company, in the future, to
pay any bonus or bonuses to the Employee.
c. VACATIONS, FRINGE BENEFITS, AND LEAVES OF ABSENCE. The
Employee shall be entitled to an annual vacation of at least that
specified on Schedule A, but in no event
<PAGE> 2
less than the minimum vacation time established by the Company for its
employees. The Employee shall further be entitled to participate in and
receive the benefits provided under any employee benefit program which
may be adopted and maintained by the Company (including, without
limitation, those described on Schedule A) and for which the Employee
is eligible by virtue of his employment hereunder, but only as and to
the extent the Employee would otherwise be eligible as provided in any
said program. The Employee shall also bc entitled to leaves of absence
as the Employee deems necessary and the Company, in its sole
discretion, deems reasonable.
d. REIMBURSEMENT OF EXPENSES. The Employee is authorized to
incur reasonable expenses while performing the Employee's duties under
this Agreement, including expenses for entertainment, travel,
automobile, and similar items incurred on behalf of the Company. The
Company will reimburse the Employee upon the presentation by the
employee of itemized accounts of such expenditures. Expenses over
$5,000 in any month must be approved in writing by the Company before
being incurred by the Employee.
4. TERMINATION OF AGREEMENT.
a. TERMINATION OF EMPLOYEE. The Employee may terminate this
Agreement without cause upon 120 days prior written notice to the
Company. In such event, the Employee shall continue to render the
services required under this Agreement and shall be paid on the regular
payment dates the compensation set forth in Schedule A up to the date
of termination.
b. TERMINATION BY THE COMPANY FOR CAUSE. In the event of
Employee's material failure or refusal to observe the provisions of
this Agreement or perform any of the duties required of Employee under
this Agreement, Employee's fraud, misappropriation or embezzlement of
funds, or conviction for any crime punishable as a felony, the Company
may terminate this Agreement upon written notice of such termination to
the Employee and upon payment by the Company to the Employee for all
compensation accrued under this Agreement to the date of termination.
In the event of a termination of Employee's employment for cause in
accordance with this Section 4.b, the Company shall have no further
obligation to the Employee. However, termination of the Employee's
employment for cause shall not terminate or extinguish the Employee's
obligation or liability to pay to the Company or any of its affiliates
any amount owed to them by the Employee, including, but not limited to,
any amounts misappropriated, embezzled or otherwise obtained by the
Employee by reason of any of the occurrences referred in this Section
4.b without prejudice to any other rights or remedies of the Company or
it affiliates at law or in equity.
c. TERMINATION UPON DEATH OF EMPLOYEE. This Agreement shall
automatically terminate in the event of the Employee's death. In such
case, any accrued compensation or benefits shall inure to the estate of
the Employee, and the payment thereof shall be the only liability the
Company shall have to the Employee's estate.
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<PAGE> 3
5. ILLNESS AND DISABILITY.
a. ILLNESS. If the Employee is unable to perform the services
required under this Agreement by reason of illness or physical injury
not amounting to disability as defined in Section 5.b, the compensation
otherwise payable to the Employee under this Agreement shall be
continued in full for a period of 60 days after the date Employee is
unable to perform such services.
b. DEFINITION OF DISABILITY. For purposes of this Agreement,
the terms "totally disabled," "disabled" and "disability" shall mean
continuous disability as defined in and for the period necessary to
qualify for benefits under any disability income insurance policies on
the Employee paid for by the Company. If no disability insurance is in
effect on the Employee, such terms shall mean continuous disability
which prevents the Employee from performing Employee's normal duties
pursuant to this Agreement. The Employee or agent of the Employee shall
notify the Company in writing as to the Employee's inability to perform
those duties or the Company shall so notify the Employee. If they are
not able to agree as to the existence of disability in 30 days after
receipt of said notice, the determination shall be made by medical
doctors, licensed as such in the State of Georgia, one designated by
the Company and the other by the Employee. If these two physicians
cannot agree, they shall appoint a third licensed medical doctor and
the determination of the majority shall be conclusive and binding on
the Company and the Employee. The fees of all medical doctors shall be
paid by the Company and not by the Employee. For the purposes of this
Agreement, adjudicated mental incompetency shall also be a definition
of disability.
c. SALARY CONTINUATION. If the Employee becomes totally
disabled during the term of this Agreement, the Employee's full salary
shall be continued for a period not to exceed 24 consecutive months,
for the period during which the Employee remains totally disabled or
until the next termination date of the Agreement, whichever is shorter.
If the Company pays premiums on a disability income insurance policy on
the Employee, any proceeds paid to the Employee by reason of disability
under such policy shall be offset against salary continuation payments
due from the Company.
6. CHANGE IN CONTROL. A "change in control" of the Company shall be
deemed to have transpired upon the occurrence after the date hereof of any one
of the following events:
a. at any time any one person (other than Employee), or more
than one person acting as a group, acquires beneficial ownership of the
voting securities of the Company that together with voting securities
beneficially held by such person or group, constitute more than 20% of
the total voting power of the Company's outstanding voting securities;
3
<PAGE> 4
b. the appointment or election of a majority of the members of
the Company's board of directors who are appointed or elected during
any 24 month period but are not endorsed in writing by a majority of
those members of the Company's board of directors who were directors
prior to the date of the appointment or election of the first such new
director comprising the majority; or
c. one person, or more than one person acting as a group,
acquires (or has acquired during the 12 month period ending on the date
of the most recent acquisition by such person or persons) assets from
the Company that have a total fair market value equal to or greater
than one third of the total fair market value of all of the Company's
assets immediately before the acquisition or acquisitions.
At any time after a "change in control" of the Company, the Employee,
at the option of the Employee, shall have the right, upon 30 days' prior written
notice by the Employee to the Company, to cause the Company to repurchase all or
any portion of the common stock of the Company then owned by the Employee at the
higher of (i) the book value thereof as determined by the independent certified
public accountants of the Company based upon the financial statements of the
Company as of the last day of the month prior to the date of such notice, (ii)
the last market value of a share of the Company's common stock established by
the board of directors, or the last price at which the common stock was sold be
the Company or by a shareholder of the Company to any person (other than the
Employee); provided, however, or if the common stock is listed on a national
securities exchange, is admitted to unlisted trading privileges on such an
exchange, or is listed for trading on a trading system of the National
Association of Securities Dealers, Inc., such as the Nasdaq National Market, the
Nasdaq SmallCap Market or the OTC Bulletin Board, then the value shall be the
last reported sale price of the common stock on such an exchange or system on
the last business day prior to the date of such notice or if no such sale is
made on such day, the average of the closing bid prices for the common stock for
such day on such exchange or such system shall be used. Within 30 days after
receipt of such notice, the Company shall pay the Employee the full amount for
such shares of common stock upon delivery of the stock certificates representing
such shares of common stock. The payment shall be in the form of a cashiers'
check or by wire transfer. Also, upon a "change in control" of the Company, the
Employee shall automatically be granted options to purchase the same number of
shares of the Company's common stock as then are issuable upon exercise of
options to purchase the Company's common stock then owned by the Employee. Such
new options shall be immediately exercisable and shall remain exercisable for
ten years. The exercise price thereof shall be $0.01 per share of common stock.
Such new options shall not replace any other options to purchase the Company's
remaining stock then owned by Employee.
7. EMPLOYEE ACTIONS.
a. EMPLOYEE SHALL NOT DISCLOSE INFORMATION. The Employee
recognizes and acknowledges that the list of the Company's and its
subsidiaries' and affiliates' customers, as it may exist from time to
time, and any proprietary or confidential
4
<PAGE> 5
information, including, but not limited to financial information and
information pertaining to the Company's, its subsidiaries' and
affiliates' manufacturing, marketing and sales operations, and
potential acquisitions, used by the Company in its business are
valuable and unique assets of the Company. The Employee will not during
or after the term of his employment, disclose the list of the
Company's, its subsidiaries' or affiliates' customers or any part
thereof or any propriety or confidential information to any person,
firm, corporation, association, or other entity for any reason or
purpose whatsoever without the prior written consent or authorization
of the board of directors of the Company. Upon termination of the
Employee's employment by the Company, its subsidiaries or its
affiliates, the Employee shall neither take nor retain any papers,
customer lists, manuals, files, or other document or copies thereof
belonging to the Company, its subsidiaries or its affiliates.
b. NON COMPETE. Employee hereby covenants and agrees that
Employee will not, without the prior written consent of the Company,
directly or indirectly, whether individually or through any entity
controlled by Employee, during the term of this Agreement and for a
period of 3 years from the termination of this Agreement, for any
reason, directly or indirectly, on his own behalf or in the service or
on behalf of others, whether or not for compensation, engage in any
business activity, or have any interest in any person, firm,
corporation or business, through a subsidiary or parent entity or other
entity (whether as a shareholder, agent, joint venturer, security
holder, trustee, partner, consultant, creditor lending credit or money
for the purpose of establishing or operating any such business,
partnership or otherwise) which is competitive with the then existing
business of the Company. Notwithstanding the foregoing, Employee may
own shares of competing companies whose securities are publicly traded,
so long as such securities do not constitute five percent or more of
the outstanding securities of any such company.
c. NON-SOLICITATION. Employee further agrees that as long as
this Agreement remains in effect and for a period of 2 years from its
termination, Employee will not divert any business of the Company
and/or its affiliates or any customers or suppliers of the Company
and/or the Company's and/or its affiliates' business to any other
person, entity or competitor, or induce or attempt to induce, directly
or indirectly, any person to leave his or her employment with the
Company.
d. INTELLECTUAL PROPERTY. Employee shall disclose to the
Company all ideas and business plans developed by the Employee during
the term of Employee's employment which relate to the business of the
Company, its subsidiaries or affiliates or any business conducted by
the Company, its subsidiaries or affiliates. All patents, patent
applications, patent licenses, formulas, inventions, processes,
copyrights, know-how, proprietary information, rights, trademarks, or
trade names, or future improvements thereto developed or conceived of
by the Employee during any period of employment with the Company shall
be promptly disclosed to, and all rights with respect thereto shall be
assigned by the Employee to the Company in consideration of the
remuneration paid or payable to the Employee hereunder.
5
<PAGE> 6
e. REMEDIES. Employee acknowledges and agrees that his
obligations provided in this Section 7 are necessary and reasonable in
order to protect Company and its affiliates and their respective
business and Employee expressly agrees that monetary damages would be
inadequate to compensate Company and/or its affiliates for any breach
by Executive of his covenants and agreements set forth herein.
Accordingly, Employee agrees and acknowledges that any such violation
or threatened violation of this Section 7 will cause irreparable injury
to Company and that, in addition to any other remedies that may be
available, in law, in equity or otherwise, Company and its affiliates
shall be entitled to obtain injunctive relief against the prospective
breach of this Section 7 or the continuation of any such breach by
Employee without the necessity of proving actual damages.
f. CONSTRUCTION. In the event that any provision of this
Section 7 should ever be deemed to exceed the time, geographic, or
other limitations permitted by applicable law, then such provision
shall be reformed to the maximum time geographic, or other limitations
permitted by applicable law. The provisions of this Section 7 shall be
applicable for the period indicated and shall survive the termination
of this Agreement
8. GENERAL MATTERS.
a. GOVERNING LAW. This Agreement shall bc governed by the laws
of the State of Ohio and shall be construed in accordance therewith.
b. NO WAIVER. No provision of this Agreement may be waived
except by an Agreement in writing signed by the waiving party. A waiver
of any term or provision shall not be construed as a waiver of any
other term or provision.
c. AMENDMENT. This Agreement may be amended or altered at any
time, in whole or in part, by filing with this Agreement a written
instrument setting forth such changes, signed by all parties.
d. BINDING EFFECT. This Agreement shall be binding upon the
Employee, the Company, and their successors and assigns.
e. CONSTRUCTION. Throughout this Agreement the singular shall
include the plural, the plural shall include the singular, and the
masculine shall include the feminine wherever the context so requires.
f. TEXT TO CONTROL. The headings of Sections are included
solely for convenience of reference. If any conflict between any
heading and the text of this Agreement exists, the text shall control.
6
<PAGE> 7
g. SEVERABILITY. If any provision of this Agreement is
declared by any court of competent jurisdiction to be invalid for any
reason, such invalidity shall not affect the remaining provisions which
shall be fully severable, and the Agreement shall be construed and
enforced as if such invalid provision had never been included.
h. ENTIRE AGREEMENT OF THE PARTIES. The parties agree that
this document contains the entire agreement and understanding between
them in relation to the subject matter hereof, and no representations,
warranties, covenants, understandings, or agreements in relation
thereto exist between the parties except as expressly set forth herein.
i. NOTICES. Every notice or other communication to be given by
either party to the other party with respect to this Agreement, shall
be in writing and shall not be effective for any purpose unless the
same shall be served personally or by national air courier service, or
United States certified mail, return receipt requested, postage
prepaid, addressed, if to the Company at 1284 Miller Road, Avon, Ohio
44011, Attention, Secretary, and if to the Employee at 4258
Communications Drive, Norcross, Georgia 30093, or such other address or
addresses as the Company or the Employee may from time to time
designate by notice given as above provided. Every notice or other
communication hereunder shall be deemed to have been given as of the
third business day following the date of such mailing (or as of any
earlier date evidenced by a receipt from such national air courier
service or the United States Postal Service) or immediately if
personally delivered. Notices not sent in accordance with the foregoing
shall be of no force and effect until received by the foregoing parties
as such addresses specified herein.
j. DUPLICATE ORIGINALS. This Agreement may be executed in
several counterparts, each of which shall be an original but all of
which together shall constitute one and the same instrument.
k. ARBITRATION. Any dispute or controversy of or relating to
this Agreement, or any breach of this Agreement, shall be settled by
arbitration to be held in Norcross, Georgia, in accordance with the
rules then in effect of the American Arbitration Association or any
successor thereto. The decision of the arbitrator shall be final,
conclusive, and binding on the parties to the arbitration. Judgment may
be entered on the arbitrator's decision in any court having
jurisdiction, and the parties irrevocably consent to the jurisdiction
of the Georgia state courts for this purpose. The Company shall pay the
costs and expenses of such arbitration.
l. ATTORNEYS' FEES. In the event that the Company or the
Employee retains an attorney or attorneys to enforce performance of
this Agreement by the other party or to obtain damages or other relief
because of violation of the terms of this Agreement by the other party,
then all reasonable attorneys' fees and costs of arbitration or
litigation are to be borne and paid by the party determined to have
failed to perform this Agreement or to be liable for damages or against
which other relief is granted.
7
<PAGE> 8
m. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of the Executive's
employment to the extent necessary to the intended preservation of such
rights and obligations.
n. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon a
party by this Agreement is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall be
in addition to any other remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by a party in
exercising any right, remedy or power hereunder or existing at law or
in equity shall be construed as a waiver thereof, and any such right,
remedy or power may be exercised by such party from time to time and as
often as may be deemed expedient or necessary by such party in its sole
discretion.
The parties have executed this Agreement to be effective as of the date
first above written.
LEISURE TIME CASINOS & RESORTS, INC.
By:/s/
------------------------------------------
Alan N. Johnson, President
Attest:
/s/
- ----------------------------------
Gerald J. Boyle, Secretary
EMPLOYEE:
/s/
---------------------------------------------
Elden W. Rance
8
<PAGE> 9
SCHEDULE A
DESCRIPTION OF DUTIES AND COMPENSATION
EMPLOYEE: Elden W. Rance
POSITION WITH COMPANY: Executive Vice President Operations, Chief Financial
Officer and Treasurer
COMPENSATION:
Base Salary: $200,000
Bonus: Paid at the discretion of the board of
directors of the Company
BENEFITS:
Insurance: Medical, dental, disability (long and short
term) and life to the extent available to
all employees of the Company and paid in
accordance with Company policy if elected by
Employee
Automobile: The Company shall provide the employee with
such automobile as is approved by the
President of the Company. All expenses for
the operation (including insurance) and
maintenance of such automobile shall be paid
by the Company or reimbursed to the Employee
by the Company.
Vacation: Four weeks (20 business days) each calendar
year commencing January 1, 1998. Such
vacation time is available upon approval by
the President of the Company. Such approval
will not be unreasonably withheld upon at
least two week notice by Employee. Vacation
time will not accrue from calendar year to
calendar year.
401(k) Plan: Available for Employee's election if
eligible.
Medical Reimbursement: Available for Employee's election if
eligible.
<PAGE> 10
2
AMENDMENT
TO
EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") effective
September 9, 1998, is by and between LEISURE TIME CASINOS & RESORTS, INC., a
Colorado corporation (the "Company"), and ELDEN W. RANCE (the "Employee"). The
Company and the Employee previously entered into an Employment Agreement that
was effective July 1, 1998. This Amendment amends the Employment Agreement as
hereinafter set forth.
1. AMENDMENT TO SECTION 7.a. Section 7.a. of the Agreement is amended
so as amended Section 7.a. reads as follows:
"a. EMPLOYEE SHALL NOT DISCLOSE INFORMATION. The Employee
recognizes and acknowledges that the list of the Company's and its
subsidiaries' and affiliates' customers, as it may exist from time to
time, and any proprietary or confidential information, including, but
not limited to financial information and information pertaining to the
Company's, its subsidiaries' and affiliates' manufacturing, marketing
and sales operations, and potential acquisitions, used by the Company
in its business are valuable and unique assets of the Company. Except
as permitted by the next sentence, the Employee will not during or
after the term of his employment, disclose the list of the Company's,
its subsidiaries' or affiliates' customers or any part thereof or any
propriety or confidential information to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever
without the prior written consent or authorization of the board of
directors of the Company. Notwithstanding the prohibitions contained in
the foregoing sentence, the Employee shall be permitted to disclose
such information during the term of his employment to other persons
employed by the Company or its subsidiaries who have a need to know
such information for a proper purpose related to the business of the
Company or its subsidiaries. Upon termination of the Employee's
employment by the Company, its subsidiaries or its affiliates, the
Employee shall neither take nor retain any papers, customer lists,
manuals, files, or other document or copies thereof belonging to the
Company, its subsidiaries or its affiliates."
2. AMENDMENT TO SECTION 2. The last sentence of the Agreement is
amended so as amended the last sentence of Section 2 reads as follows:
"Unless otherwise agreed to in writing by the Employee, those services
shall be rendered in the Sarasota, Florida, metropolitan area."
3. AMENDMENT TO SECTION 7.b. Section 7.b. of the Agreement is amended
to delete the words "3 years" therefrom and substitute the words "2 years"
therefor.
<PAGE> 11
4. AMENDMENT TO SECTION 7.e. Section 7.e. of the Agreement is amended
to delete the word "Executive" therefrom and substitute the word "Employee"
therefor.
5. AMENDMENT TO SECTION 8.i. The address to which notices to the
Employee should be sent as set forth in Section 8.i is changed to 15 Paradise
Plaza, Suite 130, Sarasota, Florida 34239.
Except as amended herein, the Agreement shall remain in full force and
effect without change.
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/
--------------------------------------------
Alan N. Johnson, President
Attest:
/s/
- ----------------------------------
Gerald J. Boyle, Secretary
EMPLOYEE:
/s/
-------------------------------------------------
Elden W. Rance
2
<PAGE> 12
AMENDMENT
TO
EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") effective
February 22, 1999, is by and between LEISURE TIME CASINOS & RESORTS, INC., a
Colorado corporation (the "Company"), and ELDEN W. RANCE (the "Employee"). The
Company and the Employee previously entered into an Employment Agreement that
was effective July 1, 1998, and that was amended September 9, 1998. This
Amendment amends the Employment Agreement as hereinafter set forth.
Schedule A to the Agreement is deleted and Schedule A that is attached
hereto as Exhibit A and hereby incorporated herein by this reference is
substituted therefor.
Except as amended herein, the Agreement shall remain in full force and
effect without change.
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/
------------------------------------------
Alan N. Johnson, President
Attest:
/s/
- -----------------------------------
Gerald J. Boyle, Secretary
EMPLOYEE:
/s/
--------------------------------------------
Elden W. Rance
<PAGE> 13
EXHIBIT A
SCHEDULE A
(AS AMENDED FEBRUARY 22, 1999)
DESCRIPTION OF DUTIES AND COMPENSATION
EMPLOYEE: Elden W. Rance
POSITION WITH COMPANY: Executive Vice President, Chief Financial Officer and
Treasurer
COMPENSATION:
o Base Salary: $300,000 per annum (payable in accordance
with Company policy and reduced by all
required withholdings and withholdings
authorized by Employee).
o Bonus: Paid at the discretion of the board of
directors of the Company
BENEFITS:
o Insurance: Medical, dental, disability (long and short
term) and life to the extent available to
all of the employees of the Company and paid
in accordance with Company policy if elected
by Employee
o Automobile: The Company shall provide the employee with
such automobile as is approved by the Board
of Directors of the Company. All expenses
for the operation (including insurance) and
maintenance of such automobile shall be paid
by the Company or reimbursed to the Employee
by the Company.
o Vacation: Four weeks (20 business days) each calendar
year. Such vacation time is available upon
approval by the President of the Company.
Such approval will not be unreasonably
withheld upon at least two week notice by
Employee. Vacation time will not accrue from
calendar year to calendar year.
o 401(k) Plan: Available for Employee's election if
eligible.
o Flexible Spending
Account: Available for Employee's election if
eligible.
2
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), effective July 1, 1998, by and
between LEISURE TIME CASINOS & RESORTS, INC., a Colorado corporation (the
"Company"), and R. THOMAS KLINGEL (the "Employee"). The Company hereby employs
the Employee and the Employee hereby accepts employment on the terms and
conditions hereinafter set forth.
1. TERM. Subject to the provisions for termination as provided in
Sections 4 and 5 of this Agreement, the term of this Agreement shall commence
on July 1, 1998, and shall terminate on June 30, 2001. Subject to the
provisions for termination as provided in Sections 4 and 5 of this Agreement,
this Agreement shall be renewed automatically after June 30, 2001, for
succeeding one year periods on the same terms and conditions as contained in
this Agreement, unless the Company or Employee shall, at least 180 days prior
to the expiration of any such renewal date, give written notice of nonrenewal
of this Agreement.
2. NATURE OF EMPLOYMENT. The Company hereby employs the Employee as
the Executive Vice President Marketing and Sales, Compliance and Licensing of
the Company to perform such duties and have such powers as Employee
substantially performed for the Company on the date of this Agreement as well
as those additional duties and powers as may be agreed upon between the Company
and the Employee. The Company may not materially change the Employee's duties
or positions without Employee's consent. The Employee accepts such employment,
agrees to abide by the Articles of Incorporation, Bylaws, Company policies and
the provisions of this Agreement, and agrees to devote his time and best
efforts to his employment under this Agreement as is reasonably required.
Employee may carry on outside activities so long as those activities do not
conflict with nor compete with Employee's job responsibilities and corporate
duties. The Employee shall, at all times, faithfully with due diligence and to
the best of Employee's ability, experience and talent, perform all the duties
hereunder. Unless otherwise agreed to in writing by the Employee, those
services shall be rendered in the Atlanta, Georgia, metropolitan area.
3. COMPENSATION, VACATIONS AND EXPENSES.
a. BASIC SALARY. The Company shall pay to the Employee a base
salary during the term of this Agreement in accordance with the amount
set forth on Schedule A hereof. This amount may be increased as
determined by the Company through an amendment to Schedule A.
b. BONUS. In addition to the basic salary, the Employee will
receive a bonus to be set at the discretion of the board of directors
of the Company. Nothing shall obligate the Company, in the future, to
pay any bonus or bonuses to the Employee.
c. VACATIONS, FRINGE BENEFITS, AND LEAVES OF ABSENCE. The
Employee shall be entitled to an annual vacation of at least that
specified on Schedule A, but in no event
<PAGE> 2
less than the minimum vacation time established by the Company for its
employees. The Employee shall further be entitled to participate in
and receive the benefits provided under any employee benefit program
which may be adopted and maintained by the Company (including, without
limitation, those described on Schedule A) and for which the Employee
is eligible by virtue of his employment hereunder, but only as and to
the extent the Employee would otherwise be eligible as provided in any
said program. The Employee shall also bc entitled to leaves of absence
as the Employee deems necessary and the Company, in its sole
discretion, deems reasonable.
d. REIMBURSEMENT OF EXPENSES. The Employee is authorized to
incur reasonable expenses while performing the Employee's duties under
this Agreement, including expenses for entertainment, travel,
automobile, and similar items incurred on behalf of the Company. The
Company will reimburse the Employee upon the presentation by the
employee of itemized accounts of such expenditures. Expenses over
$5,000 in any month must be approved in writing by the Company before
being incurred by the Employee.
4. TERMINATION OF AGREEMENT.
a. TERMINATION OF EMPLOYEE. The Employee may terminate this
Agreement without cause upon 120 days prior written notice to the
Company. In such event, the Employee shall continue to render the
services required under this Agreement and shall be paid on the
regular payment dates the compensation set forth in Schedule A up to
the date of termination.
b. TERMINATION BY THE COMPANY FOR CAUSE. In the event of
Employee's material failure or refusal to observe the provisions of
this Agreement or perform any of the duties required of Employee under
this Agreement, Employee's fraud, misappropriation or embezzlement of
funds, or conviction for any crime punishable as a felony, the Company
may terminate this Agreement upon written notice of such termination
to the Employee and upon payment by the Company to the Employee for
all compensation accrued under this Agreement to the date of
termination. In the event of a termination of Employee's employment
for cause in accordance with this Section 4.b, the Company shall have
no further obligation to the Employee. However, termination of the
Employee's employment for cause shall not terminate or extinguish the
Employee's obligation or liability to pay to the Company or any of its
affiliates any amount owed to them by the Employee, including, but not
limited to, any amounts misappropriated, embezzled or otherwise
obtained by the Employee by reason of any of the occurrences referred
in this Section 4.b without prejudice to any other rights or remedies
of the Company or it affiliates at law or in equity.
c. TERMINATION UPON DEATH OF EMPLOYEE. This Agreement shall
automatically terminate in the event of the Employee's death. In such
case, any accrued
2
<PAGE> 3
compensation or benefits shall inure to the estate of the Employee,
and the payment thereof shall be the only liability the Company shall
have to the Employee's estate.
5. ILLNESS AND DISABILITY.
a. ILLNESS. If the Employee is unable to perform the services
required under this Agreement by reason of illness or physical injury
not amounting to disability as defined in Section 5.b, the
compensation otherwise payable to the Employee under this Agreement
shall be continued in full for a period of 60 days after the date
Employee is unable to perform such services.
b. DEFINITION OF DISABILITY. For purposes of this Agreement,
the terms "totally disabled," "disabled" and "disability" shall mean
continuous disability as defined in and for the period necessary to
qualify for benefits under any disability income insurance policies on
the Employee paid for by the Company. If no disability insurance is in
effect on the Employee, such terms shall mean continuous disability
which prevents the Employee from performing Employee's normal duties
pursuant to this Agreement. The Employee or agent of the Employee
shall notify the Company in writing as to the Employee's inability to
perform those duties or the Company shall so notify the Employee. If
they are not able to agree as to the existence of disability in 30
days after receipt of said notice, the determination shall be made by
medical doctors, licensed as such in the State of Georgia, one
designated by the Company and the other by the Employee. If these two
physicians cannot agree, they shall appoint a third licensed medical
doctor and the determination of the majority shall be conclusive and
binding on the Company and the Employee. The fees of all medical
doctors shall be paid by the Company and not by the Employee. For the
purposes of this Agreement, adjudicated mental incompetency shall also
be a definition of disability.
c. SALARY CONTINUATION. If the Employee becomes totally
disabled during the term of this Agreement, the Employee's full salary
shall be continued for a period not to exceed 24 consecutive months,
for the period during which the Employee remains totally disabled or
until the next termination date of the Agreement, whichever is
shorter. If the Company pays premiums on a disability income insurance
policy on the Employee, any proceeds paid to the Employee by reason of
disability under such policy shall be offset against salary
continuation payments due from the Company.
6. CHANGE IN CONTROL. A "change in control" of the Company shall
be deemed to have transpired upon the occurrence after the date hereof of any
one of the following events:
a. at any time any one person (other than Employee), or more
than one person acting as a group, acquires beneficial ownership of
the voting securities of the Company that together with voting
securities beneficially held by such person or group, constitute more
than 20% of the total voting power of the Company's outstanding voting
securities;
3
<PAGE> 4
b. the appointment or election of a majority of the members
of the Company's board of directors who are appointed or elected
during any 24 month period but are not endorsed in writing by a
majority of those members of the Company's board of directors who were
directors prior to the date of the appointment or election of the
first such new director comprising the majority; or
c. one person, or more than one person acting as a group,
acquires (or has acquired during the 12 month period ending on the
date of the most recent acquisition by such person or persons) assets
from the Company that have a total fair market value equal to or
greater than one third of the total fair market value of all of the
Company's assets immediately before the acquisition or acquisitions.
At any time after a "change in control" of the Company, the Employee,
at the option of the Employee, shall have the right, upon 30 days' prior
written notice by the Employee to the Company, to cause the Company to
repurchase all or any portion of the common stock of the Company then owned by
the Employee at the higher of (i) the book value thereof as determined by the
independent certified public accountants of the Company based upon the
financial statements of the Company as of the last day of the month prior to
the date of such notice, (ii) the last market value of a share of the Company's
common stock established by the board of directors, or the last price at which
the common stock was sold be the Company or by a shareholder of the Company to
any person (other than the Employee); provided, however, or if the common stock
is listed on a national securities exchange, is admitted to unlisted trading
privileges on such an exchange, or is listed for trading on a trading system of
the National Association of Securities Dealers, Inc., such as the Nasdaq
National Market, the Nasdaq SmallCap Market or the OTC Bulletin Board, then the
value shall be the last reported sale price of the common stock on such an
exchange or system on the last business day prior to the date of such notice or
if no such sale is made on such day, the average of the closing bid prices for
the common stock for such day on such exchange or such system shall be used.
Within 30 days after receipt of such notice, the Company shall pay the Employee
the full amount for such shares of common stock upon delivery of the stock
certificates representing such shares of common stock. The payment shall be in
the form of a cashiers' check or by wire transfer. Also, upon a "change in
control" of the Company, the Employee shall automatically be granted options to
purchase the same number of shares of the Company's common stock as then are
issuable upon exercise of options to purchase the Company's common stock then
owned by the Employee. Such new options shall be immediately exercisable and
shall remain exercisable for ten years. The exercise price thereof shall be
$0.01 per share of common stock. Such new options shall not replace any other
options to purchase the Company's remaining stock then owned by Employee.
7. EMPLOYEE ACTIONS.
a. EMPLOYEE SHALL NOT DISCLOSE INFORMATION. The Employee
recognizes and acknowledges that the list of the Company's and its
subsidiaries' and affiliates' customers, as it may exist from time to
time, and any proprietary or confidential
4
<PAGE> 5
information, including, but not limited to financial information and
information pertaining to the Company's, its subsidiaries' and
affiliates' manufacturing, marketing and sales operations, and
potential acquisitions, used by the Company in its business are
valuable and unique assets of the Company. The Employee will not
during or after the term of his employment, disclose the list of the
Company's, its subsidiaries' or affiliates' customers or any part
thereof or any propriety or confidential information to any person,
firm, corporation, association, or other entity for any reason or
purpose whatsoever without the prior written consent or authorization
of the board of directors of the Company. Upon termination of the
Employee's employment by the Company, its subsidiaries or its
affiliates, the Employee shall neither take nor retain any papers,
customer lists, manuals, files, or other document or copies thereof
belonging to the Company, its subsidiaries or its affiliates.
b. NON COMPETE. Employee hereby covenants and agrees that
Employee will not, without the prior written consent of the Company,
directly or indirectly, whether individually or through any entity
controlled by Employee, during the term of this Agreement and for a
period of 3 years from the termination of this Agreement, for any
reason, directly or indirectly, on his own behalf or in the service or
on behalf of others, whether or not for compensation, engage in any
business activity, or have any interest in any person, firm,
corporation or business, through a subsidiary or parent entity or
other entity (whether as a shareholder, agent, joint venturer,
security holder, trustee, partner, consultant, creditor lending credit
or money for the purpose of establishing or operating any such
business, partnership or otherwise) which is competitive with the then
existing business of the Company. Notwithstanding the foregoing,
Employee may own shares of competing companies whose securities are
publicly traded, so long as such securities do not constitute five
percent or more of the outstanding securities of any such company.
c. NON-SOLICITATION. Employee further agrees that as long as
this Agreement remains in effect and for a period of 2 years from its
termination, Employee will not divert any business of the Company
and/or its affiliates or any customers or suppliers of the Company
and/or the Company's and/or its affiliates' business to any other
person, entity or competitor, or induce or attempt to induce, directly
or indirectly, any person to leave his or her employment with the
Company.
d. INTELLECTUAL PROPERTY. Employee shall disclose to the
Company all ideas and business plans developed by the Employee during
the term of Employee's employment which relate to the business of the
Company, its subsidiaries or affiliates or any business conducted by
the Company, its subsidiaries or affiliates. All patents, patent
applications, patent licenses, formulas, inventions, processes,
copyrights, know-how, proprietary information, rights, trademarks, or
trade names, or future improvements thereto developed or conceived of
by the Employee during any period of employment with the Company shall
be promptly disclosed to, and all rights with respect thereto shall be
assigned by the Employee to the Company in consideration of the
remuneration paid or payable to the Employee hereunder.
5
<PAGE> 6
e. REMEDIES. Employee acknowledges and agrees that his
obligations provided in this Section 7 are necessary and reasonable in
order to protect Company and its affiliates and their respective
business and Employee expressly agrees that monetary damages would be
inadequate to compensate Company and/or its affiliates for any breach
by Executive of his covenants and agreements set forth herein.
Accordingly, Employee agrees and acknowledges that any such violation
or threatened violation of this Section 7 will cause irreparable
injury to Company and that, in addition to any other remedies that may
be available, in law, in equity or otherwise, Company and its
affiliates shall be entitled to obtain injunctive relief against the
prospective breach of this Section 7 or the continuation of any such
breach by Employee without the necessity of proving actual damages.
f. CONSTRUCTION. In the event that any provision of this
Section 7 should ever be deemed to exceed the time, geographic, or
other limitations permitted by applicable law, then such provision
shall be reformed to the maximum time geographic, or other limitations
permitted by applicable law. The provisions of this Section 7 shall be
applicable for the period indicated and shall survive the termination
of this Agreement
8. GENERAL MATTERS.
a. GOVERNING LAW. This Agreement shall bc governed by the
laws of the State of Ohio and shall be construed in accordance
therewith.
b. NO WAIVER. No provision of this Agreement may be waived
except by an Agreement in writing signed by the waiving party. A
waiver of any term or provision shall not be construed as a waiver of
any other term or provision.
c. AMENDMENT. This Agreement may be amended or altered at any
time, in whole or in part, by filing with this Agreement a written
instrument setting forth such changes, signed by all parties.
d. BINDING EFFECT. This Agreement shall be binding upon the
Employee, the Company, and their successors and assigns.
e. CONSTRUCTION. Throughout this Agreement the singular shall
include the plural, the plural shall include the singular, and the
masculine shall include the feminine wherever the context so requires.
f. TEXT TO CONTROL. The headings of Sections are included
solely for convenience of reference. If any conflict between any
heading and the text of this Agreement exists, the text shall control.
6
<PAGE> 7
g. SEVERABILITY. If any provision of this Agreement is
declared by any court of competent jurisdiction to be invalid for any
reason, such invalidity shall not affect the remaining provisions
which shall be fully severable, and the Agreement shall be construed
and enforced as if such invalid provision had never been included.
h. ENTIRE AGREEMENT OF THE PARTIES. The parties agree that
this document contains the entire agreement and understanding between
them in relation to the subject matter hereof, and no representations,
warranties, covenants, understandings, or agreements in relation
thereto exist between the parties except as expressly set forth
herein.
i. NOTICES. Every notice or other communication to be given
by either party to the other party with respect to this Agreement,
shall be in writing and shall not be effective for any purpose unless
the same shall be served personally or by national air courier
service, or United States certified mail, return receipt requested,
postage prepaid, addressed, if to the Company at 1284 Miller Road,
Avon, Ohio 44011, Attention, Secretary, and if to the Employee at 4258
Communications Drive, Norcross, Georgia 30093, or such other address
or addresses as the Company or the Employee may from time to time
designate by notice given as above provided. Every notice or other
communication hereunder shall be deemed to have been given as of the
third business day following the date of such mailing (or as of any
earlier date evidenced by a receipt from such national air courier
service or the United States Postal Service) or immediately if
personally delivered. Notices not sent in accordance with the
foregoing shall be of no force and effect until received by the
foregoing parties as such addresses specified herein.
j. DUPLICATE ORIGINALS. This Agreement may be executed in
several counterparts, each of which shall be an original but all of
which together shall constitute one and the same instrument.
k. ARBITRATION. Any dispute or controversy of or relating to
this Agreement, or any breach of this Agreement, shall be settled by
arbitration to be held in Norcross, Georgia, in accordance with the
rules then in effect of the American Arbitration Association or any
successor thereto. The decision of the arbitrator shall be final,
conclusive, and binding on the parties to the arbitration. Judgment
may be entered on the arbitrator's decision in any court having
jurisdiction, and the parties irrevocably consent to the jurisdiction
of the Georgia state courts for this purpose. The Company shall pay
the costs and expenses of such arbitration.
l. ATTORNEYS' FEES. In the event that the Company or the
Employee retains an attorney or attorneys to enforce performance of
this Agreement by the other party or to obtain damages or other relief
because of violation of the terms of this Agreement by the other
party, then all reasonable attorneys' fees and costs of arbitration or
litigation are to
7
<PAGE> 8
be borne and paid by the party determined to have failed to perform
this Agreement or to be liable for damages or against which other
relief is granted.
m. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of the Executive's
employment to the extent necessary to the intended preservation of
such rights and obligations.
n. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon a
party by this Agreement is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall
be in addition to any other remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by a party in
exercising any right, remedy or power hereunder or existing at law or
in equity shall be construed as a waiver thereof, and any such right,
remedy or power may be exercised by such party from time to time and
as often as may be deemed expedient or necessary by such party in its
sole discretion.
The parties have executed this Agreement to be effective as of the
date first above written.
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/
-------------------------------------
Alan N. Johnson, President
Attest:
/s/
- -----------------------------------
Gerald J. Boyle, Secretary
EMPLOYEE:
/s/
-----------------------------------------
R. Thomas Klingel
8
<PAGE> 9
SCHEDULE A
DESCRIPTION OF DUTIES AND COMPENSATION
EMPLOYEE: R. Thomas Klingel
POSITION WITH COMPANY: Executive Vice President Marketing and Sales, Compliance
and Licensing
COMPENSATION:
o Base Salary: $150,000
o Bonus: Paid at the discretion of the board of directors of the
Company
BENEFITS:
o Insurance: Medical, dental, disability (long and short term) and
life to the extent available to all employees of the
Company and paid in accordance with Company policy if
elected by Employee
o Automobile: The Company shall provide the employee with such
automobile as is approved by the President of the
Company. All expenses for the operation (including
insurance) and maintenance of such automobile shall be
paid by the Company or reimbursed to the Employee by the
Company.
o Vacation: Four weeks (20 business days) each calendar year
commencing January 1, 1998. Such vacation time is
available upon approval by the President of the Company.
Such approval will not be unreasonably withheld upon at
least two week notice by Employee. Vacation time will
not accrue from calendar year to calendar year.
o 401(k) Plan: Available for Employee's election if eligible.
o Medical Reimbursement: Available for Employee's election if eligible.
<PAGE> 10
AMENDMENT
TO
EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") effective
September 9, 1998, is by and between LEISURE TIME CASINOS & RESORTS, INC., a
Colorado corporation (the "Company"), and R. THOMAS KLINGEL (the "Employee").
The Company and the Employee previously entered into an Employment Agreement
that was effective July 1, 1998. This Amendment amends the Employment Agreement
as hereinafter set forth.
1. AMENDMENT TO SECTION 7.a. Section 7.a. of the Agreement is amended
so as amended Section 7.a. reads as follows:
"a. EMPLOYEE SHALL NOT DISCLOSE INFORMATION. The Employee
recognizes and acknowledges that the list of the Company's and its
subsidiaries' and affiliates' customers, as it may exist from time to
time, and any proprietary or confidential information, including, but
not limited to financial information and information pertaining to the
Company's, its subsidiaries' and affiliates' manufacturing, marketing
and sales operations, and potential acquisitions, used by the Company
in its business are valuable and unique assets of the Company. Except
as permitted by the next sentence, the Employee will not during or
after the term of his employment, disclose the list of the Company's,
its subsidiaries' or affiliates' customers or any part thereof or any
propriety or confidential information to any person, firm,
corporation, association, or other entity for any reason or purpose
whatsoever without the prior written consent or authorization of the
board of directors of the Company. Notwithstanding the prohibitions
contained in the foregoing sentence, the Employee shall be permitted
to disclose such information during the term of his employment to
other persons employed by the Company or its subsidiaries who have a
need to know such information for a proper purpose related to the
business of the Company or its subsidiaries. Upon termination of the
Employee's employment by the Company, its subsidiaries or its
affiliates, the Employee shall neither take nor retain any papers,
customer lists, manuals, files, or other document or copies thereof
belonging to the Company, its subsidiaries or its affiliates."
2. AMENDMENT TO SECTION 7.b. Section 7.b. of the Agreement is amended
to delete the words "3 years" therefrom and substitute the words "2 years"
therefor.
3. AMENDMENT TO SECTION 7.e. Section 7.e. of the Agreement is amended
to delete the word "Executive" therefrom and substitute the word "Employee"
therefor.
<PAGE> 11
Except as amended herein, the Agreement shall remain in full force and
effect without change.
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/
-------------------------------------
Alan N. Johnson, President
Attest:
/s/
- -----------------------------------
Gerald J. Boyle, Secretary
EMPLOYEE:
/s/
-----------------------------------------
R. Thomas Klingel
2
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), effective July 1, 1998, by and
between LEISURE TIME CASINOS & RESORTS, INC., a Colorado corporation (the
"Company"), and RICHARD D. SLY (the "Employee"). The Company hereby employs the
Employee and the Employee hereby accepts employment on the terms and conditions
hereinafter set forth.
1. TERM. Subject to the provisions for termination as provided in
Sections 4 and 5 of this Agreement, the term of this Agreement shall commence
on July 1, 1998, and shall terminate on June 30, 2001. Subject to the
provisions for termination as provided in Sections 4 and 5 of this Agreement,
this Agreement shall be renewed automatically after June 30, 2001, for
succeeding one year periods on the same terms and conditions as contained in
this Agreement, unless the Company or Employee shall, at least 180 days prior
to the expiration of any such renewal date, give written notice of nonrenewal
of this Agreement.
2. NATURE OF EMPLOYMENT. The Company hereby employs the Employee as
the Assistant Secretary of the Company to perform such duties and have such
powers as Employee substantially performed for the Company on the date of this
Agreement as well as those additional duties and powers as may be agreed upon
between the Company and the Employee. The Company may not materially change the
Employee's duties or positions without Employee's consent. The Employee accepts
such employment, agrees to abide by the Articles of Incorporation, Bylaws,
Company policies and the provisions of this Agreement, and agrees to devote his
time and best efforts to his employment under this Agreement as is reasonably
required. Employee may carry on outside activities so long as those activities
do not conflict with nor compete with Employee's job responsibilities and
corporate duties. The Employee shall, at all times, faithfully with due
diligence and to the best of Employee's ability, experience and talent, perform
all the duties hereunder. Unless otherwise agreed to in writing by the
Employee, those services shall be rendered in the Cleveland, Ohio, metropolitan
area.
3. COMPENSATION, VACATIONS AND EXPENSES.
a. BASIC SALARY. The Company shall pay to the Employee a base
salary during the term of this Agreement in accordance with the amount
set forth on Schedule A hereof. This amount may be increased as
determined by the Company through an amendment to Schedule A.
b. BONUS. In addition to the basic salary, the Employee will
receive a bonus to be set at the discretion of the board of directors
of the Company. Nothing shall obligate the Company, in the future, to
pay any bonus or bonuses to the Employee.
c. VACATIONS, FRINGE BENEFITS, AND LEAVES OF ABSENCE. The Employee
shall be entitled to an annual vacation of at least that specified on
Schedule A, but in no event less than the minimum vacation time
established by the Company for its employees.
<PAGE> 2
The Employee shall further be entitled to participate in and receive
the benefits provided under any employee benefit program which may be
adopted and maintained by the Company (including, without limitation,
those described on Schedule A) and for which the Employee is eligible
by virtue of his employment hereunder, but only as and to the extent
the Employee would otherwise be eligible as provided in any said
program. The Employee shall also bc entitled to leaves of absence as
the Employee deems necessary and the Company, in its sole discretion,
deems reasonable.
d. REIMBURSEMENT OF EXPENSES. The Employee is authorized to incur
reasonable expenses while performing the Employee's duties under this
Agreement, including expenses for entertainment, travel, automobile,
and similar items incurred on behalf of the Company. The Company will
reimburse the Employee upon the presentation by the employee of
itemized accounts of such expenditures. Expenses over $5,000 in any
month must be approved in writing by the Company before being incurred
by the Employee.
4. TERMINATION OF AGREEMENT.
a. TERMINATION OF EMPLOYEE. The Employee may terminate this
Agreement without cause upon 120 days prior written notice to the
Company. In such event, the Employee shall continue to render the
services required under this Agreement and shall be paid on the
regular payment dates the compensation set forth in Schedule A up to
the date of termination.
b. TERMINATION BY THE COMPANY FOR CAUSE. In the event of Employee's
material failure or refusal to observe the provisions of this
Agreement or perform any of the duties required of Employee under this
Agreement, Employee's fraud, misappropriation or embezzlement of
funds, or conviction for any crime punishable as a felony, the Company
may terminate this Agreement upon written notice of such termination
to the Employee and upon payment by the Company to the Employee for
all compensation accrued under this Agreement to the date of
termination. In the event of a termination of Employee's employment
for cause in accordance with this Section 4.b, the Company shall have
no further obligation to the Employee. However, termination of the
Employee's employment for cause shall not terminate or extinguish the
Employee's obligation or liability to pay to the Company or any of its
affiliates any amount owed to them by the Employee, including, but not
limited to, any amounts misappropriated, embezzled or otherwise
obtained by the Employee by reason of any of the occurrences referred
in this Section 4.b without prejudice to any other rights or remedies
of the Company or it affiliates at law or in equity.
c. TERMINATION UPON DEATH OF EMPLOYEE. This Agreement shall
automatically terminate in the event of the Employee's death. In such
case, any accrued compensation or benefits shall inure to the estate
of the Employee, and the payment thereof shall be the only liability
the Company shall have to the Employee's estate.
5. ILLNESS AND DISABILITY.
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<PAGE> 3
a. ILLNESS. If the Employee is unable to perform the services
required under this Agreement by reason of illness or physical injury
not amounting to disability as defined in Section 5.b, the
compensation otherwise payable to the Employee under this Agreement
shall be continued in full for a period of 60 days after the date
Employee is unable to perform such services.
b. DEFINITION OF DISABILITY. For purposes of this Agreement, the
terms "totally disabled," "disabled" and "disability" shall mean
continuous disability as defined in and for the period necessary to
qualify for benefits under any disability income insurance policies on
the Employee paid for by the Company. If no disability insurance is in
effect on the Employee, such terms shall mean continuous disability
which prevents the Employee from performing Employee's normal duties
pursuant to this Agreement. The Employee or agent of the Employee
shall notify the Company in writing as to the Employee's inability to
perform those duties or the Company shall so notify the Employee. If
they are not able to agree as to the existence of disability in 30
days after receipt of said notice, the determination shall be made by
medical doctors, licensed as such in the State of Ohio, one designated
by the Company and the other by the Employee. If these two physicians
cannot agree, they shall appoint a third licensed medical doctor and
the determination of the majority shall be conclusive and binding on
the Company and the Employee. The fees of all medical doctors shall be
paid by the Company and not by the Employee. For the purposes of this
Agreement, adjudicated mental incompetency shall also be a definition
of disability.
c. SALARY CONTINUATION. If the Employee becomes totally disabled
during the term of this Agreement, the Employee's full salary shall be
continued for a period not to exceed 24 consecutive months, for the
period during which the Employee remains totally disabled or until the
next termination date of the Agreement, whichever is shorter. If the
Company pays premiums on a disability income insurance policy on the
Employee, any proceeds paid to the Employee by reason of disability
under such policy shall be offset against salary continuation payments
due from the Company.
6. CHANGE IN CONTROL. A "change in control" of the Company shall be
deemed to have transpired upon the occurrence after the date hereof of any one
of the following events:
a. at any time any one person (other than Employee), or more than
one person acting as a group, acquires beneficial ownership of the
voting securities of the Company that together with voting securities
beneficially held by such person or group, constitute more than 20% of
the total voting power of the Company's outstanding voting securities;
b. the appointment or election of a majority of the members of the
Company's board of directors who are appointed or elected during any
24 month period but are not endorsed in writing by a majority of those
members of the Company's board of directors who were directors prior
to the date of the appointment or election of the first such new
director comprising the majority; or
3
<PAGE> 4
c. one person, or more than one person acting as a group, acquires
(or has acquired during the 12 month period ending on the date of the
most recent acquisition by such person or persons) assets from the
Company that have a total fair market value equal to or greater than
one third of the total fair market value of all of the Company's
assets immediately before the acquisition or acquisitions.
At any time after a "change in control" of the Company, the Employee,
at the option of the Employee, shall have the right, upon 30 days' prior
written notice by the Employee to the Company, to cause the Company to
repurchase all or any portion of the common stock of the Company then owned by
the Employee at the higher of (i) the book value thereof as determined by the
independent certified public accountants of the Company based upon the
financial statements of the Company as of the last day of the month prior to
the date of such notice, (ii) the last market value of a share of the Company's
common stock established by the board of directors, or the last price at which
the common stock was sold be the Company or by a shareholder of the Company to
any person (other than the Employee); provided, however, or if the common stock
is listed on a national securities exchange, is admitted to unlisted trading
privileges on such an exchange, or is listed for trading on a trading system of
the National Association of Securities Dealers, Inc., such as the Nasdaq
National Market, the Nasdaq SmallCap Market or the OTC Bulletin Board, then the
value shall be the last reported sale price of the common stock on such an
exchange or system on the last business day prior to the date of such notice or
if no such sale is made on such day, the average of the closing bid prices for
the common stock for such day on such exchange or such system shall be used.
Within 30 days after receipt of such notice, the Company shall pay the Employee
the full amount for such shares of common stock upon delivery of the stock
certificates representing such shares of common stock. The payment shall be in
the form of a cashiers' check or by wire transfer. Also, upon a "change in
control" of the Company, the Employee shall automatically be granted options to
purchase the same number of shares of the Company's common stock as then are
issuable upon exercise of options to purchase the Company's common stock then
owned by the Employee. Such new options shall be immediately exercisable and
shall remain exercisable for ten years. The exercise price thereof shall be
$0.01 per share of common stock. Such new options shall not replace any other
options to purchase the Company's remaining stock then owned by Employee.
7. EMPLOYEE ACTIONS.
a. EMPLOYEE SHALL NOT DISCLOSE INFORMATION. The Employee recognizes
and acknowledges that the list of the Company's and its subsidiaries'
and affiliates' customers, as it may exist from time to time, and any
proprietary or confidential information, including, but not limited to
financial information and information pertaining to the Company's, its
subsidiaries' and affiliates' manufacturing, marketing and sales
operations, and potential acquisitions, used by the Company in its
business are valuable and unique assets of the Company. The Employee
will not during or after the term of his employment, disclose the list
of the Company's, its subsidiaries' or affiliates' customers or any
part thereof or any propriety or confidential information to any
person, firm, corporation, association, or other
4
<PAGE> 5
entity for any reason or purpose whatsoever without the prior written
consent or authorization of the board of directors of the Company.
Upon termination of the Employee's employment by the Company, its
subsidiaries or its affiliates, the Employee shall neither take nor
retain any papers, customer lists, manuals, files, or other document
or copies thereof belonging to the Company, its subsidiaries or its
affiliates.
b. NON COMPETE. Employee hereby covenants and agrees that Employee
will not, without the prior written consent of the Company, directly
or indirectly, whether individually or through any entity controlled
by Employee, during the term of this Agreement and for a period of 3
years from the termination of this Agreement, for any reason, directly
or indirectly, on his own behalf or in the service or on behalf of
others, whether or not for compensation, engage in any business
activity, or have any interest in any person, firm, corporation or
business, through a subsidiary or parent entity or other entity
(whether as a shareholder, agent, joint venturer, security holder,
trustee, partner, consultant, creditor lending credit or money for the
purpose of establishing or operating any such business, partnership or
otherwise) which is competitive with the then existing business of the
Company. Notwithstanding the foregoing, Employee may own shares of
competing companies whose securities are publicly traded, so long as
such securities do not constitute five percent or more of the
outstanding securities of any such company.
c. NON-SOLICITATION. Employee further agrees that as long as this
Agreement remains in effect and for a period of 2 years from its
termination, Employee will not divert any business of the Company
and/or its affiliates or any customers or suppliers of the Company
and/or the Company's and/or its affiliates' business to any other
person, entity or competitor, or induce or attempt to induce, directly
or indirectly, any person to leave his or her employment with the
Company.
d. INTELLECTUAL PROPERTY. Employee shall disclose to the Company
all ideas and business plans developed by the Employee during the term
of Employee's employment which relate to the business of the Company,
its subsidiaries or affiliates or any business conducted by the
Company, its subsidiaries or affiliates. All patents, patent
applications, patent licenses, formulas, inventions, processes,
copyrights, know-how, proprietary information, rights, trademarks, or
trade names, or future improvements thereto developed or conceived of
by the Employee during any period of employment with the Company shall
be promptly disclosed to, and all rights with respect thereto shall be
assigned by the Employee to the Company in consideration of the
remuneration paid or payable to the Employee hereunder.
e. REMEDIES. Employee acknowledges and agrees that his obligations
provided in this Section 7 are necessary and reasonable in order to
protect Company and its affiliates and their respective business and
Employee expressly agrees that monetary damages would be inadequate to
compensate Company and/or its affiliates for any breach by Executive
of his covenants and agreements set forth herein. Accordingly,
Employee agrees and acknowledges that any such violation or threatened
violation of this Section 7 will cause
5
<PAGE> 6
irreparable injury to Company and that, in addition to any other
remedies that may be available, in law, in equity or otherwise,
Company and its affiliates shall be entitled to obtain injunctive
relief against the prospective breach of this Section 7 or the
continuation of any such breach by Employee without the necessity of
proving actual damages.
f. CONSTRUCTION. In the event that any provision of this Section 7
should ever be deemed to exceed the time, geographic, or other
limitations permitted by applicable law, then such provision shall be
reformed to the maximum time geographic, or other limitations
permitted by applicable law. The provisions of this Section 7 shall be
applicable for the period indicated and shall survive the termination
of this Agreement
8. GENERAL MATTERS.
a. GOVERNING LAW. This Agreement shall bc governed by the laws of
the State of Ohio and shall be construed in accordance therewith.
b. NO WAIVER. No provision of this Agreement may be waived except
by an Agreement in writing signed by the waiving party. A waiver of
any term or provision shall not be construed as a waiver of any other
term or provision.
c. AMENDMENT. This Agreement may be amended or altered at any time,
in whole or in part, by filing with this Agreement a written
instrument setting forth such changes, signed by all parties.
d. BINDING EFFECT. This Agreement shall be binding upon the
Employee, the Company, and their successors and assigns.
e. CONSTRUCTION. Throughout this Agreement the singular shall
include the plural, the plural shall include the singular, and the
masculine shall include the feminine wherever the context so requires.
f. TEXT TO CONTROL. The headings of Sections are included solely
for convenience of reference. If any conflict between any heading and
the text of this Agreement exists, the text shall control.
g. SEVERABILITY. If any provision of this Agreement is declared by
any court of competent jurisdiction to be invalid for any reason, such
invalidity shall not affect the remaining provisions which shall be
fully severable, and the Agreement shall be construed and enforced as
if such invalid provision had never been included.
h. ENTIRE AGREEMENT OF THE PARTIES. The parties agree that this
document contains the entire agreement and understanding between them
in relation to the subject matter hereof, and no representations,
warranties, covenants, understandings, or agreements in relation
thereto exist between the parties except as expressly set forth
herein.
6
<PAGE> 7
i. NOTICES. Every notice or other communication to be given by
either party to the other party with respect to this Agreement, shall
be in writing and shall not be effective for any purpose unless the
same shall be served personally or by national air courier service, or
United States certified mail, return receipt requested, postage
prepaid, addressed, if to the Company at 1284 Miller Road, Avon, Ohio
44011, Attention, Secretary, and if to the Employee at 1284 Miller
Road, Avon, Ohio 44011, or such other address or addresses as the
Company or the Employee may from time to time designate by notice
given as above provided. Every notice or other communication hereunder
shall be deemed to have been given as of the third business day
following the date of such mailing (or as of any earlier date
evidenced by a receipt from such national air courier service or the
United States Postal Service) or immediately if personally delivered.
Notices not sent in accordance with the foregoing shall be of no force
and effect until received by the foregoing parties as such addresses
specified herein.
j. DUPLICATE ORIGINALS. This Agreement may be executed in several
counterparts, each of which shall be an original but all of which
together shall constitute one and the same instrument.
k. ARBITRATION. Any dispute or controversy of or relating to this
Agreement, or any breach of this Agreement, shall be settled by
arbitration to be held in Cleveland, Ohio, in accordance with the
rules then in effect of the American Arbitration Association or any
successor thereto. The decision of the arbitrator shall be final,
conclusive, and binding on the parties to the arbitration. Judgment
may be entered on the arbitrator's decision in any court having
jurisdiction, and the parties irrevocably consent to the jurisdiction
of the Ohio state courts for this purpose. The Company shall pay the
costs and expenses of such arbitration.
l. ATTORNEYS' FEES. In the event that the Company or the Employee
retains an attorney or attorneys to enforce performance of this
Agreement by the other party or to obtain damages or other relief
because of violation of the terms of this Agreement by the other
party, then all reasonable attorneys' fees and costs of arbitration or
litigation are to be borne and paid by the party determined to have
failed to perform this Agreement or to be liable for damages or
against which other relief is granted.
m. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of the Executive's
employment to the extent necessary to the intended preservation of
such rights and obligations.
n. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon a party
by this Agreement is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in
addition to any other remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by a party in
exercising any right, remedy or power hereunder or existing at law or
in equity shall be construed as a
7
<PAGE> 8
waiver thereof, and any such right, remedy or power may be exercised
by such party from time to time and as often as may be deemed
expedient or necessary by such party in its sole discretion.
The parties have executed this Agreement to be effective as of the
date first above written.
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/ Alan N. Johnson
-------------------------------------
Alan N. Johnson, President
Attest:
/s/ Gerald J. Boyle
- -----------------------------------
Gerald J. Boyle, Secretary
EMPLOYEE:
/s/ Richard D. Sly
-----------------------------------------
Richard D. Sly
8
<PAGE> 9
SCHEDULE A
DESCRIPTION OF DUTIES AND COMPENSATION
EMPLOYEE: Richard D. Sly
POSITION WITH COMPANY: Assistant Secretary
COMPENSATION:
Base Salary: $41,250
Bonus: Paid at the discretion of the board of directors of the
Company
BENEFITS:
Insurance: Medical, dental, disability (long and short term) and
life to the extent available to all employees of the
Company and paid in accordance with Company policy if
elected by Employee.
Automobile: None.
Vacation: Four weeks (20 business days) each calendar year
commencing January 1, 1998. Such vacation time is
available upon approval by the President of the Company.
Such approval will not be unreasonably withheld upon at
least two week notice by Employee. Vacation time will not
accrue from calendar year to calendar year.
401(k) Plan: Available for Employee's election if eligible.
Medical Reimbursement: Available for Employee's election if eligible.
<PAGE> 10
AMENDMENT
TO
EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") effective
September 9, 1998, is by and between LEISURE TIME CASINOS & RESORTS, INC., a
Colorado corporation (the "Company"), and RICHARD D. SLY (the "Employee"). The
Company and the Employee previously entered into an Employment Agreement that
was effective July 1, 1998. This Amendment amends the Employment Agreement as
hereinafter set forth.
1. AMENDMENT TO SECTION 7.A. Section 7.a. of the Agreement is amended
so as amended Section 7.a. reads as follows:
"a. EMPLOYEE SHALL NOT DISCLOSE INFORMATION. The Employee
recognizes and acknowledges that the list of the Company's and its
subsidiaries' and affiliates' customers, as it may exist from time to
time, and any proprietary or confidential information, including, but
not limited to financial information and information pertaining to the
Company's, its subsidiaries' and affiliates' manufacturing, marketing
and sales operations, and potential acquisitions, used by the Company
in its business are valuable and unique assets of the Company. Except
as permitted by the next sentence, the Employee will not during or
after the term of his employment, disclose the list of the Company's,
its subsidiaries' or affiliates' customers or any part thereof or any
propriety or confidential information to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever
without the prior written consent or authorization of the board of
directors of the Company. Notwithstanding the prohibitions contained in
the foregoing sentence, the Employee shall be permitted to disclose
such information during the term of his employment to other persons
employed by the Company or its subsidiaries who have a need to know
such information for a proper purpose related to the business of the
Company or its subsidiaries. Upon termination of the Employee's
employment by the Company, its subsidiaries or its affiliates, the
Employee shall neither take nor retain any papers, customer lists,
manuals, files, or other document or copies thereof belonging to the
Company, its subsidiaries or its affiliates."
2. AMENDMENT TO SECTION 7.B. Section 7.b. of the Agreement is amended
to delete the words "3 years" therefrom and substitute the words "2 years"
therefor.
3. AMENDMENT TO SECTION 7.E. Section 7.e. of the Agreement is amended
to delete the word "Executive" therefrom and substitute the word "Employee"
therefor.
<PAGE> 11
Except as amended herein, the Agreement shall remain in full force and
effect without change.
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/ Alan N. Johnson
-------------------------------------
Alan N. Johnson, President
Attest:
/s/ Gerald J. Boyle
- -----------------------------------
Gerald J. Boyle, Secretary
EMPLOYEE:
/s/ Richard D. Sly
-----------------------------------------
Richard D. Sly
2
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), effective March 1, 1999, by and
between LEISURE TIME CASINOS & RESORTS, INC., a Colorado corporation (the
"Company"), and KEKO MOTTES (the "Employee"). The Company hereby continues the
employment of the Employee and the Employee hereby accepts continued employment
with the Company on the terms and conditions hereinafter set forth.
1. TERM. Subject to the provisions for termination as hereinafter
provided in this Agreement, the term of this Agreement shall commence effective
on March 1, 1999, and shall terminate on January 31, 2002.
2. NATURE OF EMPLOYMENT. The Company hereby employs the Employee as the
Vice President of Sales and Marketing of the Company to perform such duties as
may be directed by the President or Executive Vice President of the Company. The
Employee accepts such continuation of employment, agrees to abide by the
Articles of Incorporation, Bylaws, Company policies and the provisions of this
Agreement and agrees to devote his full time and best efforts to his employment
under this Agreement as is reasonably required. The Employee may carry on
outside activities so long as those activities neither conflict nor compete with
the Employee's job responsibilities and corporate duties. The Employee shall at
all times, faithfully with due diligence and to the best of the Employee's
ability, experience and talent, perform all the duties hereunder.
3. COMPENSATION, VACATIONS AND EXPENSES.
a. SALARY. The Company shall pay to the Employee a salary during the
term of this Agreement in accordance with the amount set forth on
Schedule A hereof. This amount may be increased as determined by the
Company through an amendment to Schedule A.
b. VACATIONS AND FRINGE BENEFITS. The Employee shall be entitled to
an annual vacation of at least the minimum vacation time established by
the Company for its employees. The Employee shall further be entitled
to participate in and receive the benefits provided under any employee
benefit program which may be adopted and maintained by the Company
(including, without limitation, those described on Schedule A) and for
which the Employee is eligible by virtue of Employee's employment
hereunder, but only as and to the extent the Employee would otherwise
be eligible as provided in any said program.
c. REIMBURSEMENT OF EXPENSES. The Employee is authorized to incur
reasonable expenses while performing the Employee's duties under this
Agreement, including expenses for entertainment, travel, automobile and
similar items incurred on behalf of the Company in an amount consistent
with Company policies. The Company will reimburse the Employee upon the
presentation by the Employee of itemized accounts of such reasonable
and appropriate expenditures.
<PAGE> 2
4. TERMINATION OF AGREEMENT.
a. TERMINATION BY EMPLOYEE. The Employee may terminate this
Agreement without cause upon 120 days prior written notice to the
Company. In such event, the Employee shall continue to render the
services required under this Agreement and shall be paid on the regular
payment dates the compensation set forth in Schedule A up to the date
of termination.
b. TERMINATION BY THE COMPANY. If the Employee materially fails or
refuses to observe the provisions of this Agreement or if the Company
determines in its sole discretion that the Employee is not
satisfactorily performing any of the duties required of the Employee
under this Agreement, the Company shall give the Employee written
notice of such failure or refusal and, if the Employee does not correct
such failure or refusal within five (5) days after the giving of such
notice, this Agreement may be terminated by the Company immediately
upon written notice of such termination to the Employee and upon
payment by the Company to the Employee for all compensation accrued
under this Agreement to the date of termination. In the event of the
Employee's fraud, misappropriation or embezzlement of funds or
conviction for any crime punishable as a felony, the Company may
terminate this Agreement immediately upon written notice of such
termination to the Employee and upon payment by the Company to the
Employee for all compensation accrued under this Agreement to the date
of termination. In the event of a termination of the Employee's
employment for cause in accordance with this Section 4.b, the Company
shall have no further obligation to the Employee. However, termination
of the Employee's employment for cause shall not terminate or
extinguish the Employee's obligation or liability to pay to the Company
or any of its affiliates any amount owed to them by the Employee,
including, but not limited to, any amounts misappropriated, embezzled
or otherwise obtained by the Employee by reason of any of the
occurrences referred to in this Section 4.b without prejudice to any
other rights or remedies of the Company or its affiliates at law or in
equity.
c. TERMINATION UPON DEATH OF EMPLOYEE. This Agreement shall
automatically terminate in the event of the Employee's death. In such
case, any accrued compensation or benefits shall inure to the estate of
the Employee and the payment thereof shall be the only liability the
Company shall have to the Employee's estate.
5. EMPLOYEE ACTIONS.
a. EMPLOYEE SHALL NOT DISCLOSE INFORMATION. The Employee recognizes
and acknowledges that the list of the customers, as it may exist from
time to time, of the Company (which for purposes of this section 5
includes the Company's subsidiaries and affiliates) and any other
proprietary or confidential information, including, but not limited to
financial information and information pertaining to the software,
manufacturing, marketing and sales operations, financing operations and
potential acquisitions (hereinafter "Confidential Information"), used
by the Company in its business are valuable and unique assets of the
Company. Except as
2
<PAGE> 3
permitted by the next sentence, the Employee will not during or for a
period of three years after the term of his employment, disclose any
Confidential Information to any person, firm, corporation, association
or other entity for any reason or purpose whatsoever without the prior
written consent or authorization of the board of directors of the
Company. Notwithstanding the prohibitions contained in the foregoing
sentence, the Employee shall be permitted to disclose such information
during the term of his employment to other persons employed by the
Company who have a need to know such information for a proper purpose
related to the business of the Company. Upon termination of the
Employee's employment by the Company, the Employee shall neither take
nor retain any papers, customer lists, manuals, files or other
documents or copies thereof belonging to the Company. To the extent any
items of Confidential Information constitute trade secrets under
Georgia law, Employee's obligations of confidentiality and
nondisclosure shall continue to survive after said three year period to
the greatest extent permitted by applicable law. These rights of the
Company are in addition to those the Company has under the common law
or applicable statutes for the protection of trade secrets.
b. NON-COMPETE. The Employee hereby covenants and agrees that the
Employee will not, without the prior written consent of the Company,
directly or by assisting others, whether individually or through any
entity controlled by the Employee, during the term of this Agreement
and for a period of six months after the termination of this Agreement
for any reason (the "Restrictive Period"), on Employee's own behalf or
in the service or on behalf of others, whether or not for compensation,
engage in any activity that involves designing, developing,
manufacturing, leasing, selling or operating electronic gaming machines
in any state of the United States where the Company, as of the
effective date of this Employment Agreement, is engaged in the business
of designing, developing, manufacturing, leasing, selling or operating
electronic gaming machines or in any country outside of the United
States where the Company, as of the effective date of this Employment
Agreement, is engaged in the business of designing, developing,
manufacturing, leasing, selling or operating electronic gaming
machines. In addition, during the Restrictive Period, the Employee
shall not have any controlling interest in any person, firm,
corporation or business, through a subsidiary or parent entity or other
entity which engages in designing, developing, manufacturing, leasing,
selling or operating electronic gaming machines. Notwithstanding the
foregoing, the Employee may own shares of other competing companies the
securities of which are publicly traded, so long as such securities do
not constitute five percent or more of the outstanding securities of
any such company.
c. NON-SOLICITATION OF COMPANY EMPLOYEES. During the Employee's
employment with the Company and for six months thereafter, Employee
shall not solicit or in any manner encourage employees of the Company
to leave the employ of the Company. The foregoing prohibition applies
only to employees with whom the Employee had material contact pursuant
to Employee's duties during Employee's employment term. "Material
contact" means interaction between the Employee and another employee of
the Company: (i) with whom Employee actually dealt; or (ii) whose
employment or dealings with the Company or services for the Company
were handled, coordinated or supervised by the Employee.
3
<PAGE> 4
d. NON-SOLICITATION OF COMPANY CUSTOMERS. During the Employee's
employment with the Company and for six months immediately following
cessation of Employee's employment with the Company for any reason,
Employee shall not, on Employee's own behalf or on behalf of any
person, partnership, association, corporation or business organization,
entity or enterprise (except the Company), solicit any customer of the
Company or any representative of any such customer with a view to
selling or providing any product, equipment or service competitive or
potentially competitive with any product, equipment or service sold or
provided by the Company during the two year period immediately
preceding cessation of Employee's employment with the Company, provided
that the restrictions set forth herein shall apply only to customers of
the Company or representatives of such customers with whom Employee had
material contact during such two year period. "Material contact" exists
between Employee and each of the existing customers of the Company: (i)
with whom Employee actually dealt; or (ii) whose dealings with the
Company were handled, coordinated or supervised by Employee.
e. INTELLECTUAL PROPERTY. The Employee shall disclose to the Company
all ideas and business plans developed by the Employee during the term
of the Employee's employment with the Company which relate to the
business conducted by the Company. All patents, patent applications,
patent licenses, formulas, inventions, improvements, designs,
discoveries, processes, software, copyrights, know-how, proprietary
information, rights, trademarks or trade names or future improvements
thereto developed or conceived of by the Employee during any period of
employment with the Company shall be promptly disclosed to, and all
rights with respect thereto shall be assigned by the Employee to, the
Company in consideration of the remuneration paid or payable to the
Employee hereunder and shall be considered work made for hire for the
Company within the meaning of Title 17 of the United States Code. The
Employee acknowledges that "software" as used in this Section 5.e shall
include without limitation all ideas, concepts, know-how, methods,
techniques, structures, information and materials relating to the
software including source code, object and load modules, requirements
specifications, design specifications, design notes, flow charts,
decoding sheets, annotations, documentation and the structures,
organization, sequence, designs, formulas and algorithms which reside
in the software and which are not generally known to the public or
within the industries or trades in which the Company competes.
f. REMEDIES. The Employee acknowledges and agrees that Employee's
obligations provided in this Section 5 are necessary and reasonable in
order to protect the Company and its business and the Employee
expressly agrees that monetary damages would be inadequate to
compensate the Company for any breach by Employee of Employee's
covenants and agreements set forth herein. Accordingly, Employee agrees
and acknowledges that any such violation or threatened violation of
this Section 5 will cause irreparable injury to the Company and that,
in addition to any other remedies that may be available, in law, in
equity or otherwise, the Company may be entitled to obtain injunctive
relief against the prospective breach of this Section 5 or the
continuation of any such breach by the Employee without the necessity
of proving actual damages.
4
<PAGE> 5
g. CONSTRUCTION. In the event that any provision of this Section 5
should ever be deemed to exceed the time, geographic, or other
limitations permitted by applicable law, then such provision shall be
reformed to the maximum time geographic, or other limitations permitted
by applicable law. The provisions of this Section 5 shall be applicable
for the period indicated and shall survive the termination of this
Agreement.
6. GENERAL MATTERS.
a. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Georgia and shall be construed in accordance therewith.
b. NO WAIVER. No provision of this Agreement may be waived except
by an Agreement in writing signed by the waiving party. A waiver of any
term or provision shall not be construed as a waiver of any other term
or provision.
c. AMENDMENT. This Agreement may be amended or altered at any time,
in whole or in part, by filing with this Agreement a written instrument
setting forth such changes, signed by all parties.
d. BINDING EFFECT. This Agreement shall be binding upon the
Employee, the Company and their successors and assigns.
e. CONSTRUCTION. Throughout this Agreement the singular shall
include the plural, the plural shall include the singular and the
masculine shall include the feminine wherever the context so requires.
f. TEXT TO CONTROL. The headings of Sections are included solely for
convenience of reference. If any conflict between any heading and the
text of this Agreement exists, the text shall control.
g. SEVERABILITY. If any provision of this Agreement is declared by
any court of competent jurisdiction to be invalid for any reason, such
invalidity shall not affect the remaining provisions, which shall be
fully severable, and the Agreement shall be construed and enforced as
if such invalid provision had never been included.
h. ENTIRE AGREEMENT OF THE PARTIES. The parties agree that this
document contains the entire agreement and understanding between them
in relation to the subject matter hereof and no representations,
warranties, covenants, understandings or agreements in relation thereto
exist between the parties except as expressly set forth herein.
i. NOTICES. Every notice or other communication to be given by
either party to the other party with respect to this Agreement shall be
in writing and shall not be effective for any purpose unless the same
shall be served personally or by national air courier service or
5
<PAGE> 6
United States certified mail, return receipt requested, postage
prepaid, addressed, if to the Company at 4258 Communications Drive,
Norcross, Georgia 30093, Attention, President, and if to the Employee
at 1804 Walden Court, Henderson, Nevada 89014, or such other address or
addresses as the Company or the Employee may from time to time
designate by written notice given as above provided. Every notice or
other communication hereunder shall be deemed to have been given as of
the third business day following the date of such mailing (or as of any
earlier date evidenced by a receipt from such national air courier
service or the United States Postal Service) or immediately if
personally delivered. Notices not sent in accordance with the foregoing
shall be of no force and effect until received by the foregoing parties
as such addresses specified herein.
j. DUPLICATE ORIGINALS. This Agreement may be executed in several
counterparts, each of which shall be an original but all of which
together shall constitute one and the same instrument.
k. ARBITRATION. Any dispute or controversy of or relating to this
Agreement, or any breach of this Agreement, shall be settled by
arbitration to be held in Atlanta, Georgia, in accordance with the
rules then in effect of the American Arbitration Association or any
successor thereto. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may
be entered on the arbitrator's decision in any court having
jurisdiction and the parties irrevocably consent to the jurisdiction of
the Georgia state courts for this purpose. The Company shall pay the
costs and expenses of such arbitration.
l. ATTORNEYS' FEES. In the event that the Company or the Employee
retains an attorney or attorneys to enforce performance of this
Agreement by the other party or to obtain damages or other relief
because of violation of the terms of this Agreement by the other party,
then all reasonable attorneys' fees and costs of arbitration or
litigation are to be borne and paid by the party determined to have
failed to perform this Agreement or to be liable for damages or against
which other relief is granted.
m. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of the Employee's
employment to the extent necessary to the intended preservation of such
rights and obligations.
n. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon a party
by this Agreement is intended to be exclusive of any other remedy and
each and every such remedy shall be cumulative and shall be in addition
to any other remedy given hereunder or now or hereafter existing at law
or in equity. No delay or omission by a party in exercising any right,
remedy or power hereunder or existing at law or in equity shall be
construed as a waiver thereof and any such right, remedy or power may
be exercised by such party from time to time and as often as may be
deemed expedient or necessary by such party in such party's sole
discretion.
The parties have executed this Agreement to be effective as of the date
first above written.
6
<PAGE> 7
This Agreement shall replace in its entirety any other Employment
Agreement between the Company or its subsidiaries and the Employee, which
Employment Agreements shall be of no further force and effect as of March 1,
1999.
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/ Alan N. Johnson
---------------------------------------
Alan N. Johnson, President
Attest:
/s/ Gerald J. Boyle
- -------------------------------------
Gerald J. Boyle, Secretary
EMPLOYEE:
/s/ Keko Mottes
---------------------------------------
Keko Mottes
7
<PAGE> 8
SCHEDULE A
DESCRIPTION OF DUTIES AND COMPENSATION
EMPLOYEE: Keko Mottes
POSITION WITH COMPANY: Vice President of Sales and Marketing
COMPENSATION:
Salary: $135,000
Sales Incentive
Program: (Needs to be determined)
BENEFITS:
Insurance: Medical, dental, disability (long and short
term) and life to the extent available to all
employees of the Company and paid in accordance
with Company policy if elected by Employee.
Automobile
Allowance: The Company shall pay Employee an automobile
allowance of $600 per month. The cost of the
automobile and all expenses for the operation
(including insurance) and maintenance of the
automobile shall be paid by Employee.
401(k) Plan: Available for Employee's election if eligible.
Flexible Spending
Account: Available for Employee's election if eligible.
<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), effective March 1, 1999, by
and between LEISURE TIME CASINOS & RESORTS, INC., a Colorado corporation (the
"Company"), and JOHN J. PASIERB (the "Employee"). The Company hereby continues
the employment of the Employee and the Employee hereby accepts continued
employment with the Company on the terms and conditions hereinafter set forth.
1. TERM. Subject to the provisions for termination as hereinafter
provided in this Agreement, the term of this Agreement shall commence effective
on March 1, 1999, and shall terminate on January 31, 2002.
2. NATURE OF EMPLOYMENT. The Company hereby employs the Employee as
the Vice President of Engineering, Research and Development of the Company to
perform such duties as may be directed by the President or Executive Vice
President of the Company. The Employee accepts such continuation of employment,
agrees to abide by the Articles of Incorporation, Bylaws, Company policies and
the provisions of this Agreement and agrees to devote his full time and best
efforts to his employment under this Agreement as is reasonably required. The
Employee may carry on outside activities so long as those activities neither
conflict nor compete with the Employee's job responsibilities and corporate
duties. The Employee shall at all times, faithfully with due diligence and to
the best of the Employee's ability, experience and talent, perform all the
duties hereunder.
3. COMPENSATION, VACATIONS AND EXPENSES.
a. SALARY. The Company shall pay to the Employee a salary
during the term of this Agreement in accordance with the amount set
forth on Schedule A hereof. This amount may be increased as determined
by the Company through an amendment to Schedule A.
b. VACATIONS AND FRINGE BENEFITS. The Employee shall be
entitled to an annual vacation of at least the minimum vacation time
established by the Company for its employees. The Employee shall
further be entitled to participate in and receive the benefits
provided under any employee benefit program which may be adopted and
maintained by the Company (including, without limitation, those
described on Schedule A) and for which the Employee is eligible by
virtue of Employee's employment hereunder, but only as and to the
extent the Employee would otherwise be eligible as provided in any
said program.
c. REIMBURSEMENT OF EXPENSES. The Employee is authorized to
incur reasonable expenses while performing the Employee's duties under
this Agreement, including expenses for entertainment, travel,
automobile and similar items incurred on behalf of the Company in an
amount consistent with Company policies. The Company will reimburse
the Employee upon the presentation by the Employee of itemized
accounts of such reasonable and appropriate expenditures.
<PAGE> 2
4. TERMINATION OF AGREEMENT.
a. TERMINATION BY EMPLOYEE. The Employee may terminate this
Agreement without cause upon 120 days prior written notice to the
Company. In such event, the Employee shall continue to render the
services required under this Agreement and shall be paid on the
regular payment dates the compensation set forth in Schedule A up to
the date of termination.
b. TERMINATION BY THE COMPANY. If the Employee materially
fails or refuses to observe the provisions of this Agreement or if the
Company determines in its sole discretion that the Employee is not
satisfactorily performing any of the duties required of the Employee
under this Agreement, the Company shall give the Employee written
notice of such failure or refusal and, if the Employee does not
correct such failure or refusal within five (5) days after the giving
of such notice, this Agreement may be terminated by the Company
immediately upon written notice of such termination to the Employee
and upon payment by the Company to the Employee for all compensation
accrued under this Agreement to the date of termination. In the event
of the Employee's fraud, misappropriation or embezzlement of funds or
conviction for any crime punishable as a felony, the Company may
terminate this Agreement immediately upon written notice of such
termination to the Employee and upon payment by the Company to the
Employee for all compensation accrued under this Agreement to the date
of termination. In the event of a termination of the Employee's
employment for cause in accordance with this Section 4.b, the Company
shall have no further obligation to the Employee. However, termination
of the Employee's employment for cause shall not terminate or
extinguish the Employee's obligation or liability to pay to the
Company or any of its affiliates any amount owed to them by the
Employee, including, but not limited to, any amounts misappropriated,
embezzled or otherwise obtained by the Employee by reason of any of
the occurrences referred to in this Section 4.b without prejudice to
any other rights or remedies of the Company or its affiliates at law
or in equity.
c. TERMINATION UPON DEATH OF EMPLOYEE. This Agreement shall
automatically terminate in the event of the Employee's death. In such
case, any accrued compensation or benefits shall inure to the estate
of the Employee and the payment thereof shall be the only liability
the Company shall have to the Employee's estate.
5. EMPLOYEE ACTIONS.
a. EMPLOYEE SHALL NOT DISCLOSE INFORMATION. The Employee
recognizes and acknowledges that the list of the customers, as it may
exist from time to time, of the Company (which for purposes of this
section 5 includes the Company's subsidiaries and affiliates) and any
other proprietary or confidential information, including, but not
limited to financial information and information pertaining to the
software, manufacturing, marketing and sales operations, financing
operations and potential acquisitions (hereinafter "Confidential
Information"), used by the Company in its business are valuable and
unique assets of the Company. Except as permitted by the next
sentence, the Employee will not during or for a period of three years
after
2
<PAGE> 3
the term of his employment, disclose any Confidential Information to
any person, firm, corporation, association or other entity for any
reason or purpose whatsoever without the prior written consent or
authorization of the board of directors of the Company.
Notwithstanding the prohibitions contained in the foregoing sentence,
the Employee shall be permitted to disclose such information during
the term of his employment to other persons employed by the Company
who have a need to know such information for a proper purpose related
to the business of the Company. Upon termination of the Employee's
employment by the Company, the Employee shall neither take nor retain
any papers, customer lists, manuals, files or other documents or
copies thereof belonging to the Company. To the extent any items of
Confidential Information constitute trade secrets under Georgia law,
Employee's obligations of confidentiality and nondisclosure shall
continue to survive after said three year period to the greatest
extent permitted by applicable law. These rights of the Company are in
addition to those the Company has under the common law or applicable
statutes for the protection of trade secrets.
b. NON-COMPETE. The Employee hereby covenants and agrees that
the Employee will not, without the prior written consent of the
Company, directly or by assisting others, whether individually or
through any entity controlled by the Employee, during the term of this
Agreement and for a period of six months after the termination of this
Agreement for any reason (the "Restrictive Period"), on Employee's own
behalf or in the service or on behalf of others, whether or not for
compensation, engage in any activity that involves designing,
developing, manufacturing, leasing, selling or operating electronic
gaming machines in any state of the United States where the Company,
as of the effective date of this Employment Agreement, is engaged in
the business of designing, developing, manufacturing, leasing, selling
or operating electronic gaming machines or in any country outside of
the United States where the Company, as of the effective date of this
Employment Agreement, is engaged in the business of designing,
developing, manufacturing, leasing, selling or operating electronic
gaming machines. In addition, during the Restrictive Period, the
Employee shall not have any controlling interest in any person, firm,
corporation or business, through a subsidiary or parent entity or
other entity which engages in designing, developing, manufacturing,
leasing, selling or operating electronic gaming machines.
Notwithstanding the foregoing, the Employee may own shares of other
competing companies the securities of which are publicly traded, so
long as such securities do not constitute five percent or more of the
outstanding securities of any such company.
c. NON-SOLICITATION OF COMPANY EMPLOYEES. During the
Employee's employment with the Company and for six months thereafter,
Employee shall not solicit or in any manner encourage employees of the
Company to leave the employ of the Company. The foregoing prohibition
applies only to employees with whom the Employee had material contact
pursuant to Employee's duties during Employee's employment term.
"Material contact" means interaction between the Employee and another
employee of the Company: (i) with whom Employee actually dealt; or
(ii) whose employment or dealings with the Company or services for the
Company were handled, coordinated or supervised by the Employee.
3
<PAGE> 4
d. NON-SOLICITATION OF COMPANY CUSTOMERS. During the
Employee's employment with the Company and for six months immediately
following cessation of Employee's employment with the Company for any
reason, Employee shall not, on Employee's own behalf or on behalf of
any person, partnership, association, corporation or business
organization, entity or enterprise (except the Company), solicit any
customer of the Company or any representative of any such customer
with a view to selling or providing any product, equipment or service
competitive or potentially competitive with any product, equipment or
service sold or provided by the Company during the two year period
immediately preceding cessation of Employee's employment with the
Company, provided that the restrictions set forth herein shall apply
only to customers of the Company or representatives of such customers
with whom Employee had material contact during such two year period.
"Material contact" exists between Employee and each of the existing
customers of the Company: (i) with whom Employee actually dealt; or
(ii) whose dealings with the Company were handled, coordinated or
supervised by Employee.
e. INTELLECTUAL PROPERTY. The Employee shall disclose to the
Company all ideas and business plans developed by the Employee during
the term of the Employee's employment with the Company which relate to
the business conducted by the Company. All patents, patent
applications, patent licenses, formulas, inventions, improvements,
designs, discoveries, processes, software, copyrights, know-how,
proprietary information, rights, trademarks or trade names or future
improvements thereto developed or conceived of by the Employee during
any period of employment with the Company shall be promptly disclosed
to, and all rights with respect thereto shall be assigned by the
Employee to, the Company in consideration of the remuneration paid or
payable to the Employee hereunder and shall be considered work made
for hire for the Company within the meaning of Title 17 of the United
States Code. The Employee acknowledges that "software" as used in this
Section 5.e shall include without limitation all ideas, concepts,
know-how, methods, techniques, structures, information and materials
relating to the software including source code, object and load
modules, requirements specifications, design specifications, design
notes, flow charts, decoding sheets, annotations, documentation and
the structures, organization, sequence, designs, formulas and
algorithms which reside in the software and which are not generally
known to the public or within the industries or trades in which the
Company competes.
f. REMEDIES. The Employee acknowledges and agrees that
Employee's obligations provided in this Section 5 are necessary and
reasonable in order to protect the Company and its business and the
Employee expressly agrees that monetary damages would be inadequate to
compensate the Company for any breach by Employee of Employee's
covenants and agreements set forth herein. Accordingly, Employee
agrees and acknowledges that any such violation or threatened
violation of this Section 5 will cause irreparable injury to the
Company and that, in addition to any other remedies that may be
available, in law, in equity or otherwise, the Company may be entitled
to obtain injunctive relief against the prospective breach of this
Section 5 or the continuation of any such breach by the Employee
without the necessity of proving actual damages.
4
<PAGE> 5
g. CONSTRUCTION. In the event that any provision of this
Section 5 should ever be deemed to exceed the time, geographic, or
other limitations permitted by applicable law, then such provision
shall be reformed to the maximum time geographic, or other limitations
permitted by applicable law. The provisions of this Section 5 shall be
applicable for the period indicated and shall survive the termination
of this Agreement.
6. GENERAL MATTERS.
a. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Georgia and shall be construed in accordance
therewith.
b. NO WAIVER. No provision of this Agreement may be waived
except by an Agreement in writing signed by the waiving party. A
waiver of any term or provision shall not be construed as a waiver of
any other term or provision.
c. AMENDMENT. This Agreement may be amended or altered at any
time, in whole or in part, by filing with this Agreement a written
instrument setting forth such changes, signed by all parties.
d. BINDING EFFECT. This Agreement shall be binding upon the
Employee, the Company and their successors and assigns.
e. CONSTRUCTION. Throughout this Agreement the singular shall
include the plural, the plural shall include the singular and the
masculine shall include the feminine wherever the context so requires.
f. TEXT TO CONTROL. The headings of Sections are included
solely for convenience of reference. If any conflict between any
heading and the text of this Agreement exists, the text shall control.
g. SEVERABILITY. If any provision of this Agreement is
declared by any court of competent jurisdiction to be invalid for any
reason, such invalidity shall not affect the remaining provisions,
which shall be fully severable, and the Agreement shall be construed
and enforced as if such invalid provision had never been included.
h. ENTIRE AGREEMENT OF THE PARTIES. The parties agree that
this document contains the entire agreement and understanding between
them in relation to the subject matter hereof and no representations,
warranties, covenants, understandings or agreements in relation
thereto exist between the parties except as expressly set forth
herein.
i. NOTICES. Every notice or other communication to be given
by either party to the other party with respect to this Agreement
shall be in writing and shall not be effective for any purpose unless
the same shall be served personally or by national air courier service
or United States certified mail, return receipt requested, postage
prepaid, addressed, if to the
5
<PAGE> 6
Company at 4258 Communications Drive, Norcross, Georgia 30093,
Attention, President, and if to the Employee at 6305 Deerwoods Trail,
Alpharetta, Georgia 30005, or such other address or addresses as the
Company or the Employee may from time to time designate by written
notice given as above provided. Every notice or other communication
hereunder shall be deemed to have been given as of the third business
day following the date of such mailing (or as of any earlier date
evidenced by a receipt from such national air courier service or the
United States Postal Service) or immediately if personally delivered.
Notices not sent in accordance with the foregoing shall be of no force
and effect until received by the foregoing parties as such addresses
specified herein.
j. DUPLICATE ORIGINALS. This Agreement may be executed in
several counterparts, each of which shall be an original but all of
which together shall constitute one and the same instrument.
k. ARBITRATION. Any dispute or controversy of or relating to
this Agreement, or any breach of this Agreement, shall be settled by
arbitration to be held in Atlanta, Georgia, in accordance with the
rules then in effect of the American Arbitration Association or any
successor thereto. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may
be entered on the arbitrator's decision in any court having
jurisdiction and the parties irrevocably consent to the jurisdiction
of the Georgia state courts for this purpose. The Company shall pay
the costs and expenses of such arbitration.
l. ATTORNEYS' FEES. In the event that the Company or the
Employee retains an attorney or attorneys to enforce performance of
this Agreement by the other party or to obtain damages or other relief
because of violation of the terms of this Agreement by the other
party, then all reasonable attorneys' fees and costs of arbitration or
litigation are to be borne and paid by the party determined to have
failed to perform this Agreement or to be liable for damages or
against which other relief is granted.
m. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of the Employee's
employment to the extent necessary to the intended preservation of
such rights and obligations.
n. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon a
party by this Agreement is intended to be exclusive of any other
remedy and each and every such remedy shall be cumulative and shall be
in addition to any other remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by a party in
exercising any right, remedy or power hereunder or existing at law or
in equity shall be construed as a waiver thereof and any such right,
remedy or power may be exercised by such party from time to time and
as often as may be deemed expedient or necessary by such party in such
party's sole discretion.
The parties have executed this Agreement to be effective as of the
date first above written.
6
<PAGE> 7
This Agreement shall replace in its entirety any other Employment
Agreement between the Company or its subsidiaries and the Employee, which
Employment Agreements shall be of no further force and effect as of March 1,
1999.
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/ Alan N. Johnson
-------------------------------------
Alan N. Johnson, President
Attest:
/s/ Gerald J. Boyle
- --------------------------------
Gerald J. Boyle, Secretary
EMPLOYEE:
/s/ John J. Pasierb
----------------------------------------
John J. Pasierb
7
<PAGE> 8
SCHEDULE A
DESCRIPTION OF DUTIES AND COMPENSATION
EMPLOYEE: John J. Pasierb
POSITION WITH COMPANY: Vice President Engineering, Research and Development
COMPENSATION:
Salary: $125,000
BENEFITS:
Insurance: Medical, dental, disability (long and short term)
and life to the extent available to all employees
of the Company and paid in accordance with
Company policy if elected by Employee.
Automobile: The Company shall provide the employee with such
automobile as is approved by the President of the
Company. All expenses for the operation
(including insurance) and maintenance of such
automobile shall be paid by the Company or
reimbursed to the Employee by the Company.
401(k) Plan: Available for Employee's election if eligible.
Flexible
Spending
Account: Available for Employee's election if eligible.
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), effective April 20, 1999, by
and between LEISURE TIME CASINOS & RESORTS, INC., a Colorado corporation (the
"Company"), and JOSEPH C. GRUNDA (the "Employee"). The Company hereby continues
the employment of the Employee and the Employee hereby accepts continued
employment with the Company on the terms and conditions hereinafter set forth.
1. TERM. Subject to the provisions for termination as hereinafter
provided in this Agreement, the term of this Agreement shall commence effective
on April 20, 1999, and shall terminate on February 28, 2002.
2. NATURE OF EMPLOYMENT. The Company hereby continues the employment of
the Employee as the Vice President of Licensing and Compliance/General Counsel
of the Company to perform such duties as may be directed by the President or an
Executive Vice President of the Company. The Employee accepts such continuation
of employment, agrees to abide by the Articles of Incorporation, Bylaws, Company
policies and the provisions of this Agreement and agrees to devote his full time
and best efforts to his employment under this Agreement as is reasonably
required. The Employee may carry on outside activities so long as those
activities neither conflict nor compete with the Employee's job responsibilities
and corporate duties. The Employee shall at all times, faithfully with due
diligence and to the best of the Employee's ability, experience and talent,
perform all the duties hereunder.
3. COMPENSATION, VACATIONS AND EXPENSES.
a. SALARY. The Company shall pay to the Employee a salary
during the term of this Agreement in accordance with the amounts set
forth on Schedule A hereof. The amounts may be increased as determined
by the Company through an amendment to Schedule A.
b. VACATIONS AND FRINGE BENEFITS. The Employee shall be
entitled to an annual vacation of at least the minimum vacation time
established by the Company for its employees. The Employee shall
further be entitled to participate in and receive the benefits provided
under any employee benefit program which may be adopted and maintained
by the Company (including, without limitation, those described on
Schedule A) and for which the Employee is eligible by virtue
of Employee's employment hereunder, but only as and to the extent the
Employee would otherwise be eligible as provided in any said program.
c. REIMBURSEMENT OF EXPENSES. The Employee is authorized to
incur reasonable expenses while performing the Employee's duties under
this Agreement, including expenses for entertainment, travel,
automobile and similar items incurred on behalf of the Company in an
amount consistent with Company policies. The Company
<PAGE> 2
will reimburse the Employee upon the presentation by the Employee of
itemized accounts of such reasonable and appropriate expenditures.
4. TERMINATION OF AGREEMENT.
a. TERMINATION BY EMPLOYEE. The Employee may terminate this
Agreement without cause upon 120 days prior written notice to the
Company. In such event, the Employee shall continue to render the
services required under this Agreement and shall be paid on the regular
payment dates the compensation set forth in Schedule A up to the date
of termination.
b. TERMINATION BY THE COMPANY. If the Employee materially
fails or refuses to observe the provisions of this Agreement or if the
Company determines in its sole discretion that the Employee is not
satisfactorily performing any of the duties required of the Employee
under this Agreement, the Company shall give the Employee written
notice of such failure or refusal and, if the Employee does not correct
such failure or refusal within five (5) days after the giving of such
notice, this Agreement may be terminated by the Company immediately
upon written notice of such termination to the Employee and upon
payment by the Company to the Employee for all compensation accrued
under this Agreement to the date of termination. In the event of the
Employee's fraud, misappropriation or embezzlement of funds or
conviction for any crime punishable as a felony, the Company may
terminate this Agreement immediately upon written notice of such
termination to the Employee and upon payment by the Company to the
Employee for all compensation accrued under this Agreement to the date
of termination. In the event of a termination of the Employee's
employment for cause in accordance with this Section 4.b, the Company
shall have no further obligation to the Employee. However, termination
of the Employee's employment for cause shall not terminate or
extinguish the Employee's obligation or liability to pay to the Company
or any of its affiliates any amount owed to them by the Employee,
including, but not limited to, any amounts misappropriated, embezzled
or otherwise obtained by the Employee by reason of any of the
occurrences referred to in this Section 4.b without prejudice to any
other rights or remedies of the Company or its affiliates at law or in
equity.
c. TERMINATION UPON DEATH OF EMPLOYEE. This Agreement shall
automatically terminate in the event of the Employee's death. In such
case, any accrued compensation or benefits shall inure to the estate of
the Employee and the payment thereof shall be the only liability the
Company shall have to the Employee's estate.
5. EMPLOYEE ACTIONS.
a. EMPLOYEE SHALL NOT DISCLOSE INFORMATION. The Employee
recognizes and acknowledges that the list of the customers, as it may
exist from time to time, of the Company (which for purposes of this
section 5 includes the Company's subsidiaries and affiliates) and any
other proprietary or confidential information, including, but not
limited to
2
<PAGE> 3
financial information and information pertaining to the software,
manufacturing, marketing and sales operations, financing operations and
potential acquisitions (hereinafter "Confidential Information"), used
by the Company in its business are valuable and unique assets of the
Company. Except as permitted by the next sentence, the Employee will
not during or for a period of three years after the term of his
employment, disclose any Confidential Information to any person, firm,
corporation, association or other entity for any reason or purpose
whatsoever without the prior written consent or authorization of the
board of directors of the Company. Notwithstanding the prohibitions
contained in the foregoing sentence, the Employee shall be permitted to
disclose such information during the term of his employment to other
persons employed by the Company who have a need to know such
information for a proper purpose related to the business of the
Company. Upon termination of the Employee's employment by the Company,
the Employee shall neither take nor retain any papers, customer lists,
manuals, files or other documents or copies thereof belonging to the
Company. To the extent any items of Confidential Information constitute
trade secrets under Georgia law, Employee's obligations of
confidentiality and nondisclosure shall continue to survive after said
three year period to the greatest extent permitted by applicable law.
These rights of the Company are in addition to those the Company has
under the common law or applicable statutes for the protection of trade
secrets.
b. NON-COMPETE. The Employee hereby covenants and agrees that
the Employee will not, without the prior written consent of the
Company, directly or by assisting others, whether individually or
through any entity controlled by the Employee, during the term of this
Agreement and for a period of six months after the termination of this
Agreement for any reason (the "Restrictive Period"), on Employee's own
behalf or in the service or on behalf of others, whether or not for
compensation, engage in any activity that involves designing,
developing, manufacturing, leasing, selling or operating electronic
gaming machines in any state of the United States where the Company, as
of the effective date of this Employment Agreement, is engaged in the
business of designing, developing, manufacturing, leasing, selling or
operating electronic gaming machines or in any country outside of the
United States where the Company, as of the effective date of this
Employment Agreement, is engaged in the business of designing,
developing, manufacturing, leasing, selling or operating electronic
gaming machines. In addition, during the Restrictive Period, the
Employee shall not have any controlling interest in any person, firm,
corporation or business, through a subsidiary or parent entity or other
entity which engages in designing, developing, manufacturing, leasing,
selling or operating electronic gaming machines. Notwithstanding the
foregoing, the Employee may own shares of other competing companies the
securities of which are publicly traded, so long as such securities do
not constitute five percent or more of the outstanding securities of
any such company.
c. NON-SOLICITATION OF COMPANY EMPLOYEES. During the
Employee's employment with the Company and for six months thereafter,
Employee shall not solicit or in any manner encourage employees of the
Company to leave the employ of the Company. The foregoing prohibition
applies only to employees with whom the Employee had material contact
pursuant to Employee's duties during Employee's employment term.
"Material
3
<PAGE> 4
contact" means interaction between the Employee and another employee of
the Company: (i) with whom Employee actually dealt; or (ii) whose
employment or dealings with the Company or services for the Company
were handled, coordinated or supervised by the Employee.
d. NON-SOLICITATION OF COMPANY CUSTOMERS. During the
Employee's employment with the Company and for six months immediately
following cessation of Employee's employment with the Company for any
reason, Employee shall not, on Employee's own behalf or on behalf of
any person, partnership, association, corporation or business
organization, entity or enterprise (except the Company), solicit any
customer of the Company or any representative of any such customer with
a view to selling or providing any product, equipment or service
competitive or potentially competitive with any product, equipment or
service sold or provided by the Company during the two year period
immediately preceding cessation of Employee's employment with the
Company, provided that the restrictions set forth herein shall apply
only to customers of the Company or representatives of such customers
with whom Employee had material contact during such two year period.
"Material contact" exists between Employee and each of the existing
customers of the Company: (i) with whom Employee actually dealt; or
(ii) whose dealings with the Company were handled, coordinated or
supervised by Employee.
e. INTELLECTUAL PROPERTY. The Employee shall disclose to the
Company all ideas and business plans developed by the Employee during
the term of the Employee's employment with the Company which relate to
the business conducted by the Company. All patents, patent
applications, patent licenses, formulas, inventions, improvements,
designs, discoveries, processes, software, copyrights, know-how,
proprietary information, rights, trademarks or trade names or future
improvements thereto developed or conceived of by the Employee during
any period of employment with the Company shall be promptly disclosed
to, and all rights with respect thereto shall be assigned by the
Employee to, the Company in consideration of the remuneration paid or
payable to the Employee hereunder and shall be considered work made for
hire for the Company within the meaning of Title 17 of the United
States Code. The Employee acknowledges that "software" as used in this
Section 5.e shall include without limitation all ideas, concepts,
know-how, methods, techniques, structures, information and materials
relating to the software including source code, object and load
modules, requirements specifications, design specifications, design
notes, flow charts, decoding sheets, annotations, documentation and the
structures, organization, sequence, designs, formulas and algorithms
which reside in the software and which are not generally known to the
public or within the industries or trades in which the Company
competes.
f. REMEDIES. The Employee acknowledges and agrees that
Employee's obligations provided in this Section 5 are necessary and
reasonable in order to protect the Company and its business and the
Employee expressly agrees that monetary damages would be inadequate to
compensate the Company for any breach by Employee of Employee's
covenants and agreements set forth herein. Accordingly, Employee agrees
and
4
<PAGE> 5
acknowledges that any such violation or threatened violation of this
Section 5 will cause irreparable injury to the Company and that, in
addition to any other remedies that may be available, in law, in equity
or otherwise, the Company may be entitled to obtain injunctive relief
against the prospective breach of this Section 5 or the continuation of
any such breach by the Employee without the necessity of proving actual
damages.
g. CONSTRUCTION. In the event that any provision of this
Section 5 should ever be deemed to exceed the time, geographic, or
other limitations permitted by applicable law, then such provision
shall be reformed to the maximum time geographic, or other limitations
permitted by applicable law. The provisions of this Section 5 shall be
applicable for the period indicated and shall survive the termination
of this Agreement.
6. GENERAL MATTERS.
a. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Georgia and shall be construed in accordance therewith.
b. NO WAIVER. No provision of this Agreement may be waived
except by an Agreement in writing signed by the waiving party. A waiver
of any term or provision shall not be construed as a waiver of any
other term or provision.
c. AMENDMENT. This Agreement may be amended or altered at any
time, in whole or in part, by filing with this Agreement a written
instrument setting forth such changes, signed by all parties.
d. BINDING EFFECT. This Agreement shall be binding upon the
Employee, the Company and their successors and assigns.
e. CONSTRUCTION. Throughout this Agreement the singular shall
include the plural, the plural shall include the singular and the
masculine shall include the feminine wherever the context so requires.
f. TEXT TO CONTROL. The headings of Sections are included
solely for convenience of reference. If any conflict between any
heading and the text of this Agreement exists, the text shall control.
g. SEVERABILITY. If any provision of this Agreement is
declared by any court of competent jurisdiction to be invalid for any
reason, such invalidity shall not affect the remaining provisions,
which shall be fully severable, and the Agreement shall be construed
and enforced as if such invalid provision had never been included.
h. ENTIRE AGREEMENT OF THE PARTIES. The parties agree that
this document contains the entire agreement and understanding between
them in relation to the subject
5
<PAGE> 6
matter hereof and no representations, warranties, covenants,
understandings or agreements in relation thereto exist between the
parties except as expressly set forth herein.
i. NOTICES. Every notice or other communication to be given by
either party to the other party with respect to this Agreement shall be
in writing and shall not be effective for any purpose unless the same
shall be served personally or by national air courier service or United
States certified mail, return receipt requested, postage prepaid,
addressed, if to the Company at 4258 Communications Drive, Norcross,
Georgia 30093, Attention, President, and if to the Employee at 4258
Communications Drive, Norcross, Georgia 30093, or such other address or
addresses as the Company or the Employee may from time to time
designate by written notice given as above provided. Every notice or
other communication hereunder shall be deemed to have been given as of
the third business day following the date of such mailing (or as of any
earlier date evidenced by a receipt from such national air courier
service or the United States Postal Service) or immediately if
personally delivered. Notices not sent in accordance with the foregoing
shall be of no force and effect until received by the foregoing parties
as such addresses specified herein.
j. DUPLICATE ORIGINALS. This Agreement may be executed in
several counterparts, each of which shall be an original but all of
which together shall constitute one and the same instrument.
k. ARBITRATION. Any dispute or controversy of or relating to
this Agreement, or any breach of this Agreement, shall be settled by
arbitration to be held in Atlanta, Georgia, in accordance with the
rules then in effect of the American Arbitration Association or any
successor thereto. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may
be entered on the arbitrator's decision in any court having
jurisdiction and the parties irrevocably consent to the jurisdiction of
the Georgia state courts for this purpose. The Company shall pay the
costs and expenses of such arbitration.
l. ATTORNEYS' FEES. In the event that the Company or the
Employee retains an attorney or attorneys to enforce performance of
this Agreement by the other party or to obtain damages or other relief
because of violation of the terms of this Agreement by the other party,
then all reasonable attorneys' fees and costs of arbitration or
litigation are to be borne and paid by the party determined to have
failed to perform this Agreement or to be liable for damages or against
which other relief is granted.
m. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of the Employee's
employment to the extent necessary to the intended preservation of such
rights and obligations.
n. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon a
party by this Agreement is intended to be exclusive of any other remedy
and each and every such remedy shall be cumulative and shall be in
addition to any other remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by a party in
exercising
6
<PAGE> 7
any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof and any such right, remedy or
power may be exercised by such party from time to time and as often as
may be deemed expedient or necessary by such party in such party's sole
discretion.
The parties have executed this Agreement to be effective as of the date
first above written.
LEISURE TIME CASINOS & RESORTS, INC.
By:
------------------------------------
Alan N. Johnson, President
Attest:
- ---------------------------------
Gerald J. Boyle, Secretary
EMPLOYEE:
---------------------------------------
Joseph C. Grunda
7
<PAGE> 8
SCHEDULE A
DESCRIPTION OF DUTIES AND COMPENSATION
EMPLOYEE: Joseph C. Grunda
POSITION WITH COMPANY: Vice President of Licensing and Compliance/General
Counsel
COMPENSATION:
Salary: Employee's salary shall be $100,000 per annum until
February 28, 2000. Commencing March 1, 2000,
Employee's salary shall increase to $110,000 per
annum and commencing March 1, 2001, Employee's
salary shall increase to $121,000 per annum. The
salary will be payable in accordance with Company
policy and shall be reduced by all required
withholdings and withholdings authorized by
Employee.
BENEFITS:
Insurance: Medical, dental, disability (long and short term)
and life to the extent available to all employees
of the Company and paid in accordance with Company
policy if elected by Employee.
Automobile
Allowance: The Company shall pay Employee an automobile
allowance of $600 per month. The cost of the
automobile and all expenses for the operation
(including insurance) and maintenance of the
automobile shall be paid by Employee.
401(k) Plan: Available for Employee's election if eligible.
Flexible Spending
Account: Available for Employee's election if eligible.
<PAGE> 1
EXHIBIT 10.13
COVER PAGE
The capitalized terms in this Lease shall have the meanings ascribed
to them below, and each reference to such term in .the Lease shall incorporate
such meaning therein as if fully set forth therein.
LANDLORD: WEEKS REALTY, L.P., a Georgia limited partnership, with its
principal office located at 4497 Park Drive, Norcross,
Georgia 30093
TENANT: LEISURE TIME TECHNOLOGY, INC., a corporation duly organized
and existing under the laws of the State of Georgia.
LEASED
PREMISES: (a) Address: 4258 Communications Drive
(b) Rentable Area: 57,000 square feet
(c) Pro Rata Share: 100%
(d) Project: Gwinnett Park
TERM: Seven (7) years
COMMENCEMENT DATE: February 1, 1998
TERMINATION DATE: January 31, 2005
BASE-RENT
(PER YEAR): $247,950.00
BASE YEAR: 1998
SECURITY DEPOSIT: $22,900.00
TENANT'S AGENT: Scott Horowitz
Colliers Cauble & Co.
<PAGE> 2
LEISURE TIME TECHNOLOGY, INC.
LEASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1 LEASED PREMISES...........................................................1
2 TERM......................................................................1
3 RENTAL....................................................................1
4 DELAY IN DELIVERY.........................................................2
5 USE OF LEASED PREMISES....................................................2
6 UTILITIES.................................................................3
7 ACCEPTANCE OF PREMISES....................................................3
8 ALTERATIONS, MECHANICS' LIENS.............................................3
9 QUIET CONDUCT/QUIET ENJOYMENT.............................................4
10 FIRE INSURANCE, HAZARDS...................................................4
11 LIABILITY INSURANCE.......................................................5
12 INDEMNIFICATION...........................................................5
13 WAIVER OF CLAIMS..........................................................5
14 REPAIRS...................................................................6
15 SIGNS, LANDSCAPING........................................................6
16 ENTRY BY LANDLORD.........................................................6
17 TAXES AND INSURANCE INCREASE..............................................7
18 ABANDONMENT...............................................................8
19 DESTRUCTION...............................................................8
20 ASSIGNMENT AND SUBLETTING.................................................9
21 INSOLVENCY OF TENANT......................................................9
22 BREACH BY TENANT..........................................................9
23 ATTORNEYS' FEES/COLLECTION CHARGES.......................................10
24 CONDEMNATION.............................................................10
25 NOTICES..................................................................11
26 WAIVER...................................................................11
27 EFFECT OF HOLDING OVER...................................................11
28 SUBORDINATION............................................................12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
29 ESTOPPEL CERTIFICATE.....................................................12
30 PARKING..................................................................12
31 MORTGAGEE PROTECTION.....................................................12
32 PROTECTIVE COVENANTS.....................................................13
33 RELOCATION...............................................................13
34 BROKERAGE COMMISSIONS....................................................13
MISCELLANEOUS PROVISIONS....................................................13
</TABLE>
EXHIBITS:
EXHIBIT "A": Site Plan
EXHIBIT "B": Floor Plan of the Leased Premises
EXHIBIT "C": Tenant's Acceptance of Premises
EXHIBIT "D": Subordination, Non-disturbance and Attornment Agreement
EXHIBIT "E": Special Stipulations
<PAGE> 4
STATE OF GEORGIA
GWINNETT COUNTY
This Lease Agreement is made this 1st day of December, 1997, by and
between WEEKS REALTY, L.P., a Georgia limited partnership, hereinafter referred
to as "Landlord", and LEISURE TIME TECHNOLOGY, INC., hereinafter referred to as
"Tenant".
LEASED PREMISES
1.01 Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the property hereinafter referred to as the LEASED PREMISES, described
as approximately 57,000 rentable square feet of office/warehouse at 4258
Communications Drive, Norcross, Georgia 30093, Gwinnett County, in Gwinnett
Park, as shown on the plan attached hereto as Exhibit "A" and by reference
incorporated herein. The building in which the Leased Premises are located is
herein referred to as the "Building"; and the real property on which the
building is situated is herein referred to as the "Land".
TERM
2.01 TO HAVE AND TO HOLD said Leased Premises for a term of seven (7)
years, commencing on February 1, 1998 and continuing until midnight on January
31, 2005.
RENTAL
3.01 As rental for the Leased Premises, Tenant agrees to pay to
Landlord, without offset or abatement, the Base Rental as set forth below:
<TABLE>
<S> <C> <C>
February 1, 1998 - January 31, 2001 $20,662.50/month $247,950.00/year
February 1, 2001 - January 31, 2002 $21,232.50/month $254,790.00/year
February 1, 2002 - January 31, 2003 $21,802.50/month $261,630.00/year
February 1, 2003 - January 31, 2004 $22,372.50/month $268,470.00/year
February 1, 2004 - January 31, 2005 $22,900.00/month $274,800.00/year
</TABLE>
due on or before the first day of each calendar month beginning on February 1,
1998 and thereafter for the remainder of the term, together with any other
additional rental as hereinafter set forth Tenant shall pay interest at a rate
of twelve percent (12%) per annum on all payments of rent received after the
fifth (5th) of each month If the Lease shall commence on any date other than
the first day of a calendar month, or end on any date, other than the last day
of a calendar month, rent for such month shall be prorated. Tenant has
deposited with landlord, upon delivery of this Lease Agreement, an amount equal
to Forty-three Thousand Five Hundred Sixty-two and 50/100 Dollars ($43,562.50),
a portion of which, or Twenty Thousand Six Hundred Sixty-two and 50/100 Dollars
($20,662.50), is to be applied as first month's Base Rental, the remaining
portion, or Twenty-two Thousand Nine Hundred and no/100 Dollars ($22,900.00),
shall be held as a refundable security deposit. Landlord may apply all or any
part of the security deposit to cure any default by Tenant hereunder and Tenant
shall promptly restore to the security deposit all amounts so applied upon
invoice therefor. If Tenant shall fully perform each provision of this Lease,
any portion of the security deposit which has not been appropriated by Landlord
in accordance with the provisions hereof shall be returned to Tenant, without
interest, within thirty (30) days after the expiration of the term of this
Lease.
3.02 The rental provided in paragraph 3.01 "Base Rental" above,
includes an allowance ("Allowance") in the amount of $3.00 per square foot,
which is One Hundred Seventy-one Thousand and no/100 Dollars ($171,000.00) for
the construction of tenant improvements on the basis set forth in the plans and
specifications by Catter Enterprises dated September 17, 1997 and revised on
October 30, 1997 attached, or to be attached, hereto in Exhibit "B". In the
event the cost of tenant improvements exceeds the cost of tenant improvement
Allowance, the excess shall be paid by Tenant upon occupancy of the Leased
Premises.
3.03 In addition to the Base Rental, Tenant agrees to pay Landlord as
additional rental, its pro rata share of the amounts described in subparagraph
(a) and (b) below. Each year during the
<PAGE> 5
term hereof, Landlord shall give Tenant written notice of its estimate of the
amount of common area maintenance charges and common area utility charges
(collectively "Charges") for the Leased Premises for the calendar year. Tenant
shall, thereafter, during that calendar year, pay to Landlord one-twelfth
(1/12) of the amount set forth in said statement at such time as its monthly
installment of Base Rental hereunder are due and payable. At such time as
Landlord is able to determine the actual Charges for such calendar year,
Landlord shall deliver to Tenant a statement thereof and in the event the
estimated Charges differ from the actual Charges, any adjustment necessary
shall be made to additional rental payments next coming due under this
paragraph
(a) Landlord agrees to maintain those areas around the Building and in
the Project, including parking areas, planted areas, signs and landscaped areas
which are from time to time designated by Landlord. Tenant agrees to pay to
Landlord as additional rental its pro rata share of all ground maintenance
charges and other common area charges and expenses for such maintenance around
Building and the Land ("CAM Charges"). The term "grounds maintenance" shall
include, without limitation all landscaping, planting, lawn and grounds care,
all repairs and maintenance to the grounds, signs and other common areas around
the Building and in the Project and to all sidewalks, driveways, loading areas
and parking areas. CAM Charges shall not include items of a capital nature. In
no event shall any increase in the CAM Charges exceed ten percent (10%) over
CAM Charges for the preceding year.
(b) In the event any utilities furnished to the Building or the Leased
Premises are not separately metered, Tenant shall pay to Landlord, as
additional rental, Tenant's pro rata share of the gas, water, electricity,
fuel, irrigation costs, light and heat, garbage collection services and for all
other sanitary services rendered to the Leased Premises used by Tenant.
Tenant's prorated amount shall be determined on the basis of the size of the
Leased Premises, unless landlord determines that Tenant's use of the Leased
Premises justifies a disproportionate allocation of utility costs to Tenant.
3.04 Tenant agrees to pay as additional rent to Landlord, upon demand,
its pro rata share of any utility surcharges, or any other costs levied,
assessed or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by an Federal State
Municipal or local governmental authorities in connection with the use of
occupancy of the Leased Premises.
3.05 Tenant will be entitled from time to time to audit and verify the
operations of the building and the related books and records of Landlord to
assure that the operating expenses from time to time reported by Landlord are
in keeping with the provisions of this paragraph. As to any calendar year, any
undertaking by Tenant must be initiated before the end of the following
calendar year; and absent fraud or gross negligence on Landlord's part, the
operating expenses as timely reported by Landlord for the calendar year will be
deemed controlling upon the expiration of Tenant's audit and verification
rights for such calendar year. In the event of any errors, the appropriate
party will make a correcting payment in full to the other party within thirty
(30) days after the determination and communication to all parties of the
amount of such error.
DELAY IN DELIVERY OF POSSESSION
4.01 If Landlord, for any reason whatsoever, cannot deliver possession
of the Leased Premises to Tenant at the commencement of the term of this Lease,
this Lease shall not be void or voidable, nor shall Landlord be liable to
Tenant for any loss or damage resulting therefrom but in that event there shall
be a proportionate reduction of rent covering the period between the
commencement of the term and the time when Landlord can deliver possession. Of
delay is longer than one (1) months, Landlord will provide Tenant such space
(not exceeding in the Leased Premises) as Landlord may have available, until
the Leased Premises can be completed, at no charge to Tenant. The term of this
Lease shall be extended by such delay.
USE OF LEASED PREMISES
5.01 The Leased Premises may be used and occupied only for general
manufacturing and assembly, testing, warehousing and distribution, showroom and
offices and for no other purpose or purposes, without Landlord's prior written
consent. Landlord acknowledges that Tenant's primarily business is
manufacturing of gaming devices. Tenant shall promptly comply at its sole
expense with all laws, ordinances, orders, and regulations affecting the Leased
Premises and their cleanliness, safety, occupation and use. Tenant shall not do
or permit anything to be done in or
<PAGE> 6
about the Leased Premises that will in any way increase the fire insurance upon
the building. Tenant will not perform any act or carry on any practices that
may injure the building or be a nuisance or menace to tenants of adjoining
premises. Tenant shall not cause, maintain or permit any outside storage on or
about the Leased Premises, including pallets or other refuse. The rear loading
areas of the Tenant's unit must be clean and unobstructed.
5.02 Tenant shall, at Tenants sole cost and expense, comply fully with
all environmental laws and regulations, and all other legal requirements,
applicable to Tenant's operations at, on or within, or to Tenant's use and
occupancy of, the Leased Premises. Tenant shall not (either with or without
negligence) cause or permit the escape, disposal or release of any biologically
or chemically active or other hazardous substances, or materials. Tenant shall
not allow the storage or use of such substances or materials in any manner not
sanctioned by law or by the highest standards prevailing in the industry for
the storage and use of such substances or materials, nor allow to be brought
into the Project any such materials or substances except to use in the ordinary
course of Tenant's business, and then only after written notice is given to
Landlord of the identity of such substances or materials. Without limitation,
hazardous substances and materials shall include those described in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601 et seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., any applicable state
or local laws and the regulations adopted under these acts. If any governmental
agency shall ever require testing to ascertain whether or not there has been
any release of hazardous materials by Tenant, then the reasonable costs thereof
shall be reimbursed by Tenant to Landlord upon demand as additional charges if
such requirement applies to the Leased Premises. In addition, Tenant shall
execute affidavits, representations and the like from time to time at
Landlord's request concerning Tenant's knowledge and belief regarding the
presence of hazardous substances or materials on the Leased Premises. In all
events, Tenant shall indemnify Landlord in the manner elsewhere provided in
this lease from any release of hazardous materials on the Leased Premises
occurring while Tenant is in possession, or elsewhere if caused by Tenant or
persons acting under Tenant. The within covenants shall survive the expiration
or earlier termination of the lease term.
5.03 Landlord hereby agrees to indemnify, defend and hold Tenant
harmless from and against any claim, action, damage or liability incurred by,
or filed or asserted against, Tenant, and arising out of the presence of
Hazardous Materials in, on, about, or underneath the Leased Premises and
resulting from the actions or omissions of (i) any parties in possession of the
Leased Premises prior to Tenant's possession, or (ii) Landlord or its servants,
employees, agents, representatives, contractors or invitees. Notwithstanding
anything in the foregoing to the contrary, Tenant shall have no liability to
Landlord or to any other party with respect to the presence of Hazardous
Materials in, on, about or underneath the Leased Premises unless directly
caused by the acts or omissions of Tenant, its servants, employees, agents,
representatives, contractors, or invitees.
UTILITIES
6.01 Landlord shall not be liable in the event of any interruption in
the supply of any utilities. Tenant agrees that it will not install any
equipment which will exceed or overload the capacity of any utility facilities
and that if any equipment installed by Tenant shall require additional utility
facilities, the same shall be installed by Tenant at Tenant's expense in
accordance with plans and specifications approved in writing by Landlord.
Tenant shall be solely responsible for and shall pay all charges for use or
consumption of sanitary sewer, water, gas, electricity and any other utility
services. In the event Landlord determines that it is advisable to separately
meter any utility services provided to the Leased Premises, landlord shall have
the right to install a sub-meter and bill Tenant for the actual cost thereof,
which shall be paid to Landlord within fifteen (15) days following billing.
ACCEPTANCE OF LEASED PREMISES
7.01 By entry hereunder, Tenant acknowledges that it has examined the
Leased Premises and accepts the same as being in the condition called for by
this Lease, and as suited for the uses intended by Tenant, subject to the
completion of tenant improvements as provided in Exhibit "B". Upon delivery of
possession of the Leased Premises to Tenant, Tenant agrees to execute and
deliver to Landlord a Tenant's Acceptance of Premises, in the form attached
hereto as Exhibit "C"
<PAGE> 7
ALTERATIONS, MECHANICS' LIENS
8.01 Structural alterations (including moving any interior load
bearing walls) may not be made to the Leased Premises without prior written
consent of Landlord, and any alterations of the Leased Premises excepting
movable furniture and trade fixtures shall at Landlord's option, which option
shall be exercised at the time Landlord grants its consent, become part of the
realty and belong to Landlord.
8.02 Should Tenant desire to alter the Leased Premises and Landlord
gives written consent to such alterations, at Landlord's option, Tenant shall
contract with a contractor approved by landlord for the construction of such
alterations.
8.03 Tenant may install trade fixtures, machinery or other trade
equipment in conformance with all applicable laws, statutes, ordinances, rules,
regulations, and the same may be removed upon the termination of this Lease
provided Tenant shall not be in default under any of the terms and conditions
of this Lease, and the Leased Premises are not damaged by such removal. Tenant
shall return the Leased Premises on the termination of this Lease in the same
condition as when rented to Tenant, reasonable wear and tear and casualty only
excepted. Tenant shall keep the Leased Premises, the building and property in
which the Leased Premises are situated free from any liens arising out of any
work performed for, materials furnished to, or obligations incurred by Tenant.
All such work provide for above, shall be done at such times and in such manner
as Landlord may from time to time designate. Tenant shall give Landlord written
notice five (5) days prior to employing any laborer or contractor to perform
work resulting in an alteration of the Leased Premises so that Landlord may
post a notice of non-responsibility.
QUIET CONDUCT/QUIET ENJOYMENT
9.01 Tenant shall not commit, or suffer any waste upon the Leased
Premises, or any nuisance, or other act or thing which may disturb the quiet
enjoyment of any other tenant in the Building or any building in the project in
which the Leased Premises are located.
9.02 So long as Tenant is not in default in the payment of rent, or
other charges or in the performance of any of the other terms, covenants, or
conditions of the Lease, Tenant shall not be disturbed by Landlord or anyone
claiming by, through or under Landlord in Tenant's possession, enjoyment, use
and occupancy of the Leased Premises during the original or any renewal term of
the Lease or any extension or modification thereof.
FIRE INSURANCE, HAZARDS
10.01 No use shall be made or permitted to be made of the Leased
Premises, nor acts done which might increase the existing rate of insurance
upon the building or cause the cancellation of-any insurance policy covering
the building, or any part thereof, nor shall Tenant sell, or permit to be kept,
used or sold, in or about the Leased Premises, any article which may be
prohibited by the Standard form of fire insurance policies. Tenant shall, at
its sole cost and expense, comply with any and all requirements pertaining to
the Leased Premises of any insurance organization or company, necessary for the
maintenance of reasonable fire and public liability insurance, covering the
Leased Premises, building and appurtenances.
10.02 Tenant shall maintain in full force and effect on all of its
inventory, fixtures and equipment in the Leased Premises a policy or policies
of fire and extended coverage insurance with standard coverage endorsement to
the extent of at least eighty percent (80%) of their insurable value. During
the term of this Lease the proceeds from any such policy or policies of
insurance shall be used for the repair or replacement of the fixtures, and
Landlord will sign all documents necessary or proper in connection with the
settlement of any claim or loss by Tenant. Landlord will not carry insurance on
Tenant's possessions. Tenant shall furnish Landlord with a certificate of such
policy within thirty (30) days of the commencement of this Lease, and whenever
required, shall satisfy Landlord that such policy is in full force and effect
<PAGE> 8
LIABILITY INSURANCE
11.01 Tenant, at its own expense, shall provide and keep in force with
companies acceptable to Landlord public liability insurance for the benefit of
Landlord and Tenant jointly against liability for bodily injury and property
damage in the amount of not less than Three Million Dollars ($3,000,000.00) in
respect to injuries to or death of more than one person in any one occurrence,
in the amount of not less than One Million Dollars ($1,000,000.00) per
occurrence in respect to damage to property, such limits to be for any greater
amounts as may be reasonably indicated by circumstances from time to time
existing. Tenant shall furnish Landlord with a certificate of such policy
within thirty (30) days of the commencement date of this Lease and whenever
required shall satisfy Landlord that such policy is in full force and effect.
Such policy shall name Landlord as an additional insured and shall be primary
and non-contributing with any insurance carried by Landlord. The policy shall
contain a contractual liability endorsement. The policy shall further provide
that it shall not be canceled or altered without twenty (20) days prior written
notice to Landlord.
INDEMNIFICATION
12.01 Tenant shall indemnify and hold harmless Landlord against and
from any and all claims arising from Tenant's use of the Leased Premises (other
than those arising solely from negligence of Landlord or its agents or
employees), or the conduct of its business or from any activity, work, or thing
done, permitted or suffered by the Tenant in or about the Leased Premises, and
shall further indemnify and hold harmless Landlord against and from any and all
claims arising from any breach or default in the performance of any obligation
on Tenant's part to be performed under the terms of this Lease, or arising from
any act, neglect, fault or omission of the Tenant, or of its agents or
employees and from and against all costs, attorney's fees, expenses and
liabilities incurred in or about such claim or any action or proceeding brought
relative thereto and in case any action or proceeding be brought against
Landlord by reason of any such claim, Tenant upon notice from Landlord shall
defend the same at Tenant's expense by counsel chosen by Tenant and who is
reasonably acceptable to Landlord. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons in or about the Leased Premises from any cause whatsoever
except that which is caused by the failure of Landlord to observe any of the
terms and conditions of this Lease where such failure, and Tenant hereby waives
all claims in respect thereof against Landlord.
12.02 Landlord shall indemnify Tenant and hold Tenant harmless against
and from all claims arising from the negligence or willful misconduct of
Landlord, its agents, employees or contractors, or breach of Lease by Landlord
with respect to the Leased Premises or the Project that is not insured against
or required to be insured against under the insurance policies Tenant is
required to maintain under this Lease
12.03 The obligations of Landlord and Tenant under this paragraph
arising by reason of any occurrence taking place during the term of his Lease
shall survive the termination or expiration of this Lease.
WAIVER OF CLAIMS
13.01 Tenant, as a material part of the consideration to be rendered
to Landlord, hereby waives all claims against landlord for damages to goods,
wares and merchandise in, upon or about the Leased Premises and for injury to
Tenant, its agents, employees, invitees, or third persons in or about the
Leased Premises from any cause arising at any time unless such damage is due to
Landlord's negligent act or omission and such damage is caused by an occurrence
which is not insured against or required to be insured against by Tenant under
this Lease. The parties acknowledge that it is not their intent to relieve
Landlord from liability to Tenant, but rather Tenant benefit from available
insurance coverage without subjecting Landlord to liability for losses that are
required to be insured against by Tenant under this Lease and without
subjecting Landlord to subrogation claims of any insurer.
REPAIRS
14.01 Tenant shall, at its sole cost, keep and maintain the Leased
Premises and appurtenances and every part thereof (excepting exterior walls and
roofs which Landlord agrees to
<PAGE> 9
repair) including by way of illustration and not by way of limitation all
windows, and skylights, doors, any store front and the interior of the Leased
Premises, including all plumbing, heating, air conditioning, sewer, electrical
systems and all fixtures and all other similar equipment serving the Leased
Premises in good and sanitary order, condition, and repair. Tenant shall be
responsible for all pest control within the Leased Premises, including, but not
limited to, the eradication of any ants or termites should infestation be
observed during the term of the Lease. Tenant shall, at its sole cost, keep and
maintain all utilities, fixtures and mechanical equipment used by Tenant in
good order, condition and repair. All windows shall be washed and cleaned as
often as necessary to keep them clean and free from smudges and stains. In the
event Tenant fails to maintain the Leased Premises as required herein or fails
to commence repairs (requested by Landlord in writing) within thirty (30) days
after such request, or fails diligently to proceed thereafter to compete such
repairs, Landlord shall have the right in order to preserve the Leased Premises
or portion thereof, and/or the appearance thereof, to make such repairs or have
a contractor make such repairs and charge Tenant for the cost thereof as
additional rent, together with interest at the rate of twelve percent (12%) per
annum from the date of making such payments.
14.02 Landlord agrees to keep in good repair the roof, foundations,
and exterior walls of the Leased Premises except repairs rendered necessary by
the negligence of Tenant, its agents, employees or invitees. Landlord gives to
Tenant exclusive control of Leased Premises and shall be under no obligations
to inspect said Leased Premises. Tenant shall promptly report in writing to
Landlord any defective condition known to it's Production Manager or officers
which Landlord is required to repair, and Landlord shall move with reasonable
diligence to repair b item. Failure to report such defects shall make Tenant
responsible to Landlord for any additional liability incurred by Landlord by
reason of such defects.
14.03 Tenant shall obtain upon occupancy and keep current during the
lease term a service maintenance contract on the heating, ventilation and air
conditioning (HVAC) equipment serving the Leased Premises. The contract shall
be between Tenant and a dealer authorized company acceptable to Landlord, and
shall at a minimum provide for an equipment check and tune-up service each
spring and fall, and filter and lubrication service every three months. A copy
of said contract shall be provided to Landlord, as well as any modification,
extension, renewal or replacement thereof. Provided however, at Landlord's sole
expense, Landlord agrees to inspect the HVAC system in the Leased Premises to
insure it is in good working order at lease commencement and at its cost and
expense make any repairs to the HVAC system required during the first two (2)
years of the Lease term except any repairs necessary because of Tenant's
negligent actions, omissions or misconduct.
14.04 After the first two (2) years of the Lease term, Landlord agrees
to repair, replace and correct any defects of any major component of the HVAC
system in excess of $700.00, provided that Landlord shall not have any
obligation to correct, repair or replace any major component caused by the
negligence or misconduct of Tenant, its agents, contractors, employees or
invitees. Upon any such replacement by Landlord, Tenant agrees to reimburse
Landlord for a fraction of the replacement cost of any such component equal to
the number of years remaining on the Lease divided by the useful life of the
HVAC component.
SIGNS, LANDSCAPING
15.01 Landlord shall have the right to control landscaping and Tenant
make no alterations or additions to the landscaping. Landlord shall have the
right to approve the placing of signs and the size and quality of the same.
Tenant shall have the right to place one (1) exterior sign on the Leased
Premises with the prior written consent of Landlord. Any signs not in
conformity with the Lease may be immediately removed by Landlord.
ENTRY BY LANDLORD
16.01 Tenant shall permit Landlord and Landlord's agents to enter the
Leased Premises at all reasonable times and upon reasonable notice except in
the case of an emergency for the purpose of inspecting the same or for the
purpose of maintaining the building, or for the purpose of making repairs,
alterations, or additions to any portion of the building, including the
erection and maintenance of such scaffolding, canopies, fences and props as may
be required, or for the purpose of posting notices of non-responsibility for
alterations, additions, or repairs, or for the purpose of showing the Leased
Premises to prospective tenants, or within the last six (6) months of the Lease
<PAGE> 10
term placing upon the building any usual or ordinary "for sale" signs which
clearly indicate that it is only the real estate for sale, without any rebate
of rent and without any liability to Tenant for any loss of occupation or quiet
enjoyment of the Leased Premises thereby occasioned; and shall permit Landlord
at any time within six (6) months prior to the expiration of this Lease, to
place upon the Leased Premises any usual or ordinary "to let" or "to lease"
signs. For each of the aforesaid purposes, Landlord shall at all times have and
retain a key with which to unlock all of the exterior doors about the Leased
Premises.
TAXES AND INSURANCE INCREASE
17.01 Tenant shall pay before delinquency and all taxes, assessments,
license fees, and public charges levied, assessed, or imposed and which become
payable during the Lease upon Tenant's fixtures, furniture appliances and
personal property installed or located in the Leased Premises.
17.02 Tenant shall pay, as additional rental during the term of this
Lease and any extension or renewal thereof, the amount by which all taxes (as
herein defined) for each tax year exceeds all taxes for 1998. In the event the
Leased Premises are less than the area of the entire property assessed for such
taxes for any such tax year, then the tax for any such year applicable to the
Leased Premises shall be determined by proration on the basis that the rentable
floor area of the Leased Premises bears to the rentable floor area of the
entire property assessed. The term "taxes" shall include all ad valorem taxes,
special assessments, and governmental charges assessed against the Building or
the Land; and such term shall include any reasonable expenses, including fees
and disbursements of attorneys, tax consultants, arbitrators, appraisers,
experts and other witnesses, incurred by Landlord in contesting any taxes or
the assessed valuation of all or any part of the Building or the Land to the
extent of savings. If the final year of the lease term fails to coincide with
the tax year, then any excess for the tax year during which the term ends shall
be reduced by the pro rata part of such tax year beyond the lease term. The
agent's commission shall not apply to any such additional rental resulting from
the provisions of this paragraph.
17.03 Tenant agrees to pay the amount for all taxes levied upon or
measured by the rent payable hereunder, whether as a so-called sales tax,
transaction privilege tax, excise tax, or otherwise (but no income taxes of
Landlord shall be payable by Tenant). Such taxes shall be due and payable at
the same time as and in addition to each payment of rent.
17.04 Commencing in the year 1999 and during each remaining year of
the lease term or any extension or renewal thereof, in the event that the
insurance premiums payable by the Landlord for insurance coverage on the
property are increased, whether such increase in the valuation of the building,
or in the applicable rate of insurance, then Tenant agrees to pay Landlord as
additional rental, Tenant's pro rata share of the increase in said insurance
premiums over the base amount paid in the year 1998. The term "insurance" shall
include all fire and extended coverage insurance on the Building and all
liability insurance coverage on the common areas of the Building, and the
grounds, sidewalks, driveways and parking areas on the Land together with such
other insurance coverages, including, but not limited to, rent interruption
insurance, as are from time to time obtained by Landlord. Tenant's pro rata
share shall be based on the square footage of the Leased Premises leased to
Tenant (as specified in paragraph 1.01 hereof) compared to the total square
footage of leasable space in the entire building. If during the final year of
the Lease, or any extension or renewal thereof, the term does not coincide with
the year upon which the insurance rate is determined, the increase in premiums
for the: portion of that year; shall be prorated according to the number of
months during which Tenant is in possession of the Leased Premises.
17.05 On or about January 1 of each calendar year during the term of
this Lease, Landlord shall provide Tenant with a good faith estimate of the
amount by which taxes and insurance will exceed the base amounts during such
calendar year. Tenant shall thereafter pay one-twelfth (1/12) of its pro rata
share of such increase at such time as its monthly installments of Base Rental
hereunder are due and payable. When the actual bills have been received by
Landlord, Landlord shall notify Tenant of the actual taxes and insurance for
such calendar year. If Tenant has paid more than it would have paid had the
actual bills been known Landlord shall credit such excess against the next
additional rent payments coming due; if Tenant has not paid enough Tenant shall
pay the remainder to Landlord within fifteen (15) days following receipt of a
statement from Landlord.
<PAGE> 11
17.06 Tenant may, within the respective times and in the manner
prescribed by law for such purposes, in its own name and behalf or, if
necessary or appropriate in order to perfect such petition, in the name and on
behalf of Landlord (subject to the provisions of paragraph 17.07 hereof),
petition for reduction of the assessed valuation of the Building and the Land,
claim a refund of real estate taxes or assessments or otherwise challenge the
amount, validity or applicability of any real estate tax or assessment
pertaining to the Leased Premises (a "Tax Protest"); provided that (a) Tenant
shall pay such tax or assessment under protest prior to delinquency, if such
Tax Protest does not suspend the collection thereof from any party, and (b) no
portion of the Leased Premises or any rentals payable hereunder or Landlord's
title or interest herein would be in any danger of being sold, forfeited,
interrupted or lost as a result of such Tax Protest. Tenant shall prosecute any
Tax Protest with due diligence and continuity. Tenant shall provide Landlord
with copies of any application, petition or other pleading filed in connection
with any Tax Protest before filing Landlord may join with Tenant in making any
such application, petition or other pleading, retain co-counsel, attend
hearings, present evidence and arguments, and generally participate in the
conduct of the tax Protest. If and to the extent that Landlord is requested to
do so by Tenant, Landlord agrees to cooperate with Tenant in good faith in
connection with any Tax Protest undertaken by Tenant, provided Tenant promptly
reimburses Landlord for any expense in connection therewith. Subject to
Landlord's right to reimbursement as set forth below, Tenant shall be entitled
to receive and retain any refund of real estate taxes or assessments obtained
by Tenant, to the extent such tax or assessment was paid by Tenant under this
Article 17. Nothing contained in this paragraph 17.06 shall limit or restrict
Landlord's right to undertake any Tax Protest with respect to the Leased
Premises; to the extent Landlord obtains any reduction in or refund of real
estate taxes or assessments, Landlord's costs of such Tax Protest shall be
additional rent payable by Tenant to Landlord within ten (10) days of Tenant's
receipt of Landlord's invoice therefore, but Landlord shall not be entitled to
reimbursement by Tenant for the costs of such Tax Protest in excess of any
reduction and/or refund of such real estate taxes or assessments so obtained.
17.07 In the event Tenant undertakes or files any Tax Protest in the
name of Landlord, Tenant shall promptly provide Landlord written notice
thereof, and Tenant acknowledges that Tenant's use of Landlord's name shall be
subject to the indemnification of Landlord contained in Article 12 hereof.
Tenant shall give Landlord five (5) days advance written notice of any such use
of Landlord's name.
17.08 The provisions of paragraphs 17.01, 17.02, 17.03, 17.04, 17.05,
17.06 and 17.07 hereof shall survive the expiration or earlier termination of
this Lease.
ABANDONMENT
18.01 Tenant shall not abandon the Leased Premises at any time during
the term of this Lease; and if Tenant shall abandon or surrender the Leased
Premises, or be dispossessed by process of law, or otherwise, any personal
property belonging to Tenant and left on the Leased Premises shall, at the
option of the Landlord, be deemed abandoned and be and become the property of
Landlord.
18.02 Tenant shall have the right to vacate as long as (a) rental is
kept current, (b) security and maintenance is kept at acceptable levels and (c)
as long as any insurance rider required in the State of Georgia which maintains
the required protection is provided by Tenant.
DESTRUCTION
19.01 If the Leased premises or any portion thereof are destroyed by
storm, fire, lightning, earthquake or other casualty, Tenant shall immediately
notify Landlord. In the event the Leased Premises cannot, in Landlord's
reasonable judgment, be restored within one hundred twenty (120) days of the
date of such damage or destruction, this Lease shall terminate as of the date
of destruction, and all rent and other sums payable by Tenant hereunder shall
be accounted for as between Landlord and Tenant as of the date of such
destruction. Landlord shall notify Tenant within thirty (30) days of the date
of the damage or destruction whether the Leased Premises can be restored within
one hundred twenty (120) days. If this Lease is not terminated as provided in
this paragraph, Landlord shall, to the extent insurance proceeds payable on
account of such damage or destruction are available to Landlord (with the
excess proceeds belonging to Landlord), within a reasonable time, repair,
restore, rebuild, reconstruct or replace the damaged or destroyed portion of
the Leased Premises to a condition substantially similar to the condition which
existed prior to the
<PAGE> 12
damage or destruction. Provided, however, Landlord shall only be required to
repair, restore, rebuild, reconstruct and replace the Landlord's Work shown on
Exhibit "B", and Tenant shall, at its sole cost and expense, upon completion of
the Landlord's Work, repair, restore, rebuild, reconstruct and replace, as
required, any and all improvements installed in the Leased Premises by Tenant
and all trade fixtures, personal property, inventory, signs and other contents
in the Leased Premises, and all other repairs not specifically required of
Landlord hereunder; in a manner and to at least the condition existing prior to
the damage to the extent of Tenant's insurance proceeds. Tenant's obligation to
pay Base Rent shall abate until Landlord has repaired, restored, rebuilt
reconstructed or replaced the Leased Premises, as required herein, proportion
to the part of the Leased Premises which are unusable by Tenant. If the damage
or destruction is due to the act, neglect, fault or omission of Tenant; there
shall be no rent abatement except to the extent of rent loss insurance. In the
event of any dispute between Landlord and Tenant relative to the provisions of
this paragraph, they may each select an arbitrator, the two arbitrators so
selected shall select a third arbitrator and the three arbitrators so selected
shall hear and determine the controversy and their decision thereon shall be
final and binding on both Landlord and Tenant who shall bear the cost of such
arbitration equally between them. Landlord shall not be required to repair any
property installed in the Leased Premises by Tenant. Tenant waives any right
under applicable laws inconsistent with the terms of this paragraph and in the
event of a destruction agrees to accept any offer by Landlord to provide Tenant
with comparable space within the project in which the Leased Premises are
located on the same terms as this Lease. Notwithstanding the provisions of this
paragraph, if any such damage or destruction occurs within the final two (2)
years of the term hereof, then Landlord, in its sole discretion, may, without
regard to the aforesaid 120-day period, terminate this Lease by written notice
to Tenant.
ASSIGNMENT AND SUBLETTING
20.01 Landlord shall have the right to transfer and assign, in whole
or in part its rights and obligations in the building and property that are the
subject of this Lease. Tenant shall not assign this Lease or sublet all or any
part of the Leased Premises without the prior written consent of the Landlord,
which consent shall not be unreasonably withheld, conditioned or delayed. In
the event of any assignment or subletting, Tenant shall nevertheless at all
times, remain fully responsible and liable for the payment of the rent and for
compliance with all of its other obligations under the terms, provisions and
covenants of this Lease. If all or any part of the Leased Premises are then
assigned or sublet, Landlord in addition to any other remedies provided by this
Lease or provided by law, may at its option, collect directly from the assignee
or subtenant all rents becoming due to Tenant by reason of the assignment or
sublease, and Landlord shall have a security interest in all properties on the
Leased Premises to secure payment of such sums. Any collection directly by
Landlord from the assignee or subtenant shall not be construed to constitute a
novation or a release of Tenant from the further performance of its obligations
under this Lease. In the event that Tenant sublets the Leased Premises or any
part thereof, or assigns this Lease and at any time receives rent and/or other
consideration which exceeds that which Tenant would at that time be obligated
to pay to Landlord, Tenant shall pay to Landlord 100% of the gross excess in
such rent less reasonable costs of subleasing (including commissions,
advertising costs, legal costs, and tenant improvement costs) as such rent is
received by Tenant and 100% of any other consideration received by Tenant from
such subtenant in connection with such sublease or, in the case of any
assignment of this Lease by Tenant, Landlord shall receive 100% of any
consideration paid to Tenant by such assignee in connection with such
assignment. In addition, should Landlord agree to an assignment or sublease
agreement, Tenant will pay to Landlord on demand the sum of $500.00 to
partially reimburse Landlord for its costs, including reasonable attorney's
fees, incurred in connection with processing such assignment or subletting
request.
INSOLVENCY OF TENANT
21.01 Either (a) the appointment of a trustee to take possession of
all or substantially all of the assets of Tenant, or (b) a general assignment
by Tenant for the benefit of creditors, or (c) any action taken or suffered by
Tenant under any insolvency or bankruptcy act shall, if any such appointments,
assignments or action continues for a period of thirty (30) days, constitute a
breach of this Lease by Tenant, and Landlord may at its election without
notice, terminate this Lease and in that event be entitled to immediate
possession of the Leased Premises and damages as provided below.
<PAGE> 13
BREACH BY TENANT
22.01 In the event of a monetary default by Tenant, which is not cured
within ten (10) days of receipt of written notice by Tenant of such default or
in the event of a nonmonetary default by Tenant which is not cured within thirty
(30) days of receipt of written notice by Tenant of such default, Landlord in
addition to any and all other rights or remedies that it may have hereunder, at
law or in equity shall have the right to either terminate this Lease or from
time to time, without terminating this Lease relet the Leased Premises or any
part thereof for the account and in the name of Tenant or otherwise, for any
such term or terms and conditions as Landlord in its sole discretion may deem
advisable with the right to make reasonable alterations and repairs to the
Leased Premises. Tenant shall pay to Landlord, as soon as ascertained, the costs
and expenses incurred by Landlord in such reletting or in making such reasonable
alterations and repairs. Should such rentals received from time to time from
such reletting during any month be less than that agreed to be paid during that
month by Tenant hereunder, the Tenant shall pay such deficiency to Landlord.
Such deficiency shall be calculated and paid monthly.
22.02 No such reletting of the Leased Premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a notice of
such intention be given to Tenant or unless the termination thereof decreed by a
court of competent jurisdiction. Notwithstanding any such reletting without
termination, Landlord may immediately or at any time thereafter terminate this
Lease and this Lease shall be deemed to have been terminated upon receipt by
Tenant of notice of such termination; upon such termination Landlord shall
recover from Tenant all damages that Landlord may suffer by reason of such
termination including, without limitation, all arrearages in rentals, costs,
charges, additional rentals, and reimbursements, the cost (including court costs
and attorneys' fees actually incurred) of recovering possession of the Leased
Premises, the actual or estimated (as reasonably estimated by Landlord) cost of
any alteration of or repair to the Leased Premises which is necessary or proper
to prepare the same for reletting and, in addition thereto, Landlord shall have
and recover from Tenant the difference between the present value (discounted at
a rate per annum equal to the discount rate of the Federal Reserve Bank of
Atlanta at the time the Event of Default occurs) of the rental to be paid by
Tenant for the remainder of the lease term, and the present value (discounted at
the same rate) of the rental for the Leased Premises for the remainder of the
lease term, taking into account the cost, time and other factors necessary to
relet the Leased Premises; provided, however that such payment shall not
constitute a penalty or forfeiture, but shall constitute full liquidated damages
due to Landlord as a result of Tenant's default Landlord and Tenant acknowledge
that Landlord's actual damages in the event of a default by Tenant under this
Lease will be difficult to ascertain, and that the liquidated damages provided
above represent the parties' best estimate of such damages. The parties
expressly acknowledge that the foregoing liquidated damages are intended not as
a penalty, but as full liquidated damages, as permitted by Section 1367 of the
Official Code of Ga. Annotated.
ATTORNEY'S FEES
23.01 If Landlord and Tenant litigate any provision of this Lease or
the subject matter of this Lease, the unsuccessful litigant will pay to the
successful litigant all costs and expenses, including reasonable attorneys' fees
and court costs, incurred by the successful litigant at trial and on any appeal.
CONDEMNATION
24.01 If, at any time during the term of this Lease, title to the
entire Leased Premises should become vested in a public quasi-public authority
by virtue of the exercise of expropriation; appropriation condemnation or other
power in the nature of eminent domain, or by voluntary transfer from the owner
of the Leased Premises under threat of such a taking then this Lease shall
terminate as of the time of such vesting of title, after which neither party
shall be further obligated to the other except for occurrence antedating such
taking. The same results shall follow if less than the entire Leased Premises be
thus taken, or transferred in lieu of such a taking, but to such extent that it
would be legally and commercially impossible for Tenant to occupy the portion of
the Leased Premises remaining, and impossible for Tenant to reasonably conduct
his trade or business therein.
24.02 Should there be such a partial taking or transfer in lieu
thereof, but not to such an extent as to make such continued occupancy and
operation by Tenant an impossibility, then this
<PAGE> 14
Lease shall continue on all of its same terms and conditions subject only to an
equitable reduction in rent proportionate to such taking.
24.03 In the event of any such taking or transfer, whether of the
entire Leased Premises, or a portion thereof, it is expressly agreed and
understood that all sums awarded, allowed or received in connection therewith
shall belong to Landlord, and any rights otherwise vested in Tenant are hereby
assigned to Landlord, and Tenant shall have no interest in or claim to any such
sums or any portion thereof, whether the same be for the taking of the property
or for damages or otherwise. Nothing herein shall be construed, however, to
preclude Tenant from prosecuting any claim directly against the condemning
authority for loss of business, moving expenses, damage to, and cost of, trade
fixtures, furniture and other personal property belonging to Tenant
NOTICES
25.01 All notices, statements, demands, requests, consents, approvals,
authorization, offers, agreements, appointments or designations under this
Lease by either party to the other shall be in writing and shall be
sufficiently given and served upon the other party, (i) by depositing same in
the United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested; (ii) by recognized
overnight, third party prepaid courier service (such as Federal Express),
requiring signed receipt; (iii) by delivering the same in person to such party;
or (iv) by prepaid telegram, telecopy or telex with delivery of an original
copy of any such notice delivered pursuant to (ii) or (iii) above to be
received no later than the next business day. Notice personally delivered or
sent by courier service, telegram, telecopy or telex shall be effective upon
receipt. Any notice mailed in the foregoing manner as set forth in (i) above
shall be effective three (3) business days after its deposit in the United
States mail. Either party may change its address for notices by giving notice
to the other as provided above. For purposes of notice, the addresses of the
parties shall be as follows:
(a) To Tenant at the Leased Premises, and to 1284 Miller Road, Avon,
Ohio 44011, Attention: Al Johnson;
(b) To Landlord, addressed to Landlord at 4497 Park Drive, Norcross,
Georgia 30093, with a copy to such other place as Landlord may
from time to time designate by notice to Tenant.
WAIVER
26.01 The waiver by Landlord of any breach of any term, covenant, or
condition herein contained shall not be deemed to be a waiver of such term,
covenant, or condition or any subsequent breach of the same or any other term,
covenant, or condition herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant of any terms covenant, or condition of this Lease, other than
the failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent.
EFFECT OF HOLDING OVER
27.01 If Tenant should remain in possession of the Leased Premises
after the expiration of the lease term and without executing a new lease, then
such holding over shall be construed as a tenancy from month to month, subject
to all the conditions, provisions, and obligations of this Lease insofar as the
same are applicable to a month to month tenancy, except that the rent payable
pursuant to subparagraph 3.01 hereof shall be 125% of the rent payable pursuant
to subparagraph 3.01 for the first three (3) months after the Lease expiration,
and 150% of the rent payable pursuant to subparagraph 3.01 after the first
three (3) months after the Lease expiration up to a maximum of six (6) months.
SUBORDINATION
28.01 This Lease, at Landlord's option, shall be subordinate to any
first priority mortgage, first priority deed of trust, or first priority
security deed now or hereafter placed upon the real property of which the
Leased Premises are a part and to any and all advances made on the security
thereof and to all renewals, modifications, consolidations, replacements and
extensions thereof;
<PAGE> 15
provided that Landlord shall use all reasonable efforts to obtain a
subordination, non-disturbance and attornment agreement from the current
mortgagee and that any future mortgagee shall execute a subordination,
non-disturbance and attornment agreement in a form similar to that attached as
Exhibit "D".
28.02 Tenant agrees to execute any documents required to effectuate
such subordination or to make this Lease prior to the lien of any such
mortgage, deed of trust, or security deed, as the case may be, including
specifically subordination, non-disturbance and attornment agreement in the
form hereto attached as Exhibit "D", and failing to do so within ten (10) days
after written demand, does hereby make, constitute and irrevocably appoint
Landlord as Tenant's attorney in fact and in Tenant's name, place and stead, to
do so.
ESTOPPEL CERTIFICATE
29.01 Upon ten (10) days notice from Landlord to Tenant, Tenant shall
deliver a certificate dated as of the first day of the calendar month in which
such notice is received, executed by an appropriate officer, partner or
individual, in the form as Landlord may require and stating but not limited to
the following: (I) the commencement date of this Lease; (ii) the space occupied
by Tenant hereunder; (iii) the expiration date hereof; (iv) a description of
any renewal or expansion options; (v) the amount of rental currently and
actually paid by Tenant under this Lease; (vi) the nature of any default of
claimed default hereunder by Landlord and (vii) that Tenant is not in default
hereunder nor has any event occurred which with the passage of time or the
giving of notice would become a default by Tenant hereunder.
PARKING
30.01 Tenant shall be entitled to the exclusive use of one hundred
twelve (112) parking spaces as shown in Exhibit "F". There will be no assigned
parking unless Landlord, in its sole discretion may deem advisable. Tenant
agrees to park all Tenant's trucks in the parking spaces provided at the rear
of the building. "Parking" as used herein means the use by Tenants employees,
its visitors, invitees, and customers for the parking of motor vehicles for
such periods of time as are reasonably necessary in connection with use of
and/or to the Leased Premises. No vehicle may be repaired or serviced in the
parking area and any vehicle deemed abandoned by Landlord will be towed from
the project and all costs therein shall be borne by the Tenant. All driveways,
ingress and egress, and all parking spaces are for the joint use of all
tenants. No area outside of the Leased Premises shall be used by Tenant for
storage without Landlord's prior written permission. There shall be no parking
permitted on any of the streets or roadways located in Gwinnett Park.
MORTGAGE PROTECTION
31.01 In the event of any default on the part of landlord, Tenant will
give notice by registered or certified mail to any beneficiary of a deed or
trust or holder of a security deed or mortgage covering the Leased Premises
whose address shall have been furnished it, and shall offer such beneficiary or
holder a reasonable opportunity to cure the default, including time to obtain
possession of the Leased Premises by power of sale or a judicial foreclosure,
if such should prove necessary to effect a cure (but no more than 90 days).
PROTECTIVE COVENANTS
32.01 This Lease is subject to the Protective Covenants of Gwinnett
Park, and to such rules and regulations as may hereafter be adopted and
promulgated. In addition, Tenant shall comply with all covenants, restrictions
and other matters of record in the deed records of the county in which the
Leased Premises are located which affect or encumber the Leased Premises, the
Building or the Land.
RELOCATION
33.01 Intentionally deleted.
BROKERAGE COMMISSIONS
34.01 Tenants Agent and Landlord's Agent (collectively, "Agent") shall
each be entitled to
<PAGE> 16
receive a commission in the amounts, and upon the terms and conditions,
contained in a commission agreement between Landlord and such parties. Landlord
shall indemnify and hold harmless Tenant from any costs associated with such
commissions.
34.02 Tenant warrants and represents to Landlord that, other than
Agent, no other party is entitled, as a result of the actions of Tenant, to a
commission or other fee resulting from the execution of this Lease; and in the
event Tenant extends or renews this Lease, or expands the Leased Premises, and
Tenant's Agent is entitled to a commission under the above referenced commission
agreement, Tenant shall pay all commissions and fees payable to any party (other
than Tenant's Agent) engaged by Tenant to represent Tenant in connection
therewith. Landlord warrants and represents to Tenant that, except as set forth
above, no other party is entitled, as a result of the actions of Landlord, to a
commission or other fee resulting from the execution of this Lease. Landlord and
Tenant agree to indemnify and hold each other harmless from any loss, cost,
damage or expense (including reasonable attorneys' fees) incurred by the
nonindemnifying party as a result of the untruth or incorrectness of the
foregoing warranty and representation, or failure to comply with the provisions
of this subparagraph.
34.03 Tenant - Agent is representing Tenant in connection with this
Lease, and is not representing Landlord. Landlord's Agent, or employees of
Landlord or its affiliates, are representing Landlord and are not representing
Tenant.
34.04 The parties acknowledge that certain officers, directors,
shareholders, or partners of Landlord or its general partner(s), are licensed
real estate brokers and/or salesmen under the laws of the State of Georgia.
Tenant consents to such parties acting in such dual capacities.
MISCELLANEOUS PROVISIONS
A. Whenever the singular number is used in this Lease and when required
by the context, the same shall include the plural, and the masculine gender
shall include the feminine and neuter genders, and the word "person" shall
include corporation, firm or association. If there be more than one tenant, the
obligations imposed upon Tenant under this Lease shall be joint and several.
B. The headlines or titles to paragraphs of this Lease are for
convenience only and shall have no effect upon the construction or
interpretation of any part of this Lease.
C. This instrument contains all of the agreements and conditions made
between the parties to this Lease and may not be modified orally or in any
other manner than by agreement in writing signed by all parties to this Lease.
D. Where the consent of a party is required, such consent will not be
unreasonably withheld or delayed.
E. This Lease shall create the relationship of Landlord and Tenant
between Landlord and Tenant; no estate shall pass out of Landlord; Tenant has
only a usufruct, not subject to levy and/or sale and not assignable by Tenant
except as provided in paragraph 20.01 hereof.
F. Except as otherwise expressly stated; each payment required to be
made by Tenant shall be in addition to and not in substitution for other
payments to be made by Tenant.
G. All covenants and agreements to be performed by Tenant under any of
the terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent.
H. No payment by Tenant or receipt by Landlord of a lesser amount than
any installment or payment of rent due shall be deemed to be other than on
account of the amount due, and no endorsement or statement on any check or
payment of rent shall be deemed an accord and satisfaction. Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such installment or payment of rent, or pursue any other remedies
available to Landlord.
I. Subject to paragraph 20, the terms and provisions of this Lease
shall be binding upon and inure to the benefit of the heirs, executors,
administrators, successors, and assigns of Landlord and
<PAGE> 17
Tenant. In the event of any conveyance by Landlord of its interest in and to
the Leased Premises, the Building and/or the Land, all obligations, except for
repayment of Tenant's security deposit, under this Lease of the conveying party
shall cease and Tenant shall thereafter look solely to the party to whom the
Leased Premises were conveyed for performance of all of Landlord's duties and
obligations under this Lease.
J. Tenant acknowledges and agrees that Landlord shall not provide
guards or other security protection for the Leased Premises and that any and
all security protection shall be the sole responsibility of Tenant.
K. This Lease shall be governed by Georgia law.
L. Time is of the essence of each term and provision of this Lease.
M. Tenant shall not record this Lease or a memorandum thereof without
the written consent of Landlord. Upon the request of Landlord, Tenant shall
join in the execution of a memorandum or so-called "short-form" of this Lease
for the purpose of recordation. Said memorandum or short form of this Lease
shall describe the parties, the Leased Premises and the lease term, and shall
incorporate this Lease by reference.
N. Landlord's liability for performance of its obligations under the
terms of this Lease shall be limited to its interest in the Leased Premises
IN WITNESS WHEREOF, the parties hereto who are individuals have set
their hands and seals, and the parties who are corporations have caused this
instrument to be duly executed by its proper officers and its corporate seal to
be affixed, as of the day and year first above written.
Signed, sealed and delivered LANDLORD:
as to Landlord, in the WEEKS REALTY, L.P.
presence of: a Georgia limited partnership
- ---------------------------- By: Weeks GP Holdings, Inc.
A Georgia corporation
Its sole general partner
- ---------------------------- ----------------------------------------
Notary Public Name:
Its:
Signed, sealed and delivered TENANT:
As to Tenant, in the presence
Of: LEISURE TIME TECHNOLOGY,
INC.
By:
- -------------------------- -------------------------------------
Name:
-----------------------------------
Its:
- -------------------------- ------------------------------------
Notary Public
ATTEST:
By:
-------------------------------------
(Corporate Seal) Name:
-----------------------------------
Its:
------------------------------------
<PAGE> 18
EXHIBIT "D"
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT, made as of the___ day of ___________, 19__ between
_______________________, with offices at ______________________________
("Tenant") and ____________________________________(herein, together with its
successors, transferees and assigns. the "Mortgagee");
WITNESSETH:
WHEREAS, Mortgagee is about to or has heretofore granted to
__________________ , a Georgia limited partnership (the "owner") a first
mortgage loan, which loan is secured by a security deed (herein "Mortgage")
dated as of ____________ 199__ and duly recorded on ______________, 199__ in
the land records of Gwinnett County, Georgia and
WHEREAS, the Mortgage is to be a first and prior lien upon the Owner's
fee estate in the real property described in Exhibit "A" annexed hereto
("Mortgaged Premises"); and
WHEREAS, Tenant is occupying a portion of the Mortgaged Premises under
a lease dated as of ________________ ,199__ in which Owner is Landlord (the
"Lease") covering that portion of the Mortgaged Premises therein more
particularly described (the "Leased Premises"); and
WHEREAS, Tenant desires to be assured of its continued and undisturbed
occupancy of the Leased Premises should the Mortgage be foreclosed or the
Mortgaged Premises sold pursuant to any power of' sale contained therein and
Mortgagee is agreeable thereto.
NOW, THEREFORE, in consideration of .the mutual covenants contained in
this Agreement and in further consideration of the sum of ONE DOLLAR ($1.00)
each to the other in hand paid, the receipt whereof is hereby acknowledged,
Tenant and Mortgagee mutually covenant and agree as follows:
FIRST: The Lease and all of Tenant's rights, interest and estate
therein and thereunder are hereby made subject and subordinate to the lien of
the Mortgage and to any extensions, renewals, replacements, modifications,
additions or consolidations thereof and to all rights, title and interest of
Mortgagee and its successors and assigns therein and thereunder.
SECOND: In the event, however, proceedings shall ever be instituted by
Mortgagee to foreclose or liquidate the Mortgage, the Tenant's possession of
its leased portion of the Mortgaged Premises shall not be disturbed by the
foreclosure proceedings and the Mortgaged Premises shall be sold at any
foreclosure sale subject to Tenant's possession on condition that:
(a) there shall be, at the time of commencement of foreclosure
proceedings, as well as all subsequent times, no default by Tenant in the due
and timely observance and performance of any covenant and agreement in the
Lease to be observed and performed by Tenant; and
(b) the Tenant shall not have entered into any agreement modifying any
term, condition or agreement of the Mortgagee-approved Lease without the prior
written consent of Mortgagee.
THIRD: Tenant shall attorn to Mortgagee while Mortgagee is in
possession of the Mortgaged Premises, or to a Receiver appointed in any action
or proceeding to foreclose the Mortgage. In the event of the completion of
foreclosure proceedings and sale of the Mortgaged Premises or in the event the
Mortgagee should otherwise acquire possession of the Mortgaged Premises, the
Tenant will promptly upon demand attorn to the purchaser at the foreclosure
sale or to the Mortgagee, as the case may be, and will recognize such purchaser
or the Mortgagee as the Tenant's landlord. The Tenant agrees to execute and
deliver, at any time and from time to time, upon the request of the Mortgagee
or the purchaser at the foreclosure sale, as the case may be, any instrument
which may be necessary or appropriate to such successor landlord to evidence
such attornment The Tenant shall, upon demand of the Mortgagee or any Receiver
or purchaser at the foreclosure sale, pay to the Mortgagee or to such Receiver
or purchaser, as the case may be, all rental monies then due or as they
thereafter become due.
<PAGE> 19
FOURTH: Upon the attornment provided for in preceding Paragraph THIRD
the Tenant's occupancy shall thereafter be in full force and effect as under a
direct Lease between Mortgagee, the Receiver or the purchaser at the
foreclosure sale, as the case may be, and Tenant. It is specifically understood
and agreed that Mortgagee or any such Receiver or purchaser shall not be:
(a) liable for any act, omission, negligence or default of any prior
landlord, or
(b) subject to any offsets, claims or defenses which Tenant might have
against any prior landlord; or
(c) bound by any rent or additional rent which Tenant might have paid
for more than one month in advance to any prior landlord; or
(d) bound by any amendment or modification of the Lease made without
the prior written consent of the Mortgagee.
FIFTH: On and after the date Tenant in good standing attorns to
Mortgagee or any Receiver or subsequent owner in pursuance of its agreement
herein set forth, Mortgagee, the Receiver or subsequent owner will undertake
and perform all subsequent obligations of the Landlord as set forth in the
Lease for the benefit of and undisturbed occupancy of Tenant under the Lease.
SIXTH: Tenant agrees it will not amend, modify nor abridge the Lease
in any way, nor cancel or surrender the same without prior written approval of
the Mortgagee other than by reason of a continued uncured material default of
the landlord under the Lease, nor will the Lease ever merge into the fee in the
event that Mortgagee acquires fee title to the Mortgaged Premises.
SEVENTH: Any notices or other communication to be given hereunder by
either party shall be in writing and shall be deemed to have been sufficiently
given or served for all purposes if sent by registered or certified mail with
return receipt requested to the other part hereto at its address above stated
or such other address of which written notification has been timely given to
the other party.
EIGHTH: Mortgagee has and shall have the continuing right to execute
and record in the Land Records of Gwinnett County, Georgia at any time, in its
unilateral discretion, a Declaration of Subordination for the purpose of
thereby subordinating its rights, title and interest in and under the Mortgage
to the rights, title and interest of Tenant under the Lease. Such Declaration
of Subordination shall, at Mortgagee's election, operate, function and be in
full force and effect for whatever period of time Mortgagee declares therein
that it shall be in force not exceeding the term of the Lease and any
extensions thereof and the said Declaration may be voided unilaterally by
Mortgagee when it so elects.
NINTH: Tenant waives any and all rights it may have to execute and
record after the date hereof any document purporting to again or further
subordinate its right, title or interest under the Lease to the lien of either
the Mortgage or any other mortgage or deed of trust or any ground lease or any
agreement modifying or amending the Mortgage except with the written consent of
Mortgagee.
TENTH: This Agreement cannot be changed orally but only in writing
signed by both parties hereto.
ELEVENTH: This Agreement may be recorded by either party at its own
expense in the Land Records of Gwinnett County, Georgia whenever, in its sole
discretion, either party elects so to do.
TWELFTH: All of the terms, covenants and conditions hereof shall run
with the Mortgaged Premises and shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, acknowledged and delivered the day and year first above
written.
SIGNED, SEALED AND DELIVERED TENANT:
In the presence of:
- ----------------------------- ----------------------------------
- -----------------------------
MORTGAGEE:
- ----------------------------- ----------------------------------
- -----------------------------
The undersigned Owner of the leased and mortgaged premises hereby
consents to the foregoing Agreement and agrees to be bound by and subject to
the terms thereof.
By:
-------------------------------
<PAGE> 21
EXHIBIT "E"
SPECIAL STIPULATIONS
Option to purchase:
(1) Landlord hereby grants to Tenant or affiliates, shareholders; or offices
the option to purchase the Leased Premises in accordance with this Exhibit "E"
(the "Option"). The Option shall be exercisable only at least three (3) months
prior to the last day of the second year of the Lease term with closing to
occur on the last day of the second year of the Lease term (the "First Option")
or at least six (6) months prior to the forty-second (42nd) month of the Lease
term (the "Second Option"). Tenant shall have the right to exercise the option
by delivering to Landlord written notice of such exercise (the "Exercise
Letter") at least three (3) months prior to the last day of the second year of
the Lease term or at least six (6) months prior to the forty-second (42nd)
month of the Lease term. Simultaneously with the delivery to landlord of the
Exercise Letter, and as a condition to the effective exercise thereof, Tenant
shall deliver to Landlord earnest money in the amount of One Hundred Thousand
and 00/100 Dollars ($100,000.00). If Tenant fails to exercise the First Option
by delivering the Exercise Letter to Landlord at least three (3) months prior
to the last day of the second year of the Lease term or for the Second Option
at least six (6) months prior to the forty-second (42nd) month of the Lease
term, then the Option shall terminate and be null and void. In addition, the
Option (and all rights of Tenant to purchase the Leased Premises) shall
terminate upon any termination of this Lease at any time prior to a Closing,
whether or not the Option has been exercised prior to the date of termination,
including any termination resulting from an uncured Event of Default by Tenant
under this Lease.
(2) The closing of the purchase and sale (the "Closing") shall be held in
Atlanta, Georgia, at a place, time and on a date designated by Landlord by
written notice to Tenant but shall be within ninety (90) days, in the event of
the First Option, and within six (6) months in the event of the Second Option
from the delivery of the Exercise Letter (provided in either case that if such
day is a Saturday, Sunday or legal holiday, the date of Closing shall be the
next preceding business day). In the event that Tenant has exercised the
Option, but the Closing fails to occur on or before the required date of
Closing (other than as a result of Landlord's default) then the Option shall
terminate.
(3) If the Closing occurs prior to the last day of the second year of the Lease
terms then the purchase price for the Leased Premises to be paid by Tenant: to
Landlord at the Closing shall be Two Million Five Hundred Sixty-five Thousand
Dollars ($2,565,000.00) plus (ii) all sums of money owed by Tenant to Landlord
under this Lease or otherwise but not previously paid up to the date of closing
less (iii) the security deposit paid by Tenant.
(4) If the Tenant exercises the Second Option, then the purchase price for the
Leased Premises to be paid by Tenant to Landlord at the Closing shall be the
Fair Market Value of the Leased Premises (as defined below) plus (ii) all sums
of money owed by Tenant to Landlord under this Lease or otherwise but not
previously paid up to the date of closing, less (iii) the security deposit paid
by Tenant. The purchase price shall be paid in cash at closing. Landlord shall
pay recording fees for title release documents, the State of Georgia transfer
tax, and Landlord's attorneys' fees. Tenant shall all other recording costs and
Tenant's attorneys' fees. No commission shall be payable in connection with
such sale. The Fair Market Value of the Leased Premises shall mean the price a
willing sell would accept and a willing purchaser would pay for the Leased
Premises and shall be determined as follows:
(a) Landlord and Tenant will have fifteen (15) days after Landlord
receives the Exercise Letter within which to agree on the Fair Market Value of
the Leased Premises. If they agree on the Fair Market Value within fifteen (15)
days, such value shall be the Purchase Price.
(b) If they are unable to agree on the Fair Market Value within
fifteen (15) days, then the Fair Market Value of the Leased Premises, stall be
determined in accordance with paragraph (c) below.
(c) Within seven (7) days after the expiration of the fifteen (15) day
period set forth in paragraph (b) above, Landlord and Tenant will each appoint
a real estate appraiser to appraise the Fair Market Value of the Leased
Premises. The two appraisers will meet promptly and attempt to set the Pair
Market Value of the Leased Premises. If they are unable to agree within thirty
(30)
<PAGE> 22
days, they will select a third appraiser within ten (10) days to set the Fair
Market Value of the Leased Premises. Landlord and Tenant will bear one-half
(1/2) of the cost of appointing the third appraiser and of paying the third
appraiser's fee.
(d) Within thirty (30) days after the selection of the third
appraiser, a majority of the appraisers will set the Fair Market Value of the
Leased Premises. If a majority of the appraisers are unable to set the Fair
Market Value of the Leased Premises within thirty (30) days after selection of
the third appraiser, the three appraisals will be averaged and the average will
be the Fair Market Value of the Leased Premises.
(5) Tenant shall have a period of sixty (60) days from the date of the Exercise
Letter of either Option to inspect the Leased Premises and to obtain a title
commitment survey and environmental report to determine that the condition of
the title, environmental status and survey do not adversely affect Tenant's
ownership or use of the Leased Premises. In the event Tenant determines that
there is an adverse impact on Tenant's use or ownership of the Leased Premises,
Tenant shall have the option to terminate the Purchase Option and receive a
return of all of its earnest money and all of the terms and conditions of this
Lease shall continue in full force and effect. If Tenant does not terminate the
Purchase Option prior to the end of the 60 day period, then the closing will
occur as provided herein. At the Closing, Landlord shall convey to Tenant fee
simple title to the Leased Premises by limited warranty deed, free and clear of
all security deeds placed on the Leased Premises by Landlord, but otherwise
subject to the lien for ad valorem taxes not yet due and payable, all matters
of record, all matters caused, created, or suffered by Tenant and all matters
which would be shown on the Closing Date by a current and accurate survey and
inspection of the Leased Premises. Landlord shall pay off any debt of Landlord
which may constitute a lien against the Leased Premises at the time of the
Closing. The purchase and sale contemplated by the Option shall be on an "as
is, where is" basis with Landlord making no representations or warranties
whatsoever with respect to the Leased Premises. At the Closing, Tenant shall
release landlord from any and all liability of whatever nature arising out of
the Leased Premises.
Each of the Landlord and Tenant agree to execute such .usual and
customary closing documents as may be reasonably requested by the other party,
including without limitation a closing statement, bill of sale, owner's
affidavit, transfer tax declarations and other similar items.
(6) This option is not assignable except to an affiliate of Tenant. Assignment
of this Lease to any party other than one to whom this option is assignable
shall automatically void this option and neither Tenant nor anyone claiming by,
through or under Tenant shall thereafter, have any right whatsoever under this
provision.
Right of first refusal to purchase:
Landlord hereby agrees that for so long as it owns the Leased
Premises, it will grant to Tenant the right of first refusal to purchase the
Leased Premises upon the terms and conditions contained herein.
Landlord will notify Tenant of its intent to sell the Property and the
terms and conditions under which it is willing to sell. This right shall not
apply to any transfer or conveyance to a related entity or by foreclosure or by
deed in lieu of foreclosure to the holder of any mortgage or any other
individual or entity acquiring at a foreclosure sale under said mortgage or
otherwise or to 'any other individual or entity acquiring by, through or under
the holder of the mortgage.
Tenant shall provide written notice to Landlord, as to Tenant's
decision regarding the purchase of the Leased Premises within (10) days after
Landlord's notice to Tenant is received. If Tenant does not provide written
notice within ten (10) days or indicates that it will not exercise its right of
first refusal, this right will extinguish automatically and Landlord shall have
no future obligations to Tenant with regard to the .Leased Premises which was
subject to such notice. Tenant will provide such documentation as Landlord
shall reasonably request to release the Leased Premises from this right of
first refusal.
In the event that Tenant intends to exercise this right of first
refusal, Tenant must deliver to Landlord a sum equal to ten percent (10%) of
the purchase price of the Leased Premises (hereinafter the "Leased Premises
Earnest Money") together with a written notice to Landlord of its intention to
purchase the Leased Premises. On the Closing Date, the Leased Premises Earnest
<PAGE> 23
Money shall be applied as part payment of the purchase price of the Leased
Premises.
Closing of :the purchase of the Leased Premises shall take place
within ninety (90) days of Tenant's notice to Landlord and at a time and place
within the Atlanta, Georgia area as the parties may agree. Tenant shall have a
period of sixty (60) days from the date it exercises its right of first refusal
to Purchase to inspect the Leased Premises and to obtain a title commitment
survey and environmental report to determine that the condition of the title,
environmental status and survey do not adversely affect Tenant's ownership or
use of the Leased Premises. In the event Tenant determines that there is an
adverse impact on Tenant's use or ownership of the Leased Premises, Tenant
shall have the option to terminate its decision to purchase the Leased Premises
and all of the terms and conditions of this Lease shall continue in full force
and effect.. If Tenant does not terminate its decision to purchase the Leased
Premises prior to the end of the 60-day period, then the Closing will occur as
provided herein.
This right of first refusal is personal to Tenant and is not
assignable except with the express written consent of Landlord.
<PAGE> 1
EXHIBIT 10.14
L E A S E
Date: October 31, 1997
PARTIES ALAN N. JOHNSON (hereinafter referred to as Lessor) hereby leases to
LEISURE TIME CASINOS & RESORTS, INC. (hereinafter referred to as Lessee) the
following described property:
PREMISES 7300 Lakeshore Drive, Apt. # 29
in New Orleans, LA 70124, for use by Lessee as a private residence only
(City) (State) (Zip)
TERM This lease is for a term of sixty (60) months commencing on the First day
of November, 1997 and ending on the last calendar day of October, 2002.
MONTH TO MONTH RENEWAL If Lessee, or Lessor, desires that this lease terminate
at the expiration of its term he must give to the other party written notice at
least 45 days prior to that date. Failure of either party to give this required
notice automatically renews this lease and all of the terms thereof except that
the lease will then be on a month to month basis.
RENT This lease is made for and in consideration of a monthly rental of Two
Thousand Five Hundred dollars payable in advance on or before the 1st day of
each month at P. O. Box 276, Avon, OH 44011 Lessee agrees to pay lessor the sum
of N/A dollars which is prorated rental for the period N/A thru N/A 19 N/A . If
rent is paid by the _______ of the month, Lessee shall be entitled to a
deduction of _______ dollars per month, or a net rental of _______ dollars per
month provided, however, that if the rent due is not received by the ________ of
the month Lessee shall be considered delinquent. If Lessee pays by check and
said check is not honored on presentation for any reason whatsoever, Lessee
agrees to pay an additional sum of __________ as a penalty. This penalty
provision is not to be considered a waiver or relinquishment of any of the other
rights or remedies of Lessor. At Lessor's discretion after receipt of NSF check;
Lessor may require all future payments in the form of money orders or certified
funds. Lessor shall give written notice to Lessee of this requirement.
SECURITY DEPOSIT Upon execution of this lease, Lessee agrees to deposit with
Lessor, the sum of $ N/A __________________. This deposit shall be non-interest
bearing and is to be held by Lessor as security for thc full and faithful
performance of the terms and conditions of this lease. This security deposit is
not an advance rental and Lessee may not deduct portion of the deposit from rent
due to Lessor. This security deposit is not to be considered liquidated damages.
In the event of forfeiture of the security deposit due to Lessee's failure to
fully and faithfully perform all of the terms and conditions of this lease,
Lessor retains all of his other rights and remedies. Lessee does not have the
right to to cancel this lease and avoid his obligations hereunder by forfeiting
said security deposit.
Deductions will be made from the security deposit to reimburse Lessor for the
cost of repairing any damage to the premises or equipment or the cost of
replacing any of the articles or equipment that may be damaged beyond repair,
lost or missing at the termination of this lease. Deductions will also be made
to cover any damage, loss, or charges occurring prior to termination of this
lease and for which Lessee is responsible. In the event that damages or other
charges exceed the amount of the security deposit, Lessee agrees to pay all
expenses and cost to Lessor. In the event there has been a forfeiture of the
security deposit, excess charges shall be paid in addition to the amount of the
said security deposit.
Should there be any damage to the leased premises or equipment therein,
reasonable wear and tear excepted, cause by Lessee, his family, guests or
Agents, Lessee agrees to pay Lessor when billed the full amount necessary to
repair or replace the damaged premises or equipment. This includes but is not
limited to garbage disposal, plumbing problems due to improper usage, also water
problems due to improper bath/shower usage.
Not withstanding any other provisions expressed or implied herein, it is
specifically understood and agreed that the entire security deposit aforesaid
shall be automatically forfeited should Lessee vacate or abandon premises before
the expiration of this lease, except where such abandonment occurs during the
last month of the term of this lease, and Lessee has paid all rent covering the
entire term and either party has given the other timely written notice that his
lease will not be renewed under its automatic provisions. Forfeiture of the
security deposit shall not limit Lessor's rights nor Lessee's obligations.
The leased premises must be returned to the Lessor in as good condition as they
were at the time the Lessee first occupied same, subject only to normal wear and
tear. Lessor agrees to deliver the premises clean and free of trash at the
beginning of this lease and Lessee agrees to return the same in like condition
as the termination of this lease. At the termination of this lease, the Lessee
shall be entitled to an accounting, and a return of the security deposit within
30 days thereafter, providing all of the obligations of the lessee have been
fulfilled, including return of the keys to the Lessor. Lessee shall provide
Lessor with a forwarding address, in writing.
OCCUPANTS The leased premises shall be occupied by the persons listed below.
Other occupants, including temporary visitors, are not allowed to remain at the
premises for a period in excess of 10 days. Employees and/or guests of any
Leisure Time company.
A temporary visitor is one who inhabits the premises for no more than ten (10)
days.
INITIALS Lessee________ Lessee________ Lessor________ Lessor________
<PAGE> 2
SUB LEASE Lessee is not permitted to sublet or grant use or possession of the
leased premises without the written consent of Lessor and then only in
accordance with the terms of this lease. Any expense associated with sub-leasing
the premises shall be paid by Lessee.
DEFAULT, ABANDONMENT OR EVICTION Should the Lessee fail to pay the rent or any
other charges arising under this lease promptly as stipulated or should premises
be abandoned by Lessee (it being agreed that an absence of Lessee from the
leased premises for five consecutive days after rentals have become delinquent
shall create a conclusive presumption of abandonment) or should Lessee begin to
remove furniture or any substantial portion of Lessee's personal property to the
detriment of Lessors lien, or should voluntary or involuntary bankruptcy
proceedings be commenced by or against Lessee, or should Lessee make an
assignment for the benefit of creditors, then in any of said events, Lessee
shall be in default and the rental of the whole of the unexpired term of this
lease, together with any attorney's fees, and all other expenses shall
immediately become due. Lessor may proceed one or more times for past due
installments without prejudging his rights to proceed later for the rent for the
remaining term of this lease. Similarly, in the event of any such default,
Lessor retains the option to cancel this lease and obtain possession of the
premises in accordance with the provisions of Article 4701, et seq. of the
Louisiana Code of Civil Procedure. In the event of such cancellation and
eviction, Lessee is obligated to pay any and all rent and expenses due and owing
through the day said premises are re-rented or this lease expires, whichever is
sooner. Lessee is obligated to pay any collection and eviction costs and
attorney's fees. In the event the premises are abandoned as defined above,
Lessee grants to Lessor the right to dispose of belongings remaining in the
premises in any manner Lessor chooses without any responsibility or liability to
Lessee for any loss which Lessee may sustain from said disposition. Lessee shall
be responsible for any cost incurred by removal of these belongings.
OTHER VIOLATIONS, NUISANCE Should the Lessee at any time violate any of the
conditions of this lease, other than the conditions provided in the immediately
preceding paragraphs under the heading "Default, Abandonment, or Eviction" or
should the Lessee discontinue the use of the premises for the purposes for which
they are rented or fail to maintain a standard behavior consistent with the
consideration necessary to provide reasonable safety, peace and quiet to others,
such as but not limited to, being boisterous or disorderly, creating undue
noise, disturbance or nuisance of any nature or knowingly engaging in any
unlawful or immoral activities, or failure to abide by any Rules and
Regulations, and should such violation continue for a period of five days after
written notice has been given Lessee (such notice may be posted on Lessee's
door) or should such violation again occur after written notice to cease and
desist from such activity or disturbance, then, Lessee shall be in default and
Lessor shall have the right to demand the rent for the whole unexpired term of
this lease which at once becomes due and payable or to immediately cancel this
lease and obtain possession of the premises in accordance with the provisions of
Article 4701, et seq. of Louisiana Code of Civil Procedure, or to exercise any
further rights granted by this lease or available by law.
RULES & REGULATIONS Lessee acknowledges receipt of a copy of and agrees to
comply with the Rules and Regulations. Lessee agrees to comply with any
additions and/or modifications to these Rules & Regulations or with other Rules
& Regulations which may be established, adopted by the Lessor and which may be
posted on the leased premises, and/or mailed, and/or delivered to Lessee.
CONDITION, REPAIRS, ADDITIONS AND ALTERATIONS OF PREMISES Lessor warrants that
the leased premises are in good condition. Lessor shall be responsible for the
repair of electrical, plumbing, air conditioning and heating system provided the
repair is not caused by misuse or neglect by the Lessee. Lessee agrees to use
the same with care, and to perform the usual cleaning and household maintenance
customarily required. Air conditioning and heating filters are the
responsibility of Lessee. The running of the unit with dirty filters is not
permitted. Lessee acknowledges that he has been provided the opportunity to
inspect the premises and accepts it in its current condition and agrees to keep
it in same condition during the term of this lease at his expense and to return
it to Lessor in the same or better condition at termination of this lease,
normal decay, wear and tear excepted. The only exceptions to this area are
repairs/improvements that Lessor specifically agrees to perform on the premises
as may be outlined in the "SPECIAL CONDITION" section of this lease.
Lessee shall not make any additions or alterations to the premises without
written permission of the Lessor. Lessor or his employees shall have the right
to enter the premises for the purpose of inspection or making repairs necessary
for preservation of the property. Any additions or alterations made to the
property by the Lessee shall become the property of the Lessor at the
termination of this lease unless otherwise stipulated herein. Lessee expressly
waives all right to compensation for any additions or alterations made to the
premises. The Lessor, at his option, may require the premises to be returned to
its original condition at Lessee's expense.
OCCUPANCY Should Lessor be unable to provide occupancy on the date of the
beginning of this lease due to causes beyond control of Lessor, this lease shall
not be affected thereby, but Lessee shall owe rent beginning only with the day
on which he can obtain possession. Lessee shall not be entitled to any damages
beyond the remission of rent for such term during which he is deprived of
possession. Should Lessor be unable to provide occupancy within 10 calendar days
from the commencement of this lease as stipulated herein, the Lessee shall have
the option of terminating this lease by giving written notice to Lessor.
Should the property be destroyed or materially damaged so as to render it wholly
unfit for occupancy by fire or other unforeseen event not due to any fault or
neglect of Lessee, then Lessee shall be entitled to a refund of any prepaid
rents for the unexpired term of the lease. However, Lessee shall not be entitled
to a reduction of the monthly rent or cancellation of this lease because of a
temporary failure of utilities, heat, air conditioning or temporary closing of
swimming pool and/or a reasonable delay in completing agreed to improvements to
the premises as specified in the "SPECIAL CONDITIONS" section of this lease.
SURRENDER OF PREMISES At the expiration of this lease, or its termination for
other causes, Lessee is obligated to immediately surrender possession, and
should Lessee fail to do so, he consents to pay any and all damages, but in no
case less than five times the rent per day, plus attorney's fees, and other
related costs.
INITIALS Lessee________ Lessee_________ Lessor________ Lessor_________
<PAGE> 3
LIABILITY If any employee or representative of Lessor renders any services (such
as parking, washing or delivering automobiles, handling of furniture or other
articles, cleaning the rented premises, package delivery, or any other service)
for or at the request of Lessee, his family, employees or guests, then, for the
purpose of such service, such employees shall be deemed the servant of Lessee,
regardless of whether or not payment is arranged for such service, and Lessee
agrees to release Lessor and his agents and/or representatives and to hold them
harmless of any and all liability arising therefrom.
Neither Lessor nor his agents and/or representatives shall be liable to Lessee,
or to Lessee's employees, patrons and visitors, or to any other person for any
damage to person or property caused by any act, omission or neglect of Lessee or
any other tenant of said leased premises and Lessee agrees to defend, indemnify
and hold Lessor, his agents and/or representatives harmless from all claims for
any such damage, whether the injury occurs on or off leased premises.
Lessee hereby releases and holds Lessor, his agents and/or representatives
harmless and agrees to defend and indemnify Lessor from any damage or injury to
persons or property caused as a result of the use of the swimming pool by Lessee
or any persons making use of said through the use, permission or consent of
Lessee.
Lessee assumes responsibility for the condition of the premises. Lessor is not
responsible for damage caused by leaks in thc roof, by bursting of pipes by
freezing or otherwise, or any vices or defects of the leased property, or thc
consequences thereof, except in case of positive neglect or failure to take
action toward the remedying of such defects within reasonable amount of time
after receiving written notice of such defects. Should lessee fail to promptly
so notify Lessor in writing, of any such defects, Lessee will become responsible
for any damage or claims resulting to Lessor or other parties.
Lessee understands that neither Lessor, his agents and/or representatives
carries Hazard or Flood insurance on Lessee's contents in leased premises.
Lessor is not responsible for damage or loss of Lessee's personal property.
Lessor encourages lessee to acquire adequate insurance to protect themselves and
their personal property.
Lessor and Lessee acknowledge that the return or disposition of Lessee's deposit
is a decision made exclusively by the Lessor in accordance with the applicable
rules of the Louisiana Real Estate Commission, the terms and conditions of this
lease, and the requirements of law. Said parties acknowledge that the Lessor's
agent is likewise bound to the applicable rules of the Louisiana Real Estate
Commission and cannot return the deposit, if held by agent, in the absence of
mutual written agreement except in accordance with the rules and regulations of
the Louisiana Real Estate Commission. Accordingly, both Lessor and Lessee
release and discharge said agent from any and all liability or responsibility of
agent relating to the return of such deposit, except in the event agent breaches
the rules and regulations of the Louisiana Real Estate Commission. Lessee
acknowledges that the actions of the agent regarding this entire lease is made
solely and at the direction of the Lessor.
SIGNS & ACCESS Lessor reserves the right to post on the premises "For Sale"
signes at any time and "For Rent" signs can be placed on property 45 days prior
to expiration of lease. Lessee will also permit Lessor, his agents and/or
representatives to have access to the premises for the purpose of inspection,
sale or leasing at reasonable intervals between the hours of 8:00 am to 8:00 pm.
If Lessee refuses request for access, this shall constitute a violation of the
lease.
ATTORNEYS FEES Lessee further agrees that if an Attorney is employed to protect
the rights of the Lessor hereunder, Lessee will pay the fee of such attorney.
Such fee is hereby fixed at twenty-five (25%) percent of the amount claimed or a
minimum of $300.00 whichever is greater. Lessee further agrees to pay all court
costs and sheriff's charges and all other expenses involved.
NOTICES All notices required to be given under the terms of this lease shall be
in writing, and if mailed, by certified mail addressed to Lessee at the herein
leased premises or to Lessor at the address appearing in this lease, and such
mailing constitutes full proof of and compliance with the requirement of notice,
regardless of whether addressee received such notice or not. Notices may also be
given in writing by hand delivery, or by attaching to door of premises.
MEDIATION CLAUSE The parties agree that any controversy, claim for personal
injuries or loss, or dispute of any kind arising out of, or relating to these
premises or this lease, shall be submitted to mediation in accordance with the
rules and procedures of the Home Buyer's/Home Seller's Dispute Resolution System
of the New Orleans Metropolitan Association of REALTORS(C), Inc., or such other
mediator as mutually agreed to by the parties. All disputes arising out of or
relating to this agreement shall be submitted for mediation except matters
affecting a foreclosure, or proceedings relating to title, mortgage, liens,
probate issues, or other issues excluded by law as a subject matter for
mediation.
OTHER CONDITIONS The failure of Lessor to insist upon the strict performance of
the terms, covenants, agreements and conditions hereby contained, or any of
them, shall not constitute or be construed as a waiver or relinquishment of the
Lessor's right thereafter to enforce any such terms, covenant, agreement and
condition, but the same shall continue in full force and effect.
It is understood that the terms "Lessor" and "Lessee" are used in this lease,
and they shall include the plural and shall apply to all persons, both male and
female. All obligations of Lessee are joint, several and in solido.
This lease, whether or not recorded, shall be junior and subordinate to any
mortgage hereafter placed by Lessor on the entire property of which the leased
premises forms a part.
INITIALS Lessee_________ Lessee__________ Lessor_________ Lessor_________
<PAGE> 4
LEAD-BASED PAINT, ASBESTOS, RADON Lessee is aware that the premises may contain
led based paint, asbestos, or other toxins which may cause serious injury or
death if consumed or ingested into the human body, and lessee acknowledges that
the United States Department of Housing and Urban Development notice (M.L.
92-24) has been called to their attention with respect to notice and information
of lead based paint. Having knowledge of these facts, Lessee agrees to maintain
the premises in a reasonably safe condition, to report to Lessor any conditions
which may lead to damage or injury because of lead, asbestos or other toxins,
and Lessee further agrees to assume the use and occupancy of the herein leased
premises at his own risk and hereby releases Lessor, his agents and/or
representatives from any claims relating to or sustained as a consequence
thereof, and further agrees to hold harmless, defend and indemnify Lessor, his
agents and/or representatives from any claim made by Lessee, residents of his
household or others using the premises with the consent and permission of
Lessee.
UTILITIES Lessee shall maintain all utility services, including water, gas,
electricity, phone, garbage collection, and lawn and garden care, in Lessee's
name and shall promptly pay all charges due thereon, during the term of this
lease unless otherwise noted.
WAIVER OF NOTICE Upon termination of the right of occupancy for any reason,
Lessee hereby expressly waives notice to vacate premises prior to institution of
eviction proceedings in accordance with La. CCP Article 4701 and La. CC Article
2713.
MISCELLANEOUS PROVISIONS No cars to be parked on lawn or walkways. Cars to be
parked only in designated areas. No holes shall be drilled in the walls,
woodwork or floors and no antenna installations are permitted. No painting or
papering of walls is permitted without written consent of Lessor. Lessee shall
not allow the cable/phone company to wire the premises for cable without
Lessor's written permission. No waterbeds are allowed. No foil in windows is
allowed. Garbage to be placed in designated receptacle. If no receptacle is
provided, garbage is to be placed on curb as prescribed by law in a proper
receptacle provided by Lessee.
Lessee is to furnish Lessor with a list of deficiencies noted by Lessee at the
time of occupancy. This is to be held by Lessor in case of dispute as to move-in
condition of property.
SPECIAL CONDITIONS Lessor to provide washer/dryer/refrigerator. Lessee to pay
for electricity, cable, telephone, etc., plus monthly condominium maintenance
fee and any and all assessments made by the condominium association.
Time is of the essence. This document and any indicated addendum contain this
entire lease. If any part of this lease is or becomes contrary to law, the
remainder of this lease shall be unaffected. Any changes must be agreed upon in
writing, and signed by Lessor and Lessee.
FOR REPAIRS/MAINTENANCE CALL: Alan N. Johnson 800-861-5454
---------------------- -----------------------
Name Phone
WE DO BUSINESS IN ACCORDANCE WITH FEDERAL FAIR HOUSING LAWS.
THIS IS A BINDING LEGAL DOCUMENT. READ CAREFULLY BEFORE SIGNING.
LEISURE TIME
CASINOS & RESORTS, INC. 11/1/97 ALAN N. JOHNSON 11/1/97
- ----------------------- ----------- ------------------------------ ----------
Lessee Date Lessor or Lessor's Agent Date
9/30/98 11/1/97
- --------------------- ----------- --------------------- -----------
Lessee Signature Date Lessor Signature Date
<PAGE> 1
EXHIBIT 10.15
PURCHASE AGREEMENT
This Purchase Agreement is made this 23rd day of March, 1998, by and
between LISA LEMON, INC. (hereinafter referred to as "Seller"), and AL JOHNSON
(hereinafter referred to as "Purchaser").
W I T N E S S E T H:
For and in consideration of the mutual promises and covenants of the
parties hereinafter contained, the parties agree as follows:
1. Premises. Seller agrees to sell and convey to Purchaser and Purchaser
agrees to purchase the real property situated in the City of Cleveland, County
of Cuyahoga, and State of Ohio, and commonly known as 5700 South Marginal Road,
Cleveland, Ohio, 44103 and more fully described on Exhibit A attached hereto,
incorporated herein and made a part hereof, hereinafter referred to as "the
Premises", together with all rights, privileges and easements appurtenant
thereto, and in any adjacent roadways, including all fixtures and systems
contained in the buildings thereon, if any.
<PAGE> 2
2. Purchase Price.
A. The purchase price shall be the sum of $975,000.00, subject,
however, to the provisions herein.
B. The purchase price shall be payable as follows:
a. $25,000.00 earnest money upon execution of this Agreement by
check of the Purchaser deposited into escrow, receipt of which is hereby
acknowledged by the Seller.
b. $5,000.00 to be deposited into escrow on or before March 15,
1998.
c. $5,000.00 to be deposited into escrow on or before April 15,
1998.
d. $5,000.00 to be deposited into escrow on or before May 15, 1998.
e. $435,000.00 to be deposited into escrow on or before June 15,
1998.
f. The balance shall be paid by the execution of a Promissory Note
by the Purchaser in the principal sum of $500,000.00 with interest at 10% per
annum, but subject to the provisions for payment herein in a form as on Exhibit
B attached hereto and a mortgage deed for the premises described in Exhibit A
which shall be a first lien on the premises which mortgage deed shall be in a
form as on Exhibit C attached hereto and executed by the Purchaser with a
release of dower executed by the Purchaser's spouse.
C. After closing, in the event that Purchaser pays to Seller the sum
of $450,000.00 on or before six (6) months from the closing date, the
Promissory Note shall be paid in full and Seller shall return the Promissory
Note marked paid in full and satisfy the mortgage deed referred to in Exhibit
C.
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<PAGE> 3
D. In the event that Purchaser pays to Seller the sum of $450,000.00
plus interest at 10% per annum on the said Promissory Note paid to the date of
payment on or before twelve (12) months after the closing date, the said
Promissory Note shall be paid in full and Seller shall return the Promissory
Note marked paid in full and satisfy the mortgage deed referred to in Exhibit
C.
E. Payment shall be deemed to have received payment when funds in the
form of a bank or certified check or equal are received by Virginia Loebsack,
President of the Purchaser or Don P. Brown, attorney for the Seller.
F. In the event neither of the options for payment of the said
Promissory Note as set forth above are exercised in a timely manner, then the
Promissory Note shall be paid as follows:
a. $100,000.00 in principal plus interest which has accrued during
the first year shall be paid on or before the first anniversary of the closing
date.
b. The balance due plus interest shall be paid in quarterly
installments amortized over the next four (4) years with the first payment
fifteen (15) months after the closing date and subsequent payments at the end
of each quarter thereafter for the next fifteen (15) quarters.
G. Purchaser shall have the right to prepay the note without penalty.
Seller shall have the right to accelerate the payment of the note in full in
the event that Purchaser fails to make any payment on a timely basis or
violates any of the terms herein or in the Promissory Note and Mortgage deed.
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<PAGE> 4
3. Purchaser has delivered to Seller prior to the execution hereof a
financial statement of Leisure Time Casinos & Resorts, Inc. dated June 30, 1997
and a personal financial statement dated March 31, 1997. Purchaser represents
that each and every item on said financial statement are accurate and
acknowledges that Seller has relied on said financial statements in making its
decision to enter into this transaction. Purchaser represents that there are no
material differences in the financial condition of Leisure Time Casinos and his
personal financial affairs on the date of the execution of this Agreement which
are not reflected on said financial statements.
In the event that material variances exist in the financial condition of
Leisure Time Resorts or the Purchaser, individually, from the financial
statements given to the Seller on the date of this Agreement or thereafter and
are known to the Seller prior to closing, then the Seller shall have the option
to terminate this Agreement by delivery a notice of termination to the
Purchaser at the address herein and upon delivery of such notice, Purchaser
shall have the right to receive all funds deposited in escrow except $5,000.00
which shall be paid to Seller as liquidated damages and any expense incurred by
the escrow agent.
4. Conveyance. Seller shall convey to Purchaser title to the Premises by
a good and sufficient warranty deed warranting that said Premises are free and
clear of all encumbrances whatsoever except current real estate taxes and
assessments, both general and special, regulations imposed by zoning ordinances
and restrictions, conditions and easements of record, if any, approved by
Purchaser. Seller agrees not to hereafter place any restriction, conditions,
easement, mortgage or lien on the Premises unless approved in advance by
Purchaser.
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<PAGE> 5
At closing, Seller shall provide to the Purchase an Owner's Fee Policy in
the amount of the purchase price insuring the title in the Purchaser, free and
clear of all liens and encumbrances whatsoever except those liens and
encumbrances excepted in the warranty deed as permitted hereunder. Seller and
Purchase shall share the cost of the policy equally.
No less than thirty (30) days from the date hereof, Purchaser shall cause
a title commitment to be issued by the Continental Title Company and shall
deliver the same to Seller. If the title commitment reflects that title to the
Premises is subject to any exceptions other than the exceptions referred to in
this Section 4 above, then Purchaser shall notify Seller in writing of the
exceptions to which Purchaser objects, within thirty (30) days after
Purchaser's receipt of the title commitment. If Purchaser receives notice or
otherwise discovers additional exceptions after delivery of the title
commitment and prior to the closing date, Purchaser shall notify Seller in
writing of the additional exceptions to which Purchaser objects within ten (10)
days after Purchaser receives notice of such additional exceptions.
Seller shall be required to cure or remove prior to the closing date, all
exceptions which can be cured or removed by the payment of money.
Seller shall have a period of sixty (60) days after notice from the
Purchaser to use Seller's best efforts to cure any exceptions which are not
curable by the payment of money and the closing date shall be postponed if
necessary to afford Seller the full sixty (60) days to cure such exceptions.
Purchaser may also obtain an ALTA/ASCM survey of the Premises and shall have
thirty (30) days after receipt thereof to approve same. Purchaser shall notify
Seller of any survey objections within such thirty (30) days and Seller shall
have a period of sixty (60) days to cure such objections and the closing shall
be postponed for such sixty (60) days. If Seller is
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<PAGE> 6
unable to cure all of the exceptions or survey objections within the time
period provided, Purchaser shall have the following options:
A. Purchaser may postpone the closing date for up to an additional six
(6) months to afford Seller time to cure the additional exceptions, or
B. Purchaser may waive the uncured exceptions and accept title in its
existing condition, or
C. Purchaser may terminate this Agreement by sending written notice to
the Seller. Seller shall return to Purchaser the earnest money deposit. Each
party shall be responsible for their own costs. The cost of the title work
performed shall be paid by Purchaser and neither Purchaser nor Seller shall
have any further rights or obligations hereunder.
In the event the closing date is postponed to afford Seller additional
time to cure the additional exceptions, the closing shall take place twenty
(20) days after Seller delivers to Purchaser written notice that all exceptions
have been eliminated, together with evidence of same.
5. Condition. The obligations of the Purchaser to proceed with the
closing are subject to the following condition:
Purchaser shall have 45 days from the date of this Agreement to perform
due diligence with regard to the Premises. At any time during said 45 day
period Purchaser may notify Seller in writing that he will not complete the
purchase of the Premises and this Agreement shall thereupon be null and void
and Purchaser be entitled to receive the earnest money deposit less any
expenses incurred by the escrow agent for which Purchaser shall be responsible.
In the event that Purchaser waives this Condition or declines to notify Seller
within the 45 day period that he is
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<PAGE> 7
voiding this Agreement, then the transaction shall proceed to closing within 30
days after the delivery of the waiver or the expiration of the 45 day period,
whichever event occurs first.
In the event that Seller receives another bonafide written offer to
purchase the Premises during said 45 day due diligence period which Seller
deems to be more favorable than Purchaser's offer and Seller so notifies
Purchaser, then Purchaser shall have the option of (1) matching the offer
received and proceeding in accordance with the terms set forth therein or (2)
electing to waive the 45 day due diligence period and proceed to closing in
accordance with all of the terms set forth in this Agreement within 30 days
from the date of the Notice from the Seller of the more favorable offer.
Purchaser shall respond to the Seller within 5 days from receipt of the Notice
from the Seller of the more favorable offer. In the event no response is
received by the Seller within said 5 day period, then Seller shall have the
right to terminate this Agreement, and if this Agreement is so terminated,
Purchaser shall have the right to the return of the earnest money deposit.
6. Escrow and Escrow Agent. The escrow agent shall be Continental Title
Company, Cleveland, Ohio;
At the closing the parties shall be charged as follows:
A. Seller:
One-half (1/2) of the cost of the Owner's Fee Policy;
One-half (1/2) of the escrow fees;
One-half (1/2) the Ohio Conveyance fee;
the cost of any real estate tax proration;
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<PAGE> 8
The cost of removing any lien of the Seller, if any.
B. Purchaser:
One-half (1/2) of the cost of the Owner's Fee Policy;
One-half (1/2) of the escrow fee;
One-half (1/2) the Ohio Conveyance fee;
the cost of filing for transferring and recording the
warranty deed;
the cost of recording any mortgage on the Premises.
The escrow shall be subject to the standard conditions of acceptance of
escrow reasonably imposed by the escrow agent, except to the extent that such
conditions are inconsistent with the provisions of this Agreement.
7. Closing. The closing of this transaction shall take place at the
offices of Continental Title Company, Cleveland, Ohio at 9:00 a.m. thirty (30)
days after the conditions set forth in Section 4 are satisfied or waived by
Purchaser, but not later than June 15, 1998 (hereinafter referred to as the
"Closing Date"),
When the deed and the purchase price and all other necessary funds and
documents have been deposited as required herein and the title company can
issue the title insurance required hereunder, the escrow agent shall file the
deed and any mortgage deed for record. The warranty deed and mortgage deed
shall be filed on the closing date, if possible, unless the escrow agent is
instructed to the contrary by written instructions executed by both the
Purchaser and Seller. The escrow agent is authorized to pay in full all
mortgages and other liens on the Premises from the funds deposited in escrow if
the title company can and will furnish the title insurance required
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<PAGE> 9
herein. Upon making the proration and charges herein provided, the escrow agent
shall deliver to Seller the balance of the proceeds of sale, the Promissory
Note, the recorded mortgage deed and its escrow statement and deliver to
Purchaser the title insurance policy, the recorded deed, its escrow statement
and any amounts due Purchaser.
8. Mutual Covenants. Seller and Purchaser mutually agree, covenant and
affirm the following:
A. The Premises has not been occupied for use as an operating business
for at least five (5) years. Seller has no knowledge of and makes no
representations with regard to the existence of or the present condition of the
heating, air conditioning, plumbing, electrical or other systems in the
buildings and the integrity of the structures.
B. There may be conditions on the Premises which are in violation of
applicable statutes, laws, ordinances, decrees, orders, rules or regulations of
a federal, state or local governmental body including, but not limited to,
environmental conditions and building maintenance conditions. Purchaser
acknowledges that Seller is under no obligation to correct any violations of
any kind or nature whatsoever. Purchaser further affirms that the existence of
and/or the correction of any such violations, if any, are not a condition to
Seller's performance under this Agreement.
C. The parties acknowledge that no survey has been made of the
Premises, to the knowledge of the parties, and that Seller is under no
obligation to purchase or furnish a survey to the Purchaser.
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<PAGE> 10
9. Representations of Seller.Seller hereby represents and warrants to
Purchaser on the date hereof and on the present date as follows:
A. Organization and Standing of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and is licensed to do business and in good
standing in the State of Ohio. Seller has all the necessary corporate power and
authority to hold and convey ownership of the Premises.
B. Corporate Authority of Seller. Seller has full corporate power and
authority to enter into and perform this Agreement and consummate the
transaction contemplated hereby.
C. Seller has not furnished to the Purchaser any financial statements
relating to the Premises. Purchaser is relying solely on his own due diligence
to satisfy himself of the viability of proceeding with this transaction.
D. Seller has not received any notice of any violations or default
under any applicable statute, law, rule or regulation affecting the Premises
which has not been resolved, dismissed or cured.
E. To the best of Seller's knowledge, Seller has good and marketable
title to the Premises.
F. Seller is not a party to any suit, claim, investigation or
proceeding of which Seller has knowledge which is now pending or threatened
before any court or administrative or regulatory agency.
10.Representations of the Purchaser. Purchaser hereby represents and
warrants to Seller as of the day hereof and as of the closing date as follows:
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<PAGE> 11
A. This Agreement is a valid and binding Agreement of Purchaser,
enforceable jointly and severally in accordance with the terms.
B. The financial information furnished to Seller by Purchaser was
valid at the time it was delivered and remains valid at the execution of this
Agreement.
11. Seller's Closing Documents. At closing Seller shall deliver the
following documents to the escrow agent:
A. A general warranty deed executed by the Seller conveying good and
marketable fee simple title in the Premises to the Purchaser free and clear of
all liens and encumbrances except as set forth herein.
B. A certified resolution of the Seller in such form and content as
the Purchaser or the title company shall reasonably request evidencing
authority to enter into and execute this Agreement and the consummation of the
transaction contemplated herein.
C. An opinion of counsel for the Seller that Seller is a duly
organized, validly existing entity and in good standing of the laws of the
state of organization and is authorized to do business in the State of Ohio;
that the Seller has the authority to execute, deliver and perform its
obligations under this Agreement and all documents to be delivered at closing,
that the persons who executed the same were duly authorized to execute the same
and to bind the Seller by all necessary action of Seller and that said
documents are enforceable against the Seller in accordance with their
respective terms.
12. Purchaser's Closing Documents. At closing Purchaser shall deliver the
following documents to the escrow agent:
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<PAGE> 12
A certified or bank check or wire transfer of good funds in the amount of
the purchase price an executed Promissory Note identical to the example on
Exhibit B herein and an executed mortgage deed identical to the form on Exhibit
C herein plus any expenses to be paid by the Purchaser plus or minus any
prorations or credits.
13. Survival of Representations. All of the representations and
warranties of the Seller and Purchaser set forth in this Agreement shall be
true and correct as of the effective date and shall be deemed to be repeated as
of the closing date and shall be true and correct as of the closing date and
all of the representations, warranties and agreements of the Seller and
Purchaser set forth in this Agreement shall expressly survive the closing.
14. Maintenance of Property. From and after the effective date of this
Agreement, Seller shall not perform or cause to be performed any construction
or cause the removal of any improvements on the Premises or make any other
changes or improvements on or about the property without the prior written
consent of the Purchaser. Between the effective date of this Agreement and the
closing date Seller shall maintain and operate the Premises in substantially
the same condition and manner as the Premises are now maintained by the Seller.
15. Prorations.
A. Taxes. Real estate taxes shall be prorated on the basis of the
calendar year for which assessed, except if the closing shall occur before the
assessed valuation or the tax rate is fixed, the proration of taxes shall be
upon the basis of the tax rate for the immediately preceding calendar year
applied to the latest assessed valuation, with readjustment to be made as soon
as reasonably practicable after the actual assessed valuation and the actual
rate are determined.
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B. Utilities. Seller shall notify the utility companies servicing the
Premises prior to closing, or as soon thereafter as practicable, that billing
to Seller for such utilities shall be discontinued at the end of the day
preceding the closing date and Purchaser shall arrange with such utilities to
have such billings for utility services charged to Purchaser from and after the
closing date and Seller shall be entitled to the refunds of all deposits
therefore, if any. Seller shall pay all charges with respect to such utilities
for the period prior to the closing date and utility charges since the date of
the last billing will be adjusted at closing as of the closing date on the
basis of the last bill so rendered, with subsequent adjustment, if any, when
final bills are rendered.
16. Damage by Casualty.
A. If after the effective date of this Agreement but prior to the
closing date any damage occurs from fire, wind storm or other casualty to the
buildings on the Premises and the cost to repair such loss or damage does not
exceed $100,000, then in such event the closing shall be consummated as
provided herein and Seller shall cause any and all insurance proceeds payable
as a result of the damage to be assigned to the Purchaser and Purchaser shall
receive a credit at closing for any deductible amount. In the event that the
amount of the insurance proceeds cannot be determined at the closing date, then
at the Purchaser's option the closing date may be postponed until the amount is
determined.
B. If the cost to repair such damage or destruction exceeds $100,000
then within thirty (30) days after written notice from the Seller that such
cost exceeds $100,000, Purchaser shall have the option by written notice to the
Seller to terminate this Agreement in which event
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<PAGE> 14
the earnest money deposit shall be returned to the Purchaser and neither
Purchaser nor Seller shall have any further rights or obligations hereunder.
Unless Purchaser timely notifies Seller of his election to terminate this
Agreement, Purchaser shall be required to close this transaction in accordance
with the Agreement and Seller shall assign unto Purchaser any and all insurance
proceeds and Purchaser shall receive at closing a credit in the amount of any
deductible under such policy. In such event Seller shall have no additional
obligation if such insurance proceeds are insufficient or unavailable to repair
such damage.
C. Seller shall continue to maintain at least $962,000 of fire and
extended coverage insurance on the Premises up to the Closing Date.
17. Purchaser's Inspection of the Property.
A. Purchaser's Inspection of the Property. At any time from and
after the effective date through the closing date, Purchaser or its authorized
agents, personnel, employees or independent contractors shall be entitled, upon
reasonable notice, during reasonable business hours, to enter upon the land for
the purpose of making physical inspections of the Premises or any portion(s)
thereof. Purchaser may make any and all inspections of any portion or all of
the improvements, including but not limited to all roofs, fences, structures,
electrical systems, plumbing systems, mechanical systems, paving, termite
infestation, and heating, ventilating and air conditioning systems. Purchaser
may also make all inspections and investigations of the land which it may deem
necessary, including but not limited to soil borings, percolation tests,
engineering, environmental, and topographical studies, zoning and availability
of utilities. All inspections shall be made at Purchaser's expense. Any such
inspections shall be in the presence of a representative of Seller if such
representative is available within seventy-two (72) hours of
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<PAGE> 15
notice of the time of such inspection. Seller shall cooperate with Purchaser in
connection with any inspections.
B. Indemnification.
a. Purchaser acknowledges that Seller may not carry in force
liability insurance on the Premises. Purchaser agrees to indemnify and hold
Seller harmless from any loss or damage, including attorneys fees, suffered as
a result of damage or injury to the Purchaser, their agents, employees,
contractors or guests while any such person is on the premises at the request
or direction of Purchaser from the date of this Agreement to the closing date.
b. Purchaser also agrees to indemnify and hold Seller
harmless from any loss or damage, including attorneys fees, suffered as a
result of claims and demands for nonpayment for services, including attorneys
fees, rendered to Purchaser, for mechanics' liens filed against the Premises
arising out of such service, or for damage to persons or property arising out
of Purchaser's investigation of the property.
18. Seller represents to Purchaser that it has not retained nor is it
obligated to any brokers or finders involved in this transaction. Purchaser
represents that it has retained Ron Kern as a broker in this transaction and
will be solely responsible to pay Kern any fees or commissions due Kern and
agrees to indemnify and hold Seller harmless from any and all claims for any
brokerage fees or commissions asserted to be due to or by Kern or any Company
which claims to be represented by Kern.. Seller and Purchaser agree to
indemnify and hold each other harmless from any and all claims for any
brokerage fees or commissions asserted to be due to or by any brokers or
finders claiming by, through or under the indemnifying party, except as stated
herein. The provisions of this section shall survive the closing.
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19. Possession. Seller shall deliver and Purchaser shall take possession
of the Premises on the day of the closing free and clear of any tenants or
occupants. Seller shall cooperate with Purchaser by transferring keys and other
items necessary to possess the Premises immediately after the closing.
20. Condemnation. In the event of the institution of any proceedings by
any governmental authority proposing to take any portion of the property by
eminent domain prior to the closing, or in the event of the taking of any
portion of the property by eminent domain prior to the closing, Seller shall
promptly notify Purchaser. Purchaser shall thereafter have the right and option
to terminate this Agreement by giving Seller and escrow agent written notice of
the election to terminate within thirty (30) days after the receipt by the
Purchaser of notice from the Seller. Seller agrees to furnish said written
notice within two (2) business days after Seller's receipt of said
notification. In the event the Agreement is terminated the escrow agent shall
return the deposit to the Purchaser and except as otherwise provided herein,
the parties shall be released from their respective obligations and liabilities
hereunder. In the event Purchaser does not elect to terminate, the parties
shall proceed to closing and Seller shall assign to Purchaser all of the right,
title and interest in all awards in connection with such taking. The right to
terminate as stated above shall remain in effect for thirty (30) days after the
receipt by Purchaser of the notice from Seller.
Thereafter the right to terminate shall be null and void and of no effect.
21. Default. In the event that this transaction fails to close due to a
default on the part of the Purchaser, the funds deposited into escrow by
Purchaser shall be paid to the Seller as liquidated damages. The parties agree
that this is a bona fide liquidated damages provision and
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<PAGE> 17
not a penalty or forfeiture provision and Purchaser shall not be liable for any
further damages as a result of said default. The parties acknowledge that if the
Purchaser defaults, Seller will suffer damages in an amount which cannot be
ascertained with reasonable certainty on the effective date.
In the event that this transaction fails to close due to a default on the
part of the Seller, Purchaser shall have the right to either terminate the
Agreement and receive back the deposit, or pursue any and all remedies against
the Seller available at law or in equity including without limitation specific
performance of the Seller's obligation hereunder.
22. Notice of Default. Prior to the exercise by the Purchaser or the
Seller of their respective rights under Section 20 and the exercise of rights of
default under the Mortgage Deed and Promissory Note, the non-defaulting party
shall provide written notice specifying such default to the defaulting party and
the defaulting party shall have five (5) days following receipt of such notice
to cure such default; subject however to the provisions of said Mortgage Deed as
appears on Exhibit C. However, this provision shall not apply to the failure of
the defaulting party to close the transaction on the closing date.
23. Personal Property. There is no personal property involved in this
transaction. Seller shall remove any personal property on the Premises prior to
the closing. In the event that personal property remains on the Premises after
the closing, Seller shall forfeit all of its right, title and interest to said
property and forfeit the same to the Purchaser.
24 . Miscellaneous.
A. Counterparts. This Agreement may be executed in any number of
counterparts, any one and all of which shall constitute the contract of the
parties and each of which shall be deemed an original.
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B. Section and Paragraph Headings. The section and paragraph headings
herein contained are for the purposes of identification only and shall not be
considered in construing this Agreement.
C. Amendment. No modification or amendment of this Agreement shall be
of any force or effect unless in writing executed by both Seller and Purchaser.
D. Attorneys' Fees. If any party obtains a judgment against any other
party by reason of breach of this Agreement reasonable attorneys' fees shall be
included in such judgment.
E. Governing Law. This Agreement shall be interpreted in accordance
with the laws of the State of Ohio both substantive and remedial.
F. Entire Agreement. This Agreement sets forth the entire agreement
between Seller and Purchaser relating to the property and all subject matter
herein and supersedes all prior and contemporaneous negotiations,
understandings and agreements, written or oral, between the parties.
G.Time of the Essence. Time is of the essence in the performance of
all obligations by Purchaser and Seller under this Agreement.
H.Computation of Time. Any reference herein to time periods of less
than six (6) days shall exclude Saturdays, Sundays and legal holidays in the
computation thereof. Any time period provided for in this Agreement which ends
on a Saturday, Sunday or legal holiday shall extend to 5:00 p.m. on the next
full business day.
I. Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the permitted successors and assigns of the parties
hereto.
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J. Construction of Agreement.All of the parties to this Agreement have
participated freely in the negotiation and preparation hereof; accordingly,
this Agreement shall not be more strictly construed against any one of the
parties hereto.
K. Notices and Other Communications. Every notice or other
communication required, contemplated or permitted by this Agreement by any
party, shall be in writing and shall be delivered either by personal delivery,
private courier service, or postage prepaid, return receipt requested,
certified or registered mail, addressed to the party to whom intended at the
following address:
To Seller: Lisa Lemon, Inc.
c/o Virginia Loebsack, Executrix
Estate of Cynthia P. Robinson
812 Pendley Road
Willowick, Ohio 44095
Copy to: Don P. Brown
Attorney at Law
10 Center Street
Chagrin Falls, Ohio 44022
To Buyer: Al Johnson
1284 Miller Rd.
Avon Lake, OH 44012
Copy to: Bernard Johnson
or at such other address as the intended recipient previously shall have
designated by written notice. Notice by courier or certified or registered mail
shall be effective on the date it is officially recorded as delivered to the
intended recipient by return receipt or the date of attempted delivery
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where delivery is refused by the intended recipient. All notices and
communications required, contemplated or permitted by this Agreement to be
delivered in person shall be deemed to have been delivered to and received by
the addressee, and shall be effective, on the date of personal delivery.
25. Assignment. Buyer has the right to assign his rights under this
Agreement to a corporation or other entity in which he has a controlling
interest. However, such an assignment shall not relieve Buyer of any
responsibility with regard to his performance under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
dates indicated below.
SELLER:
LISA LEMON, INC.,
By: /s/ Virginia Loebsack
-------------------------------------
Virginia Loebsack, President
Date:
-----------------------------------
PURCHASER:
/s/ Al Johnson
-----------------------------------------
Al Johnson
Date:
-----------------------------------
EXHIBIT A
LEGAL DESCRIPTION
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The property referred to in this Agreement is described as follows:
Situated in the City of Cleveland, County of Cuyahoga and State of Ohio and
known as part of Original 100 Acre Lot No. 346 and is bounded and described as
follows:
The beginning point is on the Southeasterly line of Marginal Road (so called)
it being the Northwesterly line of land described in a deed from the City of
Cleveland to Union Properties, Inc., dated November 13, 1952 and recorded in
Volume 7653, Page 52 Cuyahoga County Deed Records, at the Northeasterly corner
of land conveyed to Norwalk Truck Lines, Inc., to Trammell Crow deed dated
December 9, 1959 and recorded in Volume 9784, Page 158 of Cuyahoga County Deed
Records;
Course 1 Thence South 32 degrees 23' 30" East along the Northeasterly line of
land conveyed to Trammell Crow as aforesaid and the Southeasterly prolongation
thereof 311.66 feet;
Course 2 Thence North 57 degrees 36' 30" East 320.00 feet;
Course 3 Thence North 32 degrees 23' 30" West, parallel with Course 1, and
distant Northeasterly 320.00 feet by rectangular measurement therefrom 413.44
feet to the Southeasterly line of said Marginal Road;
Course 4 Thence Southwesterly along said Southeasterly line of Marginal Road,
it being a curved line deflecting to the left 337.52 feet to the place of
beginning, said curved line having a radius of 963.00 feet and a chord which
bears South 39 degrees 58' 00" West 335.79 feet.
21
<PAGE> 1
EXHIBIT 10.16
AMENDMENT TO PURCHASE AGREEMENT
This Amendment to a certain Purchase Agreement dated March 23, 1998 by
and between Al Johnson referred to as "Purchaser" herein, and Lisa Lemon, Inc.
referred to as "Seller" herein is made this 26th day of June, 1998.
WHEREAS the parties desire to amend and modify the Purchase Agreement
dated March 23, 1998.
NOW THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
1. The purchase price shall be $1,020,000.00
2. The purchase price shall be payable by the Purchaser as follows:
a) $35,000.00 which is at present on deposit in escrow at
Continental Title Company in Cleveland, Ohio.
b) $50,000.00 to be deposited in escrow on or before June 25,
1998.
c) $50,000.00 to be deposited in escrow on or before July 25,
1998.
d) $50,000.00 to be deposited in escrow on or before August
25, 1998.
e) 290,000.00 shall be paid into escrow on or before
September 9, 1998.
f. The balance shall be paid by the execution of a Promissory
Note by the Purchaser in the principal sum of $545,000.00 with interest at 10%
per annum, but subject to the provisions for payment herein in a form as on
Exhibit B attached to the Agreement, and secured by a mortgage deed for the
premises described in Exhibit A of the Agreement which shall be a first lien on
the premises which mortgage deed shall be in a form as on Exhibit C attached to
the
<PAGE> 2
Agreement and executed by the Purchaser with a release of dower executed by the
Purchaser's spouse.
3. After closing, in the event that Purchaser pays to Seller the sum
of $500,000.00 on or before six (6) months after the closing date, the
Promissory Note shall be paid in full and Seller shall return the Promissory
Note marked paid in full and satisfy the mortgage deed referred to in Exhibit C
of the Agreement.
4. In the event that Purchaser elects not to satisfy the Promissory
Note as stated in paragraph 3 herein, but pays to Seller the sum of $525,000.00
on or before twelve (12) months after the closing date, the said Promissory
Note shall be paid in full and Seller shall return the Promissory Note marked
paid in full and satisfy the mortgage deed referred to in Exhibit C of the
Agreement.
5. In the event neither of the options for payment of the said
Promissory Note as set forth above are exercised in a timely manner, then the
Promissory Note shall be paid as follows:
a) $100,000.00 in principal plus interest which has accrued
during the first year shall be paid on or before the first anniversary of the
closing date.
b) The balance due plus interest shall be paid in quarterly
installments amortized over the next four (4) years with the first payment
fifteen (15) months after the closing date and subsequent payments at the end
of each quarter thereafter for the next fifteen (15) quarters.
6. The parties agree that the sum of $35,000.00 presently on deposit
in escrow and the payments of $50,000.00 each in June, July and August of 1998
as set forth above shall be forfeited to the Seller in the event this
transaction is not completed on the closing date due to a default on the part
of the Purchaser.
<PAGE> 3
7. The closing date shall be September 15, 1998. All funds and
documents shall be deposited into escrow on or before September 9, 1998. In all
other respects, the provisions of Section 7 of the Purchase Agreement remain in
effect.
8. The Notice of Default served on the Purchaser by the Seller on June
11, 1988 is waived.
9. Purchaser represents that he has no objection with regard to the
state of the title based on the preliminary title report of Continental Title
Company as of December 27, 1997, receipt of which both parties acknowledge and
the survey taken as of June 5, 1998.
10. Section 22 of the Purchase Agreement is amended as follows:
a) Section 20 on line 2 shall be "Section 21".
b) The last sentence of Section 22 of the Purchaser Agreement
which states, "However, this provision shall not apply to the failure of the
defaulting party to close the transaction on the closing date" is deleted.
11. The provisions of this Amendment shall prevail over the terms of
the Purchase Agreement. In all other respects, the terms of the Purchase
Agreement are ratified and confirmed.
<PAGE> 4
IN WITNESS WHEREOF the parties have executed this Agreement the day
and year first above written.
SELLER:
LISA LEMON, INC.
by /s/
------------------------------
PRESIDENT
Date
-----------------------------
PURCHASER:
/s/ AL JOHNSON
---------------------------------
AL JOHNSON
Date
-----------------------------
<PAGE> 1
EXHIBIT 10.17
ASSIGNMENT
This Assignment is executed at Bonita Springs this 11th day of
September, 1998 by Al Johnson, a.k.a. Alan N. Johnson, pursuant to the terms of
a certain Purchase Agreement dated March 23, 1998 between Lisa Lemon, Inc. and
Al Johnson for the sale and purchase of real estate at 5700 South Marginal
Road, Cleveland, Ohio.
WITNESSETH:
I hereby assign and transfer to Leisure Time Hospitality, Inc. all my
right, title and interest in the Purchase Agreement referred to above as
Purchaser therein, acknowledging that I will remain liable for all of the
promises and covenants of the Purchaser in said Agreement and the Amendment
dated June 26, 1998 and any subsequent Amendment thereto and in the Promissory
Note and Mortgage Deed referred to in said Purchaser Agreement.
/s/ Al Johnson
-----------------------------------------
Al Johnson, a.k.a. Alan N. Johnson
County of Lee
State of Florida
Sworn to before me, a Notary Public, by al Johnson, a.k.a. Alan N.
Johnson, this 11th day of September, 1998.
/s/Pietrina Mc Cormack
-----------------------------------------
Notary Public
<PAGE> 1
EXHIBIT 10.18
PROMISSORY NOTE
Amount: $545,000.00 Cleveland, Ohio
September 15, 1998
For value received, the undersigned promises to pay to the
order of Lisa Lemon, Inc., 812 Pendley Road, Willowick, OH 44095 or at such
other address as the holder hereof may from time to time designate in writing,
in lawful money of the United States of America, the principal sum of Five
Hundred forty five Thousand Dollars ($545,000.00), with interest at the rate of
Ten percent (l0%) per annum. The interest rate shall be adjusted quarterly
beginning September 15, 1999 to four and 75/100 percentage points (4.75%) above
the weekly average yield on US Treasury securities adjusted to a constant of
one year as made available by the Federal Reserve Board.
This Note shall be payable in one payment of $100,000.00 plus
interest on September 15, 1999 and quarterly payments of principal and interest
beginning December 15, 1999 and amortized over a four (4) year period ending on
September 15, 2003, however subject to the options set forth in the next two
(2) paragraphs.
The undersigned may pay this Note in full by paying
$500,000.00 to the holder on or before March 14, 1999.
In the event the option set forth above is not exercised, the
undersigned may pay this Note in full by paying $525,000.00 plus interest on
the principal sum due on or before
<PAGE> 2
September 14, 1999. The undersigned shall also pay such additional charges as
are set forth in a certain Mortgage Deed referred to below.
The undersigned reserves the right to make payments of
principal at any time, including the right to pay the principal balance in
full, without penalty, along with accrued interest to date of payment.
If an event of default as defined in the Mortgage Deed
hereinafter mentioned shall occur, and any such default shall continue for the
period, if any, specified in said Mortgage Deed, the unpaid balance of
principal hereof, together with interest accrued thereon shall become
immediately due and payable, without notice, at the option of the holder of
this Mortgage Note.
This Mortgage Note is secured by a Mortgage Deed of even date
herewith from Leisure Time Hospitality, Inc. conveying the real estate
described in the Exhibit A attached thereto and made a part thereof.
The rights of the holder of this Mortgage Note in respect to
said Mortgage Deed and the real estate described therein are contained in said
Mortgage Deed which is incorporated in and made a part hereof by reference. The
undersigned consents and agrees that without affecting its liability for this
Mortgage Note, the holder hereof may do any of the following: Grant any
indulgence, forbearance, extension of time for payment, or release to the
undersigned or to any other person now or hereafter liable for the payment of
this Mortgage Note.
2
<PAGE> 3
The undersigned hereby authorizes any attorney at law to
appear in any Court of Record, in the State of Ohio, or in any other State in
the United States, after the above obligation becomes due, and waives the
issuing and service of process and confesses a judgment against the undersigned
in favor of the holder hereof for the amount then appearing due, together with
costs of suit, and thereupon to release all errors and waives all rights of
appeal.
The undersigned hereby waives presentment, demand, notice of
dishonor, protest and notice of non-payment and protest. The undersigned have
executed this instrument, in the capacity of maker, regardless of the location
of the signature.
WARNING---BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO
NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN
AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE, AND THE POWERS OF A COURT CAN BE USED
TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR
WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH
THE AGREEMENT, OR ANY OTHER CAUSE.
IN WITNESS WHEREOF, this Note has been executed at the City
of Cleveland, Cuyahoga County, Ohio this 15th day of September, 1998.
LEISURE TIME HOSPITALITY, INC.
by /s/
------------------------------------
Title
3
<PAGE> 4
GUARANTY
The undersigned in his individual capacity personally
guarantees the payment of this Promissory Note and the performance of all of
the covenants on the Mortgage Deed referred to herein.
/s/
-----------------------------------------
ALAN N. JOHNSON
4
<PAGE> 1
EXHIBIT 10.19
MORTGAGE DEED
KNOW ALL MEN BY THESE PRESENTS, that on this 15th day of September,
1998, LEISURE TIME HOSPITALITY, INC., the Grantor, for the purposes hereinafter
mentioned in consideration of Five Hundred Forty Five Thousand Dollars
($545,000.00), received to its full satisfaction from LISA LEMON, INC., a
Pennsylvania Corporation authorized to do business in Ohio, the Grantee, does
give, grant, bargain, sell and convey unto Grantee, their representatives, heirs
and assigns, the real estate described in Exhibit A and made a part hereof; and
all the estate, title and interest which Grantor now have or hereafter may have
either at law or in equity of, in and to the said real estate, together with all
rents and other revenues thereof and any and all easements, tenements,
hereditaments and appurtenances belonging or in any wise appertaining to the
above described premises, all buildings now or hereafter erected thereon, and
all right, title and interest of the Grantor either at law or in equity in and
to all fixtures now or at any time hereafter attached to or used in any way in
connection with the use, operation and occupation of the above described real
estate. All of the property hereinbefore mentioned is hereinafter referred to as
the "mortgaged property."
To have and to hold the mortgaged property unto the Grantee, its
representatives, heirs and assigns, for the uses and purposes therein expressed,
namely, for the purpose of securing:
FIRST: Payment of the principal of and interest on a Mortgage Note of
even date executed by LEISURE TIME HOSPITALITY, INC., in the amount of Five
Hundred Forty Five Thousand Dollars with interest at the rate of 10 percent per
annum, subject to the provisions of said Note, and containing provisions for the
payment thereof upon the terms as set forth on said Note.
In addition to the rights granted to the Grantee pursuant to Paragraph
FIFTH hereof, and in addition to the debt or other obligations secured hereby,
this Mortgage Deed shall also secure unpaid balances or advances made by
Grantee, with respect to the mortgaged property for the payment of taxes,
assessments, insurance premiums or costs incurred for the protection of the
mortgaged property as provided for in Section 5301.233 of the Revised Code of
Ohio.
SECOND: Payment by to the Grantee of all sums expended or advanced by
Grantee pursuant to any term or provision of this Mortgage Deed.
<PAGE> 2
THIRD: Performance and observance of each covenant and agreement of
Grantor herein contained.
FOURTH: Payment by Grantor to Grantee of all other liabilities and
indebtedness, direct or contingent, now or hereafter owing by Grantor to
Grantee.
FOR THE CONSIDERATION AFORESAID, Grantor covenants and agrees with
Grantee as follows, to wit:
FIRST: that at the time of the ensealing and delivery of these
presents Grantor is well seized of the mortgaged property as a good and
indefeasible estate in fee simple and has good right to bargain and sell the
same in the manner and form as above written; that the mortgaged property is
free and clear of all encumbrances, except restrictions, conditions,
reservations, covenants, leases and easements of record, zoning ordinances,
taxes and assessments, both general and special, not yet due and payable, and
that Grantor will warrant and defend the title to the mortgaged property
forever against the claims and demands of all persons whomsoever, except as
aforesaid.
SECOND: Grantor will keep all buildings and other insurable property
now or hereafter erected or placed in or on said mortgaged property insured
against loss by fire and other hazards, casualties and contingencies, in an
amount not less than 90% of its insurable value, excluding foundations. All
such insurance shall be carried in companies approved by the Grantee which
approval shall not be unreasonably withheld or delayed and shall include a
provision making loss payment to Grantee as Grantee's interest may appear. The
policies of insurance shall be delivered to and held by Grantee and Grantor
will promptly pay when due all premiums for such insurance. Not less then ten
days prior to the expiration of any policy of insurance, Grantor will deliver
to Grantee a certificate evidencing renewal of new policies in like amounts
covering the same risks. Should any loss occur to the mortgaged property,
Grantor will promptly give notice by mail to Grantee for such loss or damage.
In the event of foreclosure of this mortgage, all right, title and interest of
Grantor in and to any insurance policy then in force shall pass to the Grantee
who is hereby appointed attorney-in-fact for Grantor to assign and transfer
such policies.
THIRD: Grantor acknowledges that on the date this Mortgage Deed is
filed for record, the property is unoccupied and in a state of disrepair.
Grantor will not commit further waste upon the property, however Grantor will
have the right to remodel and repair the property in order to use the property
as a hotel business. In its use of the property, including any repairs and
remodeling to the property, Grantor will comply in all material respects with
all laws, ordinances and regulations affecting said property or its use.
2
<PAGE> 3
FOURTH: Grantor will pay before they become delinquent, all taxes
(both general and special), assessments, water rates, sewer services or other
governmental or municipal charges, fines, or impositions lawfully levied or
assessed against the mortgaged property, or any part thereof, or upon the
rents, income and profits thereof, so that the lien and priority of this
Mortgage shall be fully preserved and will allow no payment of any taxes,
assessments or governmental charges by a third party with subrogation
attaching; nor permit the mortgaged property or any part thereof to be sold or
forfeited for any tax, assessment or governmental charge whatsoever. Grantor
will deliver proof of payment of each real estate tax payment to the Grantee
upon request therefore from the Grantee. Not withstanding anything herein to
the contrary, Grantor shall be permitted to contest any taxes and assessments
or other charges assessed against the mortgaged property, so long as Grantor
does so in good faith and in a diligent fashion.
FIFTH: In case the Grantor fails to make payment of any taxes,
assessments, liens, insurance premiums or any other charges herein covenanted
by Grantor to be paid at the time when the same shall become due and payable
subject to Grantor's right to contest as set forth above, or shall default in
the performance of any other covenant hereunder, then in such case after first
giving Grantor ten (10) days prior written notice of its intention to do so,
the Grantee in Grantee's discretion, but no obligation is hereby imposed upon
Grantee so to do, or any receiver appointed hereunder, may make payment of any
such sums and perform any such covenants in respect of which there has been a
default, and the Grantor agrees promptly to repay any sums so advanced, without
demand, with interest at the rate of ten, with interest as aforesaid, shall be
secured and shall be included or allowed in any percent per annum from the date
of such payments or advances and such sums so advanced or expended judgment or
decree in any foreclosure suit or other proper judicial proceeding, but no such
advance shall relieve the Grantor of the consequences of any such default.
SIXTH: Grantor will execute, acknowledge and deliver all and every
further assurance in law or for the better assuring, conveying, assigning and
transferring unto Grantee all and singular the mortgaged property hereby
conveyed, assigned or transferred or intended so to be or which Grantor may be
or hereafter become bound to convey, assign or transfer to Grantee, in such
manner as Grantee shall reasonably require. All awards of damages in connection
with any condemnation for public use of or injury to any of said mortgaged
property are hereby assigned and shall be paid to Grantee, who may apply the
same to payment of the installments last due under said Note, and the Grantee
is hereby authorized, in the name of Grantor, to execute and deliver valid
acquittances thereof and to appeal from any such award.
SEVENTH: An event of default shall be deemed to have taken place
within the meaning of this Mortgage Deed in case:
3
<PAGE> 4
(a) Default shall be made in making any payment under the said
Mortgage Note or on account of any other indebtedness of Grantor to Grantee;
however prior to the exercise of its rights under this Mortgage Deed, Grantee
shall provide written notice to the Grantor specifying such default and Grantor
shall have five (5) days following such notice to cure such default.
(b) Default shall be made in the performance or observance of any
covenant or agreement of the Grantor herein contained; and such default shall
continue for a period of thirty (30) days after Grantor has received written
notice of such default (provided, however, that if such default cannot
reasonably be cured within such thirty (30) day period, then Grantor shall not
be deemed to be in default so long as Grantor commences to cure such default
within said thirty (30) day period and diligently pursues same to completion.
(c) Default shall be made in the performance or observation of any
covenant, condition or agreement on the part of Grantor to be kept or performed
under any contract, agreement, note, mortgage, pledge, guaranty or any other
instrument or document now or hereafter executed and delivered by Grantor to
evidence, as security for, or in connection with any indebtedness of Grantor to
Grantee;
(d) Grantor shall abandon any of the mortgaged property or shall
sell, lease, convey or transfer (or contract to sell, lease, convey or
transfer) all or any part of the mortgaged property.
(e) Grantor shall assign all or any part of the rents and profits
of the mortgaged property without first obtaining Grantee's written consent or,
by the cancellation, surrender or modification of any existing lease (or in any
other manner) the security for the payments of the indebtedness hereby secured
shall be in any manner impaired;
(f) Any party liable for the indebtedness hereby secured shall make
a general assignment for the benefit of creditors, become insolvent or file a
petition of voluntary bankruptcy or shall file a petition or answer seeking
reorganization of such party or an arrangement or composition, extension or
readjustment of his or her indebtedness or consent to the appointment of a
receiver or trustee of any such party or his or her property to any part
thereof; or
(g) A petition for proceedings in bankruptcy or for the
reorganization of any party liable for the indebtedness hereby secured or for
an arrangement or composition, extension or readjustment of the indebtedness of
any such party shall be filed against him or her and he or she shall admit the
material allegations thereof or an order, judgment or decree
4
<PAGE> 5
shall be made approving such petition, or a receiver or trustee of any such
party or his or her property or any part thereof shall be appointed; and in any
and every such case provided for in this Paragraph SEVENTH, the security hereby
created shall become enforceable and the Grantee may proceed forthwith to
enforce as hereafter set forth.
EIGHTH: In case the security hereby created shall become
enforceable as hereinbefore provided, the Grantee may, in Grantee's discretion,
declare all sums secured hereby and any and all other indebtedness of Grantor
to Grantee immediately due and payable and in that event, the Grantor agrees
that Grantor will make payment of said sums accordingly.
NINTH: In case the security hereby created shall become enforceable
as hereinabove provided, the Grantee may take possession of the mortgaged
property, manage it and collect rents, issues and profits therefrom and apply
the same, less reasonable costs of collection, upon the indebtedness hereby
secured, and all leases, rents, issues and profits of the mortgaged property,
after the security shall become enforceable, are hereby assigned and mortgaged
to the Grantee as additional security for the indebtedness secured hereby. Any
and all of the rights and remedies granted by this Paragraph NINTH shall accrue
and become available to the Grantee whether or not a receiver has been
appointed or a foreclosure action has been commenced.
TENTH: In case the security hereby created shall become enforceable
as hereinbefore provided, the Grantee may take appropriate judicial proceedings
or proceed with any right or remedy, independent of or in aid of the power of
entry hereinbefore conferred, as Grantee may deem best for the protection and
enforcement of Grantee's rights hereunder or to foreclose the lien hereof, or
to enforce any right or remedy available to Grantee under the laws of the State
of Ohio, or to cause the mortgaged property to be sold as a whole or in parcels
under the judgment or decree of a court or courts of competent jurisdiction, or
may proceed to protect and enforce Grantee's rights by any other proper legal
or equitable remedy as Grantee shall deem most effectual.
ELEVENTH: Upon commencement of any judicial proceedings to enforce
any right under this Mortgage Deed, the court in which such proceeding is
brought, at any time thereafter, without reference to the then value of the
mortgaged property, to the use of said property as a homestead or to the
solvency or insolvency of any person liable for said indebtedness or other
grounds for extraordinary relief, may appoint a receiver for the benefit of
Grantee with power to take possessions of the mortgaged property, manage, rent
and collect the rents, issues and profits thereof and such rents, issues and
profits when collected may be applied toward the payment of any indebtedness
then due and secured hereby and the costs, taxes, insurance or other items
necessary for the protection and preservation of the mortgaged property,
including the expenses of such receivership.
5
<PAGE> 6
TWELFTH: Grantor will claim the benefit of any stay, extension,
valuation, appraisement or redemption law now or at any time hereafter in
force.
THIRTEENTH: Every right and remedy provided in this Mortgage Deed
shall be cumulative of every other right or remedy of Grantee whether herein or
by law conferred and may be enforced concurrently therewith and no acceptance
of the performance of any obligation as to which Grantor shall be in default,
or waiver of particular or single performance of any obligation or observance
of any covenant, shall be construed as a waiver of the obligation or covenant
or as a waiver of any other default then, theretofore or thereafter existing.
The invalidation of any provisions of this mortgage shall in no way affect the
validity of any other provision hereof.
FOURTEENTH: Grantee may, at any time, deal in any way with Grantor
or grant to Grantor any indulgences or forebearances and/or and extensions of
the time of payment of any indebtedness secured hereby, or a release of
liability for the payment of any such indebtedness. No such act or acts of
Grantee shall affect the personal liability of any other person for the payment
of the indebtedness secured hereby or the lien of this Mortgage Deed upon the
remainder of the mortgaged property for the full amount of the indebtedness
secured hereby.
FIFTEENTH: The term "Grantor" wherever used in this Mortgage Deed
shall include not only the persons signing this Mortgage Deed, but also any
person or persons who guarantees or hereafter may assume payment of any and all
of the indebtedness secured hereby, together with the respective heirs,
representatives, successors and assigns of such persons, and the term "Grantee"
wherever used in this mortgage shall include any lawful owner, holder, or
pledgee of any indebtedness secured hereby.
PROVIDED, ALWAYS, that if the Grantor shall pay unto the Grantee
the principal of and interest on the said Mortgage Note, when and as the same
shall become due and payable, whether by acceleration or otherwise, and shall
pay any and all other sums payable under said Mortgage Note or under this
Mortgage Deed or secured by this Mortgage Deed, then and in that case, the
premises hereby conveyed and all rights and interests therein and thereto shall
revert to the Grantor and the estate, right, title and interest of the Grantee
therein shall thereupon cease, determine and become void, and in such case the
Grantee shall execute and deliver to the Grantor, at the Grantor's cost, an
appropriate release and discharge of this Mortgage Deed in a form to be
recorded.
6
<PAGE> 7
IN WITNESS WHEREOF, the Mortgage Deed has been executed at
Cleveland, Ohio, this day and year first above written.
SIGNED, ACKNOWLEDGED AND
DELIVERED IN THE PRESENCE OF: LEISURE TIME HOSPITALITY,
INC.
by:
- ----------------------------------- /S/
-----------------------------------------
GRANTOR
- -----------------------------------
7
<PAGE> 8
STATE OF OHIO )
)SECTIONS
CUYAHOGA COUNTY )
BEFORE ME, a Notary Public in and for said County and State, did
personally appear the above named ________________________, __________________
of LEISURE TIME HOSPITALITY, INC. who acknowledged that he did sign the
foregoing instrument, and that the same is his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal, at Cleveland, Ohio, this 15th day of September, 1998.
/s/
----------------------------
NOTARY PUBLIC
This instrument prepared by:
Don P. Brown
Attorney at law
10 Center St.
Chagrin Falls Ohio 44022
440-247-9100
8
<PAGE> 9
EXHIBIT A
LEGAL DESCRIPTION
The property referred to in this Mortgage Deed is described as follows:
Situated in the City of Cleveland, County of Cuyahoga and State of Ohio and
known as part of Original 100 Acre Lot No. 346 and is bounded and described as
follows:
The beginning point is on the Southeasterly line of Marginal Road (so called)
it being the Northwesterly line of land described in a deed from the City of
Cleveland to Union Properties, Inc., dated November 13, 1952 and recorded in
Volume 7653, Page 52 Cuyahoga County Deed Records, at the Northeasterly corner
of land conveyed to Norwalk Truck Lines, Inc., to Trammell Crow deed dated
December 9, 1959 and recorded in Volume 9784, Page 158 of Cuyahoga County Deed
Records;
Course 1 Thence South 32 degrees 23' 30" East along the Northeasterly line of
land conveyed to Trammell Crow as aforesaid and the Southeasterly prolongation
thereof 311.66 feet;
Course 2 Thence North 57 degrees 36' 30" East 320.00 feet;
Course 3 Thence North 32 degrees 23' 30" West, parallel with Course 1, and
distant Northeasterly 320.00 feet by rectangular measurement therefrom 413.44
feet to the Southeasterly line of said Marginal Road;
Course 4 Thence Southwesterly along said Southeasterly line of Marginal Road,
it being a curved line deflecting to the left 337.52 feet to the place of
beginning, said curved line having a radius of 963.00 feet and a chord which
bears South 39 degrees 58' 00" West 335.79 feet.
9
<PAGE> 1
EXHIBIT 10.20
BAREBOAT CHARTER PARTY
THIS BAREBOAT CHARTER PARTY, dated as of June 22, 1998 (hereinafter
called the "Charter Party") between Florida Casino Cruises, Inc., a corporation
organized and existing under and by virtue of the laws of the State of Georgia,
with an office at __________________ (hereinafter called the "Owner") and
Leisure Express Cruise, L.L.C., a limited liability company organized and
existing under and by virtue of the laws of the State of Colorado, with an
office at _______________. (hereinafter called the "Charterer").
WHEREAS, Owner is the owner of the VEGAS EXPRESS (Official No. 594643),
WHEREAS, Owner and Charterer desire to enter into the Charter Party in
accordance with the terms and conditions hereof, and
NOW, THIS CHARTER WARTY WITNESSETH that, in consideration of the
premises above recited and the covenants contained herein, Owner agrees to let
and Charterer agrees to hire the Vessel (as hereinafter defined) on the
following terms and conditions.
SECTION 1
DEFINITIONS
1.1 "Vessel" shall mean the VEGAS EXPRESS, together with all of its
boilers, engines, machinery, masts, rigging, boats, anchors, chains, tackle,
apparel, furniture, fittings and equipment and all other appurtenances "hereunto
appertaining or belonging, whether now owned or hereafter acquired, whether on
board or not, and all additions, improvements and replacements hereafter made in
or to said Vessel, and including all gaming equipment, machinery or accessories
related to gaming operations.
1.2 "Delivery Date", as used in Sections 3, 4, and 5, hereof, shall
mean the closing date when Owner delivers to and Charterer accepts the Vessel as
provided in Section 2 hereof.
SECTION 2
DELIVERY OF VESSEL
2.1 The Vessel will be delivered by Owner to Charterer at Dania, FL, on
June __, 1998. At the time the Vessel is delivered by Owner, Charterer shall
accept the Vessel by executing and delivering to Owner an Acceptance Supplement
therefor, substantially in the form attached hereto as Exhibit A and by this
reference made a part hereof, whereupon the Vessel shall (i) be deemed to have
been accepted by Charterer on the Delivery Date specified in such Acceptance
Supplement, and (ii) become subject to and governed by all the provisions of
this Charter Party.
<PAGE> 2
SECTION 3
CONDITIONS PRECEDENT TO DELIVERY OF VESSEL
3.1 Owner's obligation to deliver the Vessel to Charterer is subject to
the satisfaction on or before the Delivery Date of each of the following
conditions:
a. The representations and warranties contained in Section 7 of
this Charter Party shall be true on and as of the Delivery Date of the
Vessel and there shall exist on such Delivery Date no Event of Default
as defined in Section 15 in this Charter Party, nor any condition,
event or act which with notice or lapse of time or both would become an
Event of Default as so defined which Event of Default, conditions,
event or act has not been remedied or waived.
b. Owner shall have received evidence satisfactory to Owner that
the insurance required under the terms of this Charter Party is in full
force and effect.
c. Owner shall have received a certified copy of a resolution of
the Board of Directors of Charterer authorizing Charterer's execution
and delivery of this Charter Party and the chartering of the Vessels
from Owner pursuant to the provisions thereof.
3.2 Charterer's obligation to accept delivery of the Vessels from
Owner is subject to the satisfaction on or before the Delivery Date of
each of the following conditions:
a. Charterer has inspected the Vessel and Owner shall have
warranted that the Vessel is in the same condition, reasonable wear and
tear excepted, at the Delivery Date as reflected in the inspection
report prepared by attached hereto as Exhibit B.
b. The representations and warranties contained in Section 7.2 of
this Charter Party shall be true on and as of the Delivery Date of the
Vessel.
c. Charterer shall have received a certified copy of a resolution
of the Board of Directors of Owner authorizing Owner's execution and
delivery of this Charter Party and the chartering of the Vessel to
Charterer pursuant to the provisions thereof.
SECTION 4
TERM OF CHARTER PARTY
4.1 The term of this Charter Party shall commence upon the Delivery
Date and unless sooner terminated as provided herein, shall continue until
January 21, 1999.
4.2 At all times during the term of this Charter Party, title to the
Vessel shall be vested in Owner to the exclusion of Charterer, and delivery of
the Vessel to Charterer and Charterer's possession thereof shall constitute a
letting and bailment.
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4.3 This Charter Party shall not be subject to termination by Owner
unless Charterer is in default hereunder, nor by Charterer except in the event
of a breach of Owner's obligations hereunder.
SECTION 5
CHARTER HIRE PAYMENTS
5.1 Charterer agrees to pay Owner as charter hire equal consecutive
monthly payments of _________________ ($100,000.00) AND NO/100 DOLLARS, in
____________ commencing on the last day of the month of the Delivery Date and on
the last day of each consecutive month thereafter. Such charter hire shall be
absolutely net to Owner, so that this Charter Party will yield to Owner the full
amount of the installments of such charter hire throughout the term of this
Charter Party without deduction.
5.2 All payments under Section 5.1 and all other payments by Charterer
to Owner under this Charter Party shall be made in United States Dollars in
immediately available funds net of any withholding or other taxes except
franchise or income taxes of the Owner, either at the office of Owner at the
address set forth in Section 23 hereof, or at such other address in the United
States as Owner may notify Charterer giving ten (10) days notice in writing.
SECTION 6
NO WARRANTIES; QUIET ENJOYMENT
6.1 Notwithstanding any other provisions of this Charter Party,
simultaneously with the delivery of the Vessel and execution by Charterer and
Owner of the Acceptance Supplement therefor, Charterer shall be deemed to have
accepted delivery of the Vessel under this Charter Party "as is, where is",
without any agreement, representation or warranty, express or implied, by Owner
except as set forth in Section 7.2. OWNER SHALL NOT, BY VIRTUE OF MERELY HAVING
CHARTERED AND LET THE VESSEL UNDER THIS CHARTER PARTY, BE DEEMED TO HAVE MADE
ANY REPRESENTATION OR WARRANTY EITHER EXPRESS OR IMPLIED AS TO THE VESSEL, OR AS
TO THE DESIGN, CONDITION, MERCHANTABILITY OR SEAWORTHINESS OF, OR AS TO
CONSUMABLE STORES ON BOARD THE VESSEL, OR AS TO THE FITNESS OF THE VESSEL, FOR
ANY PARTICULAR PURPOSE OR ANY PARTICULAR TRADE, OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER except as set forth in Section 7.2, it being agreed and
understood that all such risks as between Owner and Charterer are to be borne
under the Charter Party by Charterer, except as set forth in Section 7.2.
6.2 AS BETWEEN OWNER AND CHARTERER, CHARTERER ACKNOWLEDGES AND AGREES
THAT OWNER HAS NOT MADE, AND DOES NOT HEREBY MAKE, ANY REPRESENTATION OR
WARRANTY OR COVENANT WITH RESPECT OF THE MERCHANTABILITY, CONDITION, QUALITY,
DURABILITY OR SUITABILITY WITH OR FOR THE PURPOSES AND USES OF CHARTERER, OR ANY
OTHER REPRESENTATION OR WARRANTY OR COVENANT OF ANY KIND OR CHARACTER, EXPRESS
OR IMPLIED, EXCEPT AS SET FORTH IN SECTION 7.2 AND
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THAT CHARTERER AGREES THAT OWNER SHALL NOT BE LIABLE TO CHARTERER FOR ANY
LIABILITY, CLAIM, LOSS, DAMAGE OR EXPENSE OF ANY KIND OR NATURE CAUSED, DIRECTLY
OR INDIRECTLY, TO THE VESSEL OR ANY INADEQUACY THEREOF FOR ANY PURPOSE, OR ANY
DEFICIENCY OR DEFECT THEREIN, OR THE USE OR MAINTENANCE THEREOF, OR ANY REPAIRS,
SERVICING OR ADJUSTMENTS THERETO, OR ANY INTERRUPTION OR LOSS OF SERVICE OR USE
THEREOF, OR ANY LOSS OF BUSINESS BY CHARTERER, OR ANY OTHER CONSEQUENTIAL
DAMAGES, EXCEPT TO THE EXTENT THE SAME IS ATTRIBUTABLE TO A BREACH OF THE
REPRESENTATION IN SECTION 7.2.
6.3 If Charterer shall pay the charter hire and other amounts payable
by Charterer hereunder as and when the same become due and payable and shall
perform and comply with all of the other terms and conditions hereof, Owner and
persons claiming by through or under Owner will not interfere with the peaceful
and quiet use and enjoyment of the Vessel by Charterer, provided that Owner and
its authorized representative may, on reasonable notice, inspect the Vessel as
provided in Section 18 hereof.
SECTION 7
REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 Charterer represents, warrants and covenants with respect to this
Charter Party that:
(a) Charterer is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Colorado, and is duly qualified and authorized to do business wherever
the nature of its activities or properties require such qualification
and authorization.
(b) Charterer has the full power, authority and legal right to
execute, deliver and perform the terms of this Charter Party. This
Charter Party has been duly authorized by all necessary action of the
Directors of Charterer and continues a valid and binding obligation of
Charterer enforceable in accordance with its terms.
(c) There is no law and no charter, by law or preference share
provision of Charterer and no provision in any existing mortgage,
indenture, contract or agreement binding on Charterer which would be
contravened by the execution, delivery or performance by Charterer of
the terms of this Charter Party.
(d) No consent of the holder of any indebtedness of Charterer is
or will be required as a condition to the validity of this Charter
Party or, if required, all such consents have been obtained.
(e) Neither the execution or delivery of this Charter Party nor
fulfillment of or compliance with the terms and provisions hereof will
contravene any provision of law, including, without limitation thereto,
any statute, rule, regulation, judgment, decree,
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<PAGE> 5
order, franchise or permit applicable to Charterer or any agreement or
instrument to which Charterer is now a party.
(f) Charterer represents that it now is and covenants throughout
the term of this Charter Party that it will continue to be a citizen of
the United States qualified to engage in the coastwise trade within the
meaning of Section 2 of the Shipping Act, 1916, as amended (46 USC,
Section 802, as amended). Charterer further covenants that it will not
cause or permit the Vessel to be operated in any manner contrary to the
law and the Charterer will not engage in any unlawful trade or violate
any law or carry any cargo that will expose the Vessel to penalty,
forfeiture or capture, and will not do, or suffer or permit to be done
(other than to suffer or permit anything done by the Owner), anything
which can or may injuriously effect the documentation of the Vessel
under the laws and regulations of the United States and will at all
times keep the Vessel duly documented thereunder.
7.2 Owner represents, warrants and covenants with respect to this
Charter Party that:
(a) Owner is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia, and is duly
qualified and authorized to do business wherever the nature of its
activities or properties require such qualification and authorization.
(b) Owner has the full power, authority and legal right to execute,
deliver and perform the terms of this Charter Party. This Charter Party
has been duly authorized by all necessary corporate action of Owner and
constitutes a valid and binding obligation of Owner enforceable in
accordance with its terms.
(c) There is no law and no charter, by-law or preference share
provision of Owner and no provision in any existing mortgage,
indenture, contract or agreement binding on Owner which would be
contravened by the execution, delivery or performance by Owner of the
terms of this Charter Party.
(d) No consent of the holder of any indebtedness of Owner or of
any mortgagee of the Vessel is or will be required as a condition to
the validity of this Charter Party or, if required, all such consents
have been obtained.
(e) Neither the execution or delivery of this Charter Party nor
fulfillment of or compliance with the terms and provisions hereof will
contravene any provision of law, including, without limitation thereto,
any statute, rule, regulation, judgment, decree, order, franchise or
permit applicable to Owner or any agreement or instrument to which
Owner is now a party.
(f) Owner has good and marketable title to the Vessel, free and
clear of all liens, except as set forth on Schedule I annexed hereto.
There is no action or proceeding pending or, insofar as Owner knows,
threatened against Owner before any court or
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<PAGE> 6
administrative agency which in its opinion might result in any material
adverse effect on the business or conditions or operations of Owner or
Owner's good and marketable title to the Vessel.
(g) Owner represents that it now is and covenants throughout the
terms of this Charter Party that it will continue to be a citizen of
the United States qualified to engage in the coastwise trade within the
meaning of Section 2 of the Shipping Act, 1916, as amended (46 USC,
Section 802, as amended), that the Vessel is duly documented to engage
in the coastwise trade has a valid and current (without benefit of any
grace period) Certificate of Inspection, ____________________________,
and is suitable to be operated as an offshore casino gaming vessel.
(h) ______________________________________________________________
______________________________________________________________________
______________________________________________________________________
SECTION 8
POSSESSION AND USE OF VESSEL
8.1 Charterer shall man, fuel, insure, maintain, navigate and supply
the Vessel at its sole cost and expense and shall pay all charges and expenses
of every kind and penalties levied against the Vessel and arising on or after
the Delivery Date, it being understood that Owner retains no dominion, control,
possession or command during the term of this Charter Party but that Charterer
shall have exclusive use, dominion, control, possession and command of said
Vessel during the term of this Charter Party.
Owner shall, throughout the charter period, maintain the documentation
of the Vessel in the Owner's name under the laws of the United States of America
at the Owner's expense. Charterer will execute such documents and furnish such
information as Owner may reasonably require to enable Owner to maintain such
documentation. Charterer shall not suffer or permit anything to be done (other
than to suffer or permit anything done by the Owner) which can or might
injuriously affect the documentation of the Vessel under the laws and
regulations of the United States of America, engage in any unlawful trade or
violate any law recognized as valid by the United States of America, or carry
any cargo that will expose the Vessel to penalty, forfeiture or capture.
8.2 Charterer shall not sell, assign or transfer or, directly or
indirectly, create or incur or suffer to be created or incurred or to exist any
mortgage (other than any mortgage granted by Owner) lien, charge or encumbrance
of any kind, except for longshoreman's or crew's wages or salvage, on any of its
rights under this Charter Party or on the Vessel, and if any such mortgage,
lien, charge or encumbrance does exist, Charterer, at its sole cost and expense,
shall promptly remove the same. Charterer will at all times keep a true copy of
this Charter Party on board the Vessel with its papers and exhibit the same on
request and Charterer agrees to notify any person furnishing repairs, supplies,
towage, or other necessaries to the Vessel that neither the Charterer nor the
Master of the Vessel nor any person has any right or power to create, incur or
permit to
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be imposed upon the Vessel any liens whatsoever, except a longshoreman's or
crew's wages or salvage, and will keep prominently displayed on the Vessel a
notice which shall read as follows:
"NOTICE OF BAREBOAT CHARTER PARTY
This Vessel is the property of Florida Casino Cruises, Inc. It is under
charter to Leisure Express Cruise, L.L.C. and by the terms of the
Bareboat Charter Party neither the Charterer, the Master of this Vessel
nor any other person has the right, power or authority to create, incur
or permit to be imposed on the Vessel any liens whatsoever, except for
longshoreman's or crew's wages and salvage."
Notwithstanding anything contained herein to the contrary, Charterer shall have
the right to create, incur or permit to be placed or imposed upon the Vessel
usual and customary operating liens which are to be discharged within the normal
course of business and shall have the right to grant security rights to allow
financing for furniture, fixtures and equipment, including gaming equipment, of
the Charterer used in its ordinary course of business (hereinafter called
"FF&E"), so long as the grantee of such security rights expressly waives any
lien or security right against the Vessel or its equipment.
8.3 Charterer shall accept, and pay to Owner the then current market
price at N/A for such fuel, lubricating oil and unbroached consumable stores as
may be the property of Owner and on board at the time of delivery to Charterer.
_______________________________________________________________________________
_______________________________________________________________________________
_____________________________________________.
Charterer shall at its own expense provide such additional equipment,
outfit, appliances, tools, spare and replacement parts, non-consumable stores,
etc. as may be required for operation of the Vessel. Such equipment shall remain
the property of Charterer.
8.4. Subject to the right of Charterer to deliver possession of the
Vessel to any organization for overhauling, service, repair or maintenance work
on the Vessel, Charterer shall not transfer possession of or sub-lease the
Vessel.
SECTION 9
MAINTENANCE AND OPERATION OF VESSEL
9.1 Charterer at its own cost and expense shall maintain and preserve
the Vessel in good running order and repair, so that the vessel, insofar as due
diligence can make her so, is tight, staunch, strong and well and sufficiently
tackled, appareled, furnished, equipped.
9.2 Charterer covenants that the vessel will at all times comply with
applicable laws, treaties, conventions, rules and regulations issued thereunder,
and will keep on board, when required thereby, valid certificates showing
compliance therewith.
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9.3 Charterer will not cause or permit the Vessel to be operated in any
manner contrary to applicable laws, treaties, conventions or rules and
regulations and undertakes to do all such things, without expense to Owner, as
shall be necessary to comply with all requirements to permit lawful operation of
the Vessel; provided, however, that Charterer may in good faith contest the
validity and application of any such law or rule in any reasonable manner which
does not adversely affect the property or rights of Owner hereunder, and no
technical or nonsubstantial noncompliance with the provisions of this Section
9.3 shall be deemed a material breach if Charterer shall have obtained, in
writing, from the appropriate authorities permissions, extensions or
continuances to perform any act required of Charterer hereunder, provided
Charterer shall perform any and all requirements or conditions set forth in such
permissions, extensions or continuances.
9.4 Charterer shall not detach or remove from, or permit or suffer to
be detached or removed from the Vessel any equipment, accessories or parts on
board the Vessel at the commencement of the term of this Charter Party or
considered to be a part thereof in accordance with the definition contained in
Section 1 hereof, unless any such detachment or removal shall be incident to any
replacement permitted under Section 10 hereof.
9.5 Owner shall have the right at any time and at its expense, on
reasonable notice, to inspect the Vessel in order to ascertain whether the
Vessel is being properly repaired and maintained and the Charterer shall cause
to be made all such repairs, without expense to Owner, as such inspection or
survey may show to be required. The Charterer shall also permit the Owner to
inspect the Vessel's logs, whenever requested, on reasonable notice, and shall
furnish the Owner with full information regarding any material casualties or
other accidents or damage to the Vessel.
9.6 If a complaint be filed against the Vessel or the Vessel be
otherwise attached, arrested, levied upon or taken into custody under process or
color of legal authority for any cause whatsoever, the Charterer will promptly
notify Owner by telecopier or by telephone that is confirmed in writing, at the
address specified in Section 22.1 of this Charter Party, and unless such liens
were created solely by any act or inaction of the Owner, within 15 days from the
time of such complaint, attachment, arrest or seizure will cause the Vessel to
be released and all Liens thereon to be discharged and will promptly notify the
Owner in the manner aforesaid.
If the Charter shall fail or neglect to furnish proper security or
otherwise to release the Vessel from complaint, arrest, levy, seizure or
attachment, the Owner or the Trustee or any person acting on behalf of the Owner
may furnish security to release the Vessel and by so doing shall not be deemed
to cure the default of the Charterer.
9.7 Charterer acknowledges that this is a Bareboat Charter Party only
and that Charterer has not acquired and shall not acquire during the term of
this Charter Party any right, title or interest in and to the Vessel, which are
and shall at all times remain the property of the Owner.
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SECTION 10
REPLACEMENT AND ADDITIONS TO THE VESSEL
10.1 Charterer will not make, nor permit to be made, any substantial
change in the structure, type or speed of the Vessel or change in her rig,
without first having obtained the written approval thereof of the Owner.
Charterer may replace any accessory, equipment, part or item appurtenant to the
Vessel or any of its equipment where necessary in the normal course of
Charterer's maintenance, provided such replacement is of new manufacture or
warranted as rebuilt or reconditioned by Charterer or a manufacturer and in good
operating order, and is of at least equivalent value and condition as the
accessory, equipment, part, item or equipment replaced. Any accessories, parts
or items that are installed on, incorporated in or attached to the Vessel by
Charterer in replacement of existing accessories, equipment, parts, items, and
any accessories, and which are essential to the operation of the Vessel, will be
considered to be accessions (hereinafter called "accessions") to the Vessel and,
title to such accessions will be immediately vested in Owner without cost or
expense to Owner upon such installation, incorporation or attachment, and such
accessions will become subject to all of the terms and provisions of this
Charter Party as completely and to the same extent as if they had been
components of the Vessel at the time it originally became subject to this
Charter Party, and title to the accessories, equipment, parts, or items which
are replaced by the accessions shall be vested in Charterer when such
replacement has been completed. Any accessories, equipment, parts or items that
are installed on, incorporated in or attached to the Vessel by Charterer and
which are in addition to, but not in replacement of, existing accessories,
equipment, parts or items, but are not essential to the operation of the Vessel
will not be considered accessions but rather will be considered non-essential
additions (hereinafter called "non-essential additions") to the Vessel if, and
only if, such non-essential additions to the Vessel are not affixed or attached
to the Vessel to such an extent that their removal could involve considerable
expense or might result in damage to the Vessel, and title to such non-essential
additions as well as title to any Charterer supplied gaming equipment, machinery
or accessories related to gaming operations and other furniture and equipment
owed by Charterer and used in its ordinary course of business, shall remain with
Charterer. Charterer's FF&E shall be absolutely removable, provided Charterer
repairs all damage resulting from such removal.
SECTION 11
ALTERATIONS
11.1 Owner shall bear no liability whatsoever for the cost of any
replacements or additions to accessories, equipment, parts or other items to the
Vessel or for alterations or modifications to the Vessel made by Charterer
during the term hereof, including, without limitation, modifications required by
authority or by changes in laws or regulations.
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SECTION 12
INSURANCE
Charterer shall, at its sole expense, carry the following minimum
insurance coverages through the term of this Charter Party, including any
extension hereof, or such increased coverages as may be considered necessary or
advisable for the protection of Owner:
12.1 (a)(i) Unless such types of insurance are no longer commercially
available, the Charterer will at all times and at its own cost and expense cause
to be carried and maintained in respect of the Vessel insurance payable in
United States Dollars in such amounts, against such risks (including navigating
risk and marine hull and machinery (including excess value) insurance, marine
protection and indemnity insurance and public liability insurance) and in such
form (including, without limitation, the form of the loss payable clause and the
designation of named assureds) as provided in Schedule II.
(ii) In the case of all marine hull and machinery policies, the
Charterer will cause, within 30 days after the Closing Date, Owner to
be named as a co-insured and will (and cause its insurance broker to)
cause the insurers under such policies to waive any liability of Owner
for premiums payable under such policies. In the case of all protection
and indemnity insurance, if obtainable, the Shipowner will cause Owner,
within 30 days after the Closing Date, to be named as an additional
insured unless it cannot be provided that Owner shall not be liable
under such policies for payment of any premium, club call, assessment
or advance. Notwithstanding the foregoing, at no time shall there be
recourse against Owner and owner under such policies for payment of any
premium, club call, assessment, advance or commission.
(iii) The Charterer will cause the form of insurance brokers
referenced in Section 12.1(a)(iv) of this Charter Party to agree to
advise Owner forthwith by telecopier to their addresses of any lapse of
any such insurance by expiration, termination, failure to renew or
otherwise and of any default in payment of any premium and of any other
act or omission on the part of the Charterer of which such brokers have
knowledge and which might invalidate or render unenforceable, in whole
or in part, any insurance on the Vessel. Absent actual knowledge,
neither Owner shall be deemed to have knowledge of any such lapse of
insurance in the absence of receipt of notice from such brokers.
Promptly after the Closing Date, the Charterer will also cause such
brokers to agree to mark their records and to advise Owner, by
telecopier, addressed as provided above in this subsection, at least
five (5) business days prior to the expiration date of any insurance
carried pursuant to this Charter Party, that such insurance has been
renewed or replaced with new insurance which complies with the
provisions of this Section 12. In addition, the Charterer will use its
best efforts to cause each insurance company, underwriter, club or fund
(or any authorized agent thereof) with respect to all insurance
required hereby to agree in writing for the benefit of Owner that each
policy or contract issued by such insurance company, underwriter, club
or fund shall not lapse, expire, terminate or be
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cancelled for any reason whatsoever without at least ten days' prior
notice to Owner by telecopier or cable addressed as provided above in
this subsection (iii).
(iv) __________________________ Charterer, at its own expense,
shall furnish to Owner simultaneously with the execution and delivery
hereof, a report in form and substance satisfactory to Owner (which
shall set forth, without limitation, with respect to each type of
insurance coverage, each policy or certificate of entry, its form, its
number, its amount, each direct or indirect or participating insurer or
underwriter, the type of risk covered and the expiration date), signed
by a firm of independent insurance brokers appointed by the Charterer
and acceptable to Owner, with respect to the insurance carried and
maintained in respect of the Vessel.
(b) For the purposes of insurance against total loss, the Vessel,
its equipment, appurtenances, etc., shall be insured for and valued at
an amount at least equal to the fair market value thereof. Protection
and indemnity insurance in respect of the Vessel shall be in the
highest amount from time to time commercially reasonable for vessels of
the same type, size, age and flag the Vessel, but in any event shall be
in an amount for each occurrence of not less than the declared value of
Vessel under its hull and machinery insurance.
(c) Unless otherwise required by Owner by notice to the
underwriters, although the following insurance is payable to the Owner,
(i)___________________________________________________________________
in the case of any loss ______________________________________________
under any insurance with respect to the Vessel involving any damage to
the Vessel, the underwriters may pay directly for the repair, salvage
or other charges involved or, if the Charterer shall have first fully
repaired the damage or paid all of the salvage or other charges, will
pay the Charterer as reimbursement therefor.
(d) In the event of an actual, constructive or compromised total
loss of the Vessel, all insurance provided for herein or other payments
for such loss shall be paid to the Owner. Under such an event, the
Charter Party shall then terminate as of the date payment of the
insurance is made to the Owner and, in addition, Charterer shall be
required to pay to Owner the sum of the charter hire due and payable as
to the Vessel to the date of the loss. Nothing herein shall prevent
Charterer from obtaining business interruption insurance or insurance
on FF&E, the proceeds of which, if any, shall be payable to the
Charterer or its assigns.
(e) The Charterer will cause all policies and certificates of
entry with respect to insurance required hereby to contain a loss
payable clause which shall: (i) in the case of protection and indemnity
insurance and public liability insurance, provide for payment to the
Charterer or its order unless and until the underwriters or
associations receive notice from the Owner that there has occurred and
is continuing an Event of Default hereunder, in which event all
payments shall be made to the Owner and (ii) in the case of
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all other insurance, provide for payment in acceptance with the terms
of subsections (c) and (d) of this Section 12.1. In addition (unless
all or substantially all of the insurance required by this Section 12.1
is placed in the United States market), the Charterer will, at its own
cost and expense, assign to Owner as their interests may appear all of
the Charterer's right, title and interest in and to each policy and
contract of insurance (including all entries in protection and
indemnity associations) with respect to the insurance required hereby
and furnish, or cause its brokers to furnish, written notice of such
assignment to all insurers, underwriters, clubs and associations with
respect to such insurance.
(f) In the event that any claim or lien is asserted against the
Vessel for loss, damage or expense which is covered by insurance
required hereunder, and it is necessary for the Charterer to obtain a
bond or supply other security to prevent arrest of the Vessel or to
release the Vessel from arrest on account of such claim or lien. Owner,
on request of the Charter or its agent, may assign to any person, firm
or corporation executing a surety or guarantee bond or other agreement
to save or release the Vessels from such arrest, all right, title and
interest of Owner in and to said insurance covering said loss, damage
or expense, as collateral security to indemnify against liability under
said bond or other agreement.
(g) The Charterer will deliver to Owner copies of all cover notes,
binders, policies and certificates of entry in protection and indemnity
associations, and all endorsements and riders amendatory thereof, in
respect of insurance maintained in connection with the Vessel.
(h) The Charterer agrees that it will not do or permit or
willingly allow to be done any act by which any insurance required by
the terms of this Charter may be suspended, impaired or cancelled, and
that it will not permit or allow the Vessel to undertake any voyage or
run any risk or transport any cargo which may not be permitted by the
policies in force, without having previously insured the Vessel by
additional coverage to extend to such voyages, risks or cargoes.
12.2 Without limiting the foregoing, it is hereby agreed that Owner
may, at Owner's expense, insure the Vessel against loss under Charterer's then
current policies, and the full amount of any proceeds or award in respect of
such additional insurance shall be paid to Owner. Charterer agrees that it will
cooperate with Owner in any reasonable manner to enable Owner to obtain such
additional insurance.
SECTION 13
SEIZURE OF VESSEL
13.1 In the event that there should be a condemnation, seizure or other
taking of the Vessel by governmental authority, whether under the power of
eminent domain or otherwise, if lasting for a period of more than thirty (30)
days, then Owner and Charterer shall have the same rights, duties and
responsibilities with reference to the Vessel so condemned, seized or taken, as
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they would under the provisions of Section 12.1(d) hereof, with the result that
the Charter Party shall then terminate as of the date payment of insurance is
made to the Owner and, in addition, Charterer shall be required to pay to Owner
the charter hire due and payable as to the Vessel to the date of condemnation or
taking. The sum shall be due to Owner no later than sixty (60) days following
the date of such condemnation, seizure or taking.
SECTION 14
INDEMNIFICATION AND WAIVER
14.1 Charterer hereby agrees to indemnify, defend, reimburse and hold
Owner harmless from and against any and all claims (by whomsoever made and
whether groundless or not), losses, liabilities, including, but not limited to,
any claim or liability for strict liability in tort, demands, suits, judgments
or causes of action and all legal proceedings, whether civil or criminal,
penalties, fines and other sanctions and any costs and expenses in connection
therewith which may result from or grow or arise in any manner out of the
management, control, chartering, encumbering, condition, repair, use or
operation of the Vessel during the term hereof.
SECTION 15
OWNER'S REMEDIES UPON DEFAULT
15.1 If during the continuance of this Charter Party one or more of the
following events (herein called Events of Default) shall occur:
(a) default shall be made by Charterer in the making of any
payments of charter hire to Owner when due under this Charter Party,
___ __________________ and, as to any other payments due under this
Charter Party, when not made within ten (10) days after written notice
specifying the default and demanding the same to be remedied;
(b) default shall be made by Charterer at any time in the
procurement or maintenance of any insurance coverage prescribed herein;
(c) default shall be made in the observance or performance of any
other of the covenants, representations, conditions, agreements, or
warranties on the part of Charterer contained herein, and such default
shall continue for _________ days after written notice from Owner to
Charterer specifying the default and demanding the same to be remedied;
(d) if any representation or warranty of Charterer contained in
this Charter Party shall prove to have been untrue or incorrect in any
material respect when made, and not remedied with _________ days after
discovery thereof;
(e) Charterer shall consent to the appointment of a receiver,
trustee or liquidator of itself or of a substantial part of its
property, or Charterer shall admit, in writing, its insolvency or
bankruptcy or its inability to pay its debts generally as they come
due, or shall make a general assignment for the benefit of creditors,
or shall file a petition in bankruptcy or a petition or any answer
seeking reorganization in a proceeding
13
<PAGE> 14
under any bankruptcy laws (as now or hereafter in effect), or a
readjustment of its indebtedness, or an answer admitting the material
allegations of a petition filed against the Charterer in any such
proceedings, or Charterer shall by petition, answer or consent seek
relief under the provisions of any other now existing or future
bankruptcy or other similar law providing for the reorganization or
winding-up of corporations, or Charterer shall make an agreement,
composition, extension or adjustment with its creditors;
(f) an order, judgment or decree shall be entered by any court of
competent jurisdiction appointing a receiver, trustee or liquidator of
Charterer or of any substantial part of the property of Charterer
without its consent, or if any substantial part of the property of the
Charterer shall be sequestered and any such order, judgment or decree
of appointment or sequestration shall remain in force undismissed,
unstayed or unvacated for a period of ___________ days after the date
of entry thereof.
(g) a petition against Charterer in a proceeding under the
bankruptcy laws or other solvency laws (as now or hereafter in effect)
shall be filed and any decree or other order adjudging Charterer a
bankrupt or insolvent in such proceeding shall remain in force
undismissed or unstayed for a period of ______________ days after such
adjudication (whether or not consecutive), or in case the approval of
such petition by a court of competent jurisdiction is required, the
petition as filed or amended shall be approved by such a court as
properly filed and such approval shall not be withdrawn or the
proceeding dismissed within ___________ days thereafter, or if under
the provisions of any law providing for reorganization or winding-up of
corporations which may apply to Charterer, any court or competent
jurisdiction shall assume jurisdiction, custody or control of Charterer
or of any substantial part of its property, and such jurisdiction,
custody or control shall remain in force unrelinquished, unstayed or
unterminated for a period of _________ days;
Then, in any such case, after the occurrence of such Event of Default, and while
such Event of Default shall be continuing, Owner, at its option, may:
(i) Proceed by appropriate court action or actions either at law,
admiralty or in equity to enforce performance by Charterer of the
applicable covenants and terms of this Charter Party or to recover from
Charterer any and all damages or expenses, including reasonable
attorneys' fees, which Owner shall have sustained by reason of
Charterer's default in any covenant or covenants of this Charter Party
or on account of Owner's enforcement of its remedies hereunder, and/or
(ii) give notice in writing to Charterer specifying the occurrence
giving rise to such Event of Default or Events of Default and stating
that this Charter Party shall expire and terminate on the date
specified in such notice, which shall be at least ten (10) days after
the giving of such notice (hereinafter called "Date of Termination")
and upon the date so specified (unless such Event of Default or Events
of Default have been cured), this Charter Party shall expire and
terminate, whereupon all rights of Charterer to or in the use of the
Vessel shall absolutely cease and determine as though this Charter
Party
14
<PAGE> 15
had never been made, but Charterer shall remain liable as hereinafter
provided and thereupon Charterer shall deliver possession of the Vessel
to Owner in accordance with Section 16 hereof, and Owner by itself or
by its agents, without further notice, may retake the Vessel wherever
found, but shall be under no obligation to, whether upon the high seas
or at any port, harbor or other place and irrespective of whether
Charterer, any subcharterer or any other person, corporation,
partnership or any other entity may be in possession of the Vessel, all
without prior demand and without legal process, and for that purpose
Owner or its agents may enter upon any dock, pier or other premises
where the Vessel may be and may take possession thereof, and
thenceforth hold, possess and enjoy the Vessel free from any right of
Charterer or its successor or assigns, to hold, use or sell the Vessel
for any purpose whatsoever and Owner shall have a right to recover from
Charterer any and all amounts which under the terms of this Charter
Party may be then due.
15.2 In accordance with Section 15.1(ii) and without limiting the
generality thereof, Owner or its agents may sell the Vessel at public or private
sale, with or without notice to Charterer, advertisement or publication, as
Owner may determine or otherwise may dispose of, hold, use, operate, charter
(whether for a period greater or less than the balance of what would have been
the term of the Charter Party in the absence of the termination of Charterer's
rights to the Vessel) to others, all on such terms and conditions and at such
place or places as Owner may determine.
15.3 If on the Date of Termination the Vessel is lost, destroyed,
requisitioned, forfeited, seized or captured, Charterer's liability hereunder
shall be determined by Section 13 hereof.
15.4 No right or remedy conferred upon or reserved to Owner by this
Charter Party shall be exclusive of any other right or remedy herein or by law
provided; all rights and remedies of Owner conferred upon Owner by this Charter
Party or by law shall be cumulative and in addition to every other right and
remedy available to Owner.
15.5 Owner, at its election, may waive any Event of Default and its
consequences and rescind and annul any such notices of termination by notice to
Charterer, in writing, to that effect and thereupon the respective rights of the
parties shall be as they could have been if no Event of Default had occurred and
no such notice had been given. Notwithstanding the provisions of this Section
15.5, it is expressly understood and agreed by Charterer that time is of the
essence of this Charter Party and that no waiver, rescission or annulment shall
extend to or affect any other or subsequent default or impair any right or
remedies of Owner consequent thereon.
15.6 To the extent that the provisions of Section 1110(a) of the
Bankruptcy Code (11 U.S.C. Sections 362, 363), or any corresponding provisions
of subsequent law at any time may be applicable hereto, the title of Owner to
the Vessel and any right of Owner to take possession of the Vessel in compliance
with the provisions hereof shall not be affected by any power of the court to
enjoin the taking of such possession, or by Sections 362 and 363 of the
Bankruptcy Code
15
<PAGE> 16
(11 U.S.C. Sections 362, 363) as that Code may be amended from time to time, or
by corresponding provisions of subsequent law.
SECTION 16
RETURN OF VESSEL AND ITS EQUIPMENT UPON DEFAULT
16.1 If this Charter Party shall terminate pursuant to Section 15
hereof, Charterer shall forthwith deliver possession of the Vessel to Owner.
For the purpose of delivering possession of the Vessel to Owner
as above required, Charterer shall at its own cost, expense and risk forthwith
place the Vessel safely afloat and securely moored or anchored at
_____________________________________________.
16.2 Charterer shall also deliver to Owner with the Vessel, the
Vessel's log books, if any, and all classification, inspection, modification and
overhaul records applicable to the Vessel.
16.3 In the event that within five (5) days after such termination
pursuant to Section 15 of this Charter Party Charterer shall fail to deliver the
Vessel to Owner as required by Section 16.1 of this Charter Party, Owner shall
be entitled to take (or cause to be taken by its agent or agents) immediate
possession of the Vessel as the same may be found together with their records,
and to transport, berth and store the Vessel at Charterer's expense in the
manner, at the place referred to in Section 16.1 of this Charter Party.
Without in any way limiting the obligation of Charterer under the
foregoing provisions of this Section 16, Charterer hereby irrevocably appoints
Owner as the agent and attorney of Charterer, with full power and authority, at
any time while Charterer is obligated to deliver possession of the Vessel to
Owner, to demand and take possession of the Vessel and their records in the name
and on behalf of the Charterer from whomsoever shall be at the time in
possession of the Vessel.
SECTION 17
RETURN OF VESSEL UPON EXPIRATION OF TERM
17.1 At the expiration of the term or upon sooner termination of this
Charter Party, Charterer shall return the Vessel to Owner free of all liens and
encumbrances other than any created by Owner, its agent or assigns, and in the
same operating order, repair, condition and appearance as when received by
Charterer, excepting only for (i) reasonable wear and tear, and (ii) changes or
alterations properly made by Charterer as permitted in Section 10 hereof.
Charterer shall pay for any and all repairs necessary to restore the Vessel to
their original condition except as aforesaid.
17.2 Charterer shall also deliver to Owner with the Vessel the Vessel's
log books, if any, all classification, inspection, modification and overhaul
records as applicable to the Vessel.
16
<PAGE> 17
17.3 The Charterer shall return the Vessel to the Owner, safely afloat
and securely moored or anchored at ____________________________________________.
SECTION 18
INSPECTION
18.1 During the term of this Charter Party, Charterer shall furnish to
Owner such information concerning the location, condition, use and operation of
the Vessel as Owner may reasonably request and Charterer, on reasonable notice,
shall permit any person designated by Owner, in writing, at Owner's expense, to
visit and inspect the Vessel and the records maintained in connection therewith.
Owner agrees that in any such inspection pursuant to this Section 18 or
otherwise contained in this Agreement, to use all reasonable efforts to minimize
any interference with Charterer's operations.
SECTION 19
ASSIGNMENT BY CHARTERER
19.1 No assignment, subcharter or sublease of this Charter Party or of
any right or obligation hereunder whatsoever may be made by Charterer without
the prior written consent of Owner. In the event of any such assignment or
subcharter or sublease, Charterer shall continue to remain liable hereunder
notwithstanding such assignment or subcharter or sublease, although Owner may
have consented thereto
SECTION 20
FURTHER ASSURANCES
20.1 Charterer and Owner shall from time to time do and perform such
other and further acts and execute and deliver any and all such other and
further instruments as may be required by law or reasonably requested by the
other to establish, maintain and protect the respective rights and remedies of
the other and to carry out and effect the intents and purposes of this Charter
Party.
SECTION 21
EXTENSION NOT A WAIVER
21.1 No delay or omission in the exercise of any power or remedy herein
provided or otherwise available to the Owner shall impair or affect Owner's
right thereafter to exercise the same. Any extension of time for payment
hereunder or other indulgence granted to Charterer shall not otherwise alter or
affect the obligations of Charterer or Owner's rights hereunder with respect to
any subsequent payments or defaults hereunder.
17
<PAGE> 18
SECTION 22
NOTICES
22.1 All demands, notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when personally delivered
or when deposited in the mail first class postage prepaid or delivered to a
telegraph office charges prepaid addressed as follows:
To Owner:
Florida Casino Cruises, Inc.
____________________________
____________________________
Attn: ______________________
Phone: _____________________
Fax:________________________
To Charterer:Leisure
Express Cruise, L.L.C.
____________________________
____________________________
Attn: ______________________
Phone: _____________________
Fax:________________________
SECTION 23
SUCCESSORS AND ASSIGNS
24.1 Subject to the provisions of Sections 8 and 21 hereof, this
Charter party shall be binding upon and shall inure to the benefit of Owner and
Charterer and their respective successors and assigns provided that any
assignment or sublease shall be made in accordance with the terms hereof and no
other persons shall have or acquire any right under or by virtue of this Charter
Party.
SECTION 24
EXECUTION IF CHARTER PARTY
25.1 Three (3) or more counterparts of this Charter Party have been
executed by the parties hereto. One (1) counterpart has been prominently marked
"OWNER'S COPY". Only the counterpart marked "OWNER'S COPY" shall evidence a
monetary obligation of Charterer.
18
<PAGE> 19
SECTION 25
APPLICABLE LAW
26.1 The provisions of this Charter Party and all rights and
obligations hereunder shall be governed by and construed in accordance with the
maritime law of the United States and, where silent, the laws of the State of
Florida. Any provision hereof prohibited by or unlawful or unenforceable under
any applicable law of any jurisdiction shall as to such jurisdiction be
ineffective without modifying the remaining provisions of this Charter Party.
Where, however, the provisions of any such applicable law may be waived, they
are hereby waived by Charterer and Owner to the full extent permitted by law to
the end that this Charter Party shall be deemed to be a valid binding agreement
enforceable in accordance with its terms. SEE ALSO ATTACHED ADDENDUM CONSISTING
OF TWO (2) PAGES
IN WITNESS WHEREOF, the parties hereto have caused this Charter Party
to be executed this day of June, 1998, in their respective corporate names by
their respective representatives hereunto duly authorized.
FLORIDA CASINO CRUISES, INC. LEISURE EXPRESS CRUISE, L.L.C.
Owner Charterer
By /s/ J. Kent Manley By /s/ Elden W. Rance
---------------------------------- ---------------------------------
J. Kent Manley, Elden W. Rance,
President Executive Vice President
19
<PAGE> 20
EXHIBIT A
ACCEPTANCE SUPPLEMENT
VEGAS EXPRESS
(Official No. 594643)
Florida Casino Cruises, Inc. ("Owner") hereby delivers to Leisure Lady
Cruise Corporation ("Charterer") and Charterer does hereby accept and
acknowledge sole care, custody, control and receipt in accordance with a certain
Bareboat Charter Party, dated as of June 22, 1998, of the captioned vessel
safely afloat at Dania, FL.
IN WITNESS WHEREOF, Owner and Charterer have hereunto caused their
respective names to be signed by their proper representative, duly authorized to
do so, on this 22nd day of June, 1998 at Naples, Florida.
LEISURE EXPRESS CRUISE, L.L.C.
By:
--------------------------------
Its: President
FLORIDA CASINO CRUISES, INC.
By:
--------------------------------
Its: President
20
<PAGE> 21
SCHEDULE I
1. HULL AND MACHINERY COVERAGE:
American Institute Hull Clauses (June 2, 1977)
Institute S.R. & C.C. Clauses
Insured for & Valued at $6,500,000
2. PROTECTION & INDEMNITY:
Form SD-23
$1,000,000 per occurrence, $5,000 Deductible, each occurrence
3. POLLUTION:
WQIS Form
$5,000,000
4. BUMBERSHOOT LIABILITY:
$10,000,000 excess of $1,000,000 primary limits
21
<PAGE> 1
EXHIBIT 10.21
ADDENDUM TO BAREBOAT CHARTER AGREEMENT
This Addendum is executed by the parties to supplement the BAREBOAT
CHARTER AGREEMENT of even date herewith. Notwithstanding the printed provisions
of the BAREBOAT CHARTER AGREEMENT, Owner and Charterer agree as follows
(paragraph references are to numbered paragraphs in the Bareboat Charter
Agreement):
5.1 Charterer agrees to pay Owner as charter hire equal consecutive
monthly payments of ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($100,000.00) per month commencing on the date hereof and continuing
on the same date of each and every month thereafter during the Term of
the Charter Party, PLUS any applicable sales and/or use taxes imposed
by applicable governmental authority. All agreed charter payments
shall be paid to Owner, or as hereinafter set forth, plus applicable
sales and/or use taxes, and shall be payable without demand and in
advance without any set off, counterclaim or deduction whatsoever;
provided, however, Charterer shall have the right to make payments in
the amount of FORTY-FIVE THOUSAND TWO HUNDRED NINETEEN AND NO/100
DOLLARS ($45,219.00) directly to Brownsville Bank (for the account of
Owner) under the existing ship mortgage encumbering the Vessel as a
first lien thereon and thereafter to pay the balance of such monthly
payment, FIFTY FOUR THOUSAND SEVEN HUNDRED EIGHTY-ONE AND NO/100
DOLLARS ($54,781.00), to Owner. In the event Charterer fails to pay
the Brownsville Bank Mortgage as and when due and Owner becomes liable
for a late payment fee or a default rate of interest charge, Charterer
shall be liable for payment of same in addition to the above described
monthly payments.
7.2 (h) Charterer acknowledges, understands and agrees that Charterer is
taking delivery "AS IS" and "WHERE IS" and Owner does not and shall
not be deemed to make any warranty or representation either express or
implied as to the Vessel, or as to the design, condition,
merchantability or seaworthiness of, or as to the quality of material
or workmanship in, or as to the fitness of the Vessel for any
particular purpose or trade.
8.3 Deleted in its entirety.
12.1 (c)(i): Owner consents to insurance payments being made directly to
Charterer as long as Owner is not personally liable for any payment to
the injured person; the amount of damages claimed by such injured
person have been liquidated as to amount (whether by settlement or
non-appealable judicial decree) and such agreed upon damages have been
paid in full by Charterer; and such insurance payments are merely
reimbursement for damage payments actually made by Charterer to such
injured person.
(Page 1 of 3)
<PAGE> 2
15.1 (c); (d); (f); the applicable "cure" period in each instance shall be
FIFTEEN (15) days; provided, however, in the event such default cannot
be cured within such FIFTEEN (15) day period, the "cure" period shall
be extended as long as Charterer has commenced and is diligently
proceeding to correct any such default condition.
15.1 (g): the applicable "cure" period shall be THIRTY (30) days.
16.1 The Vessel shall be re-delivered to Harbortowne Marina, Dania, FL or
to such other location as Owner and Charterer shall agree.
17.3 The Vessel shall be re-delivered to Harbortowne Marina, Dania, FL or
to such other location as Owner and Charterer shall agree.
22.1 Notices to Owner shall be to: Mr. Craig Goeckel, Manley Farms, 2077
Pine Ridge Road, Naples, FL 34109. Notices to Charterer shall be to:
Leisure Express Cruise, L.L.C., c/o Mr. Al Johnson, 1284 Miller Road,
Avon, OH 44011
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed as of the day and year first above written.
<TABLE>
<CAPTION>
CHARTERER:
<S> <C>
Signed, Sealed and Delivered LEISURE EXPRESS CRUISE, L.L.C.,
in the Presence of: a Colorado limited liability company
By: /s/
- ------------------------------------------ ----------------------------------------
Print Name: ELDEN W. RANCE,
------------------------------ Executive Vice President
- ------------------------------------------
Print Name:
------------------------------
</TABLE>
(Page 2 of 3)
<PAGE> 3
<TABLE>
<CAPTION>
OWNER:
<S> <C>
Signed, Sealed and Delivered FLORIDA CASINO CRUISES, INC.,
in the Presence of: a Georgia corporation
By: /s/
- ------------------------------------------ ----------------------------------------
Print Name: ELDEN W. RANCE,
------------------------------ Executive Vice President
- ------------------------------------------
Print Name:
------------------------------
</TABLE>
(Page 3 of 3)
<PAGE> 1
EXHIBIT 10.22
PURCHASE OPTION AGREEMENT
This PURCHASE OPTION AGREEMENT is dated as of the 22nd of June, 1998
by and between FLORIDA CASINO CRUISES, INC., a Georgia corporation, (the
"Owner" or "FCCI") and LEISURE EXPRESS CRUISE, L.L.C., a Colorado limited
liability company (the "Charterer").
WHEREAS, Owner and Charterer have entered into a BAREBOAT CHARTER
PARTY AGREEMENT of even date herewith (the "Charter") covering the charter of
the Vessel as defined therein (the "Vessel");
WHEREAS, the Charter requires that this Agreement be entered into in
conjunction therewith;
WHEREAS, the parties acknowledge the Vessel is presently encumbered by
two ship's mortgages, being a first mortgage in favor of Brownsville Bank (the
"First Mortgage" or the "Brownsville Bank Mortgage") and a second mortgage in
favor of Branch Mahaffey (the "Second Mortgage" or the "Mahaffey Mortgage").
NOW, THEREFORE, in consideration of the premises and the sum of TEN
AND NO/100 DOLLARS ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by each of the parties
hereto, it is hereby agreed as follows:
1. Provided that the Charter is in full force and effect and there has
not occurred and is continuing an Event of Default thereunder, Charterer shall
have the option to purchase the Vessel (OR, at Charterer's election, all of the
outstanding stock of FLORIDA CASINO CRUISES, INC., a Georgia corporation) prior
to the expiration of the Charter on January 21, 1999.
2. The aforesaid purchase option shall be exercised if at all by
written notice from the Charterer to Owner not less than TEN (10) days prior to
the proposed closing date (the "Closing Date") of the closing (the "Closing")
of said purchase which Closing Date shall not be earlier than January 10, 1999,
nor later than January 21, 1999. In the event Charterer fails to give notice of
its election to purchase by January 11, 1999, Owner will use its best efforts
to give written notice to Charterer inquiring as to Charterer's intent.
Charterer's notice to exercise option shall set forth the Closing Date and
whether Charterer has elected to purchase the Vessel or the stock of FCCI.
3. Prior to the Closing Date, Owner shall cause the Mahaffey Mortgage
to be paid in full and satisfied.
4. THE PURCHASE PRICE OF THE VESSEL shall be equal to the sum of the
outstanding balance of: (i) the Brownsville Bank Mortgage at the date of
Closing; PLUS (ii) Charterer's assumption of the second ship's mortgage in
favor of J. KENT MANLEY, his successors and/or
(Page 1 of 5)
<PAGE> 2
assigns, in the principal amount of TWO MILLION EIGHT HUNDRED FIFTY THOUSAND
AND NO/100 DOLLARS ($2,850,000.00); PLUS (iii) Charterer's assumption of the LT
Mortgage (as hereinafter defined) in the amount of ONE MILLION SEVEN HUNDRED
THOUSAND AND NO/100 DOLLARS ($1,700,000.00).
5. From and after the Closing date, the indebtedness secured by the
Manley Mortgage shall bear interest at the rate of TEN PERCENT (10%) per annum,
shall be fully amortized over a SEVENTY-TWO (72) month period, and shall be due
and payable in equal monthly installment payments of FIFTY-TWO THOUSAND SEVEN
HUNDRED NINETY-EIGHT AND 64/100 DOLLARS ($52,798.64) per month commencing on
the date ONE (1) month after the date of Closing and continuing on the same
date of each and every month thereafter until paid in full.
6. In addition, during the term of the Charter Party, Owner agrees to
place an additional ship's mortgage on the Vessel (which shall be subordinate
and inferior to the Brownsville Bank, Mahaffey and Manley Mortgages) in the
amount of ONE MILLION SEVEN HUNDRED THOUSAND AND NO/100 DOLLARS ($1,700,000.00)
and shall be in favor of LEISURE TIME CASINOS AND RESORTS, INC., A COLORADO
CORPORATION (the "LT Mortgage"). The LT Mortgage shall be without interest,
shall be non-recourse (i.e., the holder agrees to look solely to the Vessel as
collateral security for repayment of such mortgage and neither J. Kent Manley
nor Florida Casino Cruises, Inc., shall have any personal liability for its
payment) and shall be due and payable in a single balloon payment on the
earlier to occur of: (i) closing of the sale of the Vessel, or (ii) on January
21, 2001.
7. From and after the date hereof, as between Owner and Charterer,
Owner shall have no further personal obligation for payment of any accounts
payable with respect to the Vessel (the "Disclosed Accounts Payable") whether
such liability accrued prior to or after the date the Charter. During the term
of the Charter, Charterer shall have the right but not the obligation, to
settle any and all Disclosed Accounts Payable (on behalf of Owner and not on
Charterer's own account) on such terms and conditions as Charterer shall deem
appropriate. In the event Owner has failed to disclose a particular accounts
payable or other claim as of the date hereof (an "Undisclosed Account Payable")
and prior to the Closing Date the Charterer discovers that the total
outstanding balance of the Disclosed and Undisclosed Accounts Payable is in
excess ONE MILLION FOUR HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($1,450,000.00) (the "Maximum Accounts Payable Amount") Owner shall be
responsible to discharge Undisclosed Accounts Payable in excess of the Maximum
Accounts Payable Amount in a manner such that any such Undisclosed Account
Payable does not become a lien, charge or obligation against either the Vessel
or FCCI, it being the intent of the parties that at the time of the closing of
the option, Owner is able to convey "free and clear" title to the Vessel or
FCCI stock as applicable except for the above described ship's mortgages and
outstanding Disclosed Accounts Payable not yet settled.
8. ASSET OR STOCK ELECTION PROVISIONS. Owner and Charterer agree that
Charterer shall have the right to elect either to purchase the Vessel as an
asset-type purchase, or to purchase all of the stock in the Vessel's owner,
Florida Casino Cruises, Inc., a Georgia corporation ("FCCI"). In
(Page 2 of 5)
<PAGE> 3
the event Charter elects to purchase the Vessel rather than the stock of FCCI,
the Purchase Price of the Vessel shall be as set forth hereinabove in paragraph
4 PLUS the $50,000.00 cash payment set forth in paragraph 9. iv) hereinbelow.
and title to the Vessel shall be conveyed by Owner to Charterer subject to the
three outstanding ship mortgages (which Charterer agrees to assume and to pay)
and the balance of Disclosed Accounts Payable not yet settled by Charterer.
Further, in the event Charterer elects to purchase the Vessel and not the stock
of FCCI, Charterer agrees to pay to FCCI, a sum equal to the incremental
federal income tax difference between the sale of stock and the sale of assets
for gain actually realized by J. Kent Manley on his federal income tax return
(together with the amount of additional tax due as a result of the incremental
payment) (collectively the "Tax Payment Amount") which Tax Payment Amount shall
be due and payable by Charterer not later than January 10, 2000. In addition,
Charterer agrees to execute a ship's mortgage in favor of FCCI in the principal
amount of the Tax Payment Amount (the "Manley Tax Payment Mortgage") which
mortgage shall be subordinate solely to the Brownsville Bank first ship's
mortgage and the Manley second ship's mortgage. In the event the LT Mortgage is
not satisfied at Closing, Charterer shall cause the then holder of the LT
Mortgage to execute a subordination of its mortgage to the lien of the Manley
Tax Payment Mortgage so that title to the Vessel will be conveyed by Owner to
Charterer subject to the following liabilities (for which Charterer shall be
primarily liable):
i) The Brownsville Bank Mortgage;
ii) The Manley Mortgage (in favor of J. Kent Manley personally);
iii) The Manley Tax Payment Mortgage (in favor of FCCI);
iv) The LT Mortgage, if applicable; and
v) The balance of any remaining unsettled Disclosed Accounts
Payable;
In the event Charterer elects to purchase the outstanding stock of
FCCI rather than the Vessel, the Purchase Price of the stock shall be TWO
MILLION EIGHT HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($2,850,000.00) which
sum shall be due and payable by Charterer to J. Kent Manley and shall be
evidenced by Charterer's promissory note in the amount of TWO MILLION EIGHT
HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($2,850,000.00) and secured by ship's
mortgage subordinate and inferior solely to the Brownsville Bank first ship's
mortgage (the "Manley Purchase Money Second Mortgage") PLUS the $50,000.00 cash
payment set forth in paragraph 9. iv) hereinbelow. The note secured by the
Manley Purchase Money Second Mortgage shall bear interest at the rate of TEN
PERCENT (10%) per annum, shall be fully amortized over a SEVENTY-TWO (72) month
period, and shall be due and payable in equal monthly installment payments of
FIFTY-TWO THOUSAND SEVEN HUNDRED NINETY-EIGHT AND 64/100 DOLLARS ($52,798.64)
per month commencing on the date ONE (1) month after the date of Closing and
continuing on the same date of each and every month thereafter until paid in
full. Similar to the asset election scenario, in the event the LT Mortgage is
not satisfied at the stock purchase Closing, Charterer shall cause the then
holder of the LT Mortgage to execute a subordination of its mortgage to the
lien of the Manley Purchase Money Second Mortgage so that title to the Vessel
will be conveyed by Owner to Charterer subject to the following liabilities:
i) The Brownsville Bank Mortgage;
ii) The Manley Purchase Money Second Mortgage (in favor of J.
Kent Manley personally);
(Page 3 of 5)
<PAGE> 4
iii) The LT Mortgage, if applicable; and
iv) The balance of any remaining unsettled Disclosed Accounts
Payable;
Regardless of whether Charterer elects to purchase the Vessel or the
stock of FCCI, from and after the Closing Date, all remaining outstanding
Disclosed Accounts Payable shall be the responsibility of Charterer and
Charterer shall indemnify and hold FCCI and J. Kent Manley harmless from any
and all personal liability for payment of same.
9. During the term of the Charter, in addition to the charter hire
payments payable to Owner under the Bareboat Charter Party Agreement, Charterer
shall also make the following payments:
i) all lease payments due under the Harbortowne Marina Lease,
with respect to dockage rights in Dania Florida for which
Charterer shall enjoy the benefit of all marina use and
dockage rights in favor of the Vessel under such dock lease.
ii) the sum of approximately ONE HUNDRED SIX THOUSAND AND NO/100
DOLLARS ($106,000.00) payable to Owner to reimburse Owner for
a prior payment made by Owner under the Mahaffey Mortgage
which shall payable one-half on August 1, 1998 and the
balance on September 1, 1998 (and which sum shall bear
interest at the rate of TEN PERCENT (10%) per annum from the
date hereof with accrued interest being payable current at
the time of each installment payment).
iii) the payment due in July 1998 under the Mahaffey Mortgage.
iv) the sum of FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00)
payable to J. Kent Manley at the time of the Closing
hereunder which payment shall be in addition to the Purchase
Price of the stock or Vessel, as applicable.
10. Any default by a party hereunder shall be a default by such party
under the Bareboat Charter Party Agreement and any default by a party under the
Bareboat Charter Party Agreement shall be a default by such party hereunder.
(THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK.)
(Page 4 of 5)
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed as of the day and year first above written.
<TABLE>
<CAPTION>
CHARTERER:
<S> <C>
Signed, Sealed and Delivered LEISURE EXPRESS CRUISE, L.L.C.,
in the Presence of: a Colorado limited liability company
By: /s/
- ------------------------------------------ ----------------------------------------
Print Name: ELDEN W. RANCE,
------------------------------ Executive Vice President
- ------------------------------------------
Print Name:
------------------------------
</TABLE>
<TABLE>
<CAPTION>
OWNER:
<S> <C>
Signed, Sealed and Delivered FLORIDA CASINO CRUISES, INC.,
in the Presence of: a Georgia corporation
By: /s/
- ------------------------------------------ ----------------------------------------
Print Name: J. KENT MANLEY,
------------------------------ President
- ------------------------------------------
Print Name:
------------------------------
</TABLE>
(Page 5 of 5)
<PAGE> 1
EXHIBIT 10.23
SECURED PROMISSORY NOTE
$3,000,000.00 Los Angeles, California
October 9, 1998
FOR VALUE RECEIVED, the undersigned hereby promises to pay to FOOTHILL
CAPITAL CORPORATION ("Foothill"), or order, at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, or at such other address as the
holder of this Secured Promissory Note ("Note") may specify in writing, the
principal sum of THREE MILLION DOLLARS ($3,000,000.00) plus interest and the
Monthly Service Charge (defined below) in the manner and upon the terms and
conditions set forth below. This Note is made pursuant to that certain Security
Agreement, dated as of even date herewith, between the undersigned and Foothill
(as hereafter amended, restated, supplemented, or modified from time to time,
the "Agreement"), the provisions of which are incorporated herein by reference.
All capitalized terms used herein, unless otherwise defined herein, shall have
the meanings ascribed to them in the Agreement.
1. Rate of Interest
The principal balance of this Note shall bear interest from the date
hereof at a per annum rate equal to one (1.0) percentage point above the
Reference Rate. For purposes of this Note, "Reference Rate" means the variable
rate of interest per annum most recently announced by Norwest Bank Minneapolis,
National Association, or any successor to such institution, as its "prime rate"
or "reference rate," as the case may be, irrespective of whether such announced
rate is the best rate available from such financial institution, all as
determined by Foothill. In the event that the Reference Rate is changed from
time to time hereafter, the applicable rate of interest hereunder automatically
and immediately shall be increased or decreased by an amount equal to the
Reference Rate change. Upon the occurrence of an Event of Default under the
Agreement, the rate of interest on this Note shall, at the option of the holder
of this Note, be increased to five (5.0) percentage points above the Reference
Rate. Interest charged on this Note shall be computed on the basis of a three
hundred sixty (360) day year for actual days elapsed.
In no event shall the interest rate or rates payable under this Note,
plus any other amounts paid in connection herewith, exceed the highest rate
permissible under any law that a court of competent jurisdiction shall, in a
final determination, deem applicable. The undersigned and Foothill intend
legally to agree upon the rate or rates of interest (and the other amounts paid
in connection herewith) and manner of payment stated within this Note;
provided, however, that anything contained herein to the contrary
notwithstanding, if said interest rate or rates of interest (or other amounts
paid in connection herewith) or the manner of payment exceeds the maximum
allowable under applicable law, then, ipso facto as of the
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<PAGE> 2
date of this Note, the undersigned is and shall be liable only for the payment
of such maximum as allowed by law, and payment received from the undersigned in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of this Note to the extent of such excess.
2. Schedule of Payments
Principal, interest, and the Monthly Service Charge under this Note
shall be due and payable according to the following schedule:
a. Interest and the Monthly Service Charge shall be due and payable
in arrears on the first (1st) day of each month commencing December 1, 1998,
and continuing thereafter until this Note has been paid in full;
b. Sixty (60) installments of principal, each in the amount of
Fifty Thousand Dollars ($50,000.00), shall be due and payable on the first
(1st) day of each month commencing December 1, 1998; and
c. Any remaining outstanding principal, together with all accrued
and unpaid interest thereon and any other sums owing in connection herewith
(including, but not limited to, Monthly Service Charges that remain unpaid),
shall be due and payable in full on November 1, 2003.
3. Monthly Service Charges
In addition to the interest and other amounts due under this Note, a
service charge of one quarter of one percent (0.25%) per month shall be payable
monthly in arrears based on the average daily outstanding principal balance of
this Note, calculated on the basis of a 360-day year and paid for actual days
elapsed (the "Monthly Service Charge").
4. Prepayment
Prepayments of the principal balance of this Note shall be permitted
at any time; provided that each such prepayment shall be accompanied by all
interest and any Monthly Service Charges that have accrued and remain unpaid
with respect to the amount of principal being repaid and a prepayment fee equal
to the following:
(i) Five percent (5.0%) of the amount prepaid with respect to any
prepayments made prior to November 1, 1999;
(ii) Three percent (3.0%) of the amount prepaid with respect to any
prepayments made on or after November 1, 1999, and prior to November 1, 2000;
and
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<PAGE> 3
(iii) One percent (1.0%) of the amount prepaid with respect to any
prepayments made on or after November 1, 2000.
Amounts repaid or prepaid with respect to this Note may not be reborrowed.
Partial prepayments of principal shall be applied to scheduled payments of
principal in the inverse order of their maturity.
5. Holder's Right of Acceleration
Upon the occurrence of an Event of Default under the Agreement,
including, but not limited to, the failure to pay any installment of principal,
interest, or Monthly Service Charge hereunder when due, the holder of this Note
may, at its election and without notice to the undersigned, declare the entire
balance hereof (including, but not limited to, all principal, interest, and
Monthly Service Charges) immediately due and payable.
6. Additional Rights of Holder
If any installment of principal, interest, or Monthly Service Charges
hereunder is not paid when due, the holder shall have the following rights in
addition to the rights set forth herein, in the Agreement, and under law:
a. the right to compound interest and the Monthly Service Charge by
adding the unpaid interest and/or Monthly Service Charge to principal, with
such amount thereafter bearing interest and the Monthly Service Charge at the
rates provided in this Note; and
b. if any installment is more than ten (10) days past due, the
right to collect a charge equal to the greater of Fifteen Dollars ($15) or five
percent (5%) of the late payment for each month in which it is late. This
charge is a result of a reasonable endeavor by the undersigned and the holder
to estimate the holder's added costs and damages resulting from the
undersigned's failure to make timely payments under this Note; hence the
undersigned agrees that the charge shall be presumed to be the amount of damage
sustained by the holder since it is extremely difficult to determine the actual
amount necessary to reimburse the holder for damages.
7. General Provisions
a. If this Note is not paid when due, the undersigned further
promises to pay all costs of collection, foreclosure fees, and reasonable
attorneys' fees incurred by the holder, whether or not suit is filed hereon,
together with the fees, costs and expenses as provided in the Agreement.
b. The undersigned hereby consents to any and all renewals,
3
<PAGE> 4
replacements, and/or extensions of time for payment of this Note before, at, or
after maturity.
c. The undersigned hereby consents to the acceptance, release, or
substitution of security for this Note.
d. Presentment for payment, demand, notice of dishonor, protest,
and notice of protest are hereby expressly waived.
e. Any waiver of any rights under this Note, the Agreement, or
under any other agreement, instrument, or paper signed by the undersigned is
neither valid nor effective unless made in writing and signed by the holder of
this Note.
f. No delay or omission on the part of the holder of this Note in
exercising any right shall operate as a waiver thereof or of any other right.
g. A waiver by the holder of this Note upon any one occasion shall
not be construed as a bar or waiver of any right or remedy on any future
occasion.
h. Should any one or more of the provisions of this Note be
determined illegal or unenforceable, all other provisions shall nevertheless
remain effective.
i. This Note cannot be changed, modified, amended, or terminated
orally.
j. This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of California, without reference to the
principles of conflicts of laws thereof.
8. Security for this Note
This Note is secured by the collateral described in the Agreement and
other Loan Documents, and is subject to all of the terms and conditions thereof
including, but not limited to, the remedies specified therein or granted in
connection therewith.
9. Venue: Jurisdiction; Waiver of Trial by Jury
THE UNDERSIGNED AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS NOTE SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT
THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. THE UNDERSIGNED WAIVES, TO THE
4
<PAGE> 5
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 9. THE UNDERSIGNED, TO
THE EXTENT IT MAY LEGALLY DO SO, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING UNDER
OR WITH RESPECT TO THIS NOTE, OR IN ANY WAY CONNECTED WITH, OR RELATED TO, OR
INCIDENTAL TO, THE DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS NOTE OR
THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE. THE UNDERSIGNED, TO THE EXTENT IT MAY LEGALLY DO SO, HEREBY AGREES
THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING SHALL BE
DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT THE HOLDER OF THIS NOTE MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 9 WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE UNDERSIGNED TO THE WAIVER OF ITS RIGHT
TO TRIAL BY JURY.
IN WITNESS WHEREOF, this Note has been executed and delivered on the
date first set forth above.
LEISURE TIME CRUISE CORPORATION,
a Colorado corporation
By: /s/
-------------------------------------
Print Name:
Title:
5
<PAGE> 1
EXHIBIT 10.24
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, is entered into as of October 9,
1998, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, and LEISURE TIME CRUISE
CORPORATION, a Colorado corporation ("Borrower"), with its chief executive
office located at 1284 Miller Road, Avon, Ohio 44011.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the
following terms shall have the following definitions:
"Accounts" means all presently existing and
hereafter arising accounts, contract rights, and all other forms of obligations
owing to Borrower arising out of the sale or lease of goods or the rendition of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.
"Agreement" means this Security Agreement
and any extensions, riders, supplements, notes, amendments, or modifications to
or in connection with this Security Agreement.
"Borrower's Books" means all of Borrower's
books and records including: ledgers; records indicating, summarizing, or
evidencing Borrower's assets or liabilities, or the Collateral; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disc or tape files, printouts, runs, or other computer
prepared information, and the equipment containing such information.
"Closing Date" means the date on which
Foothill makes the Term Loan to Borrower.
"Code" means the California Uniform
Commercial Code.
"Collateral" means each of the following:
the Accounts; Borrower's Books; the Equipment; the Freights; the General
Intangibles; the Inventory; the Negotiable Collateral; the Investment Property;
the collateral described in the First Preferred Ship Mortgage; any money, or
other assets of Borrower which hereafter come into the
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<PAGE> 2
possession, custody, or control of Foothill; and the proceeds and products,
whether tangible or intangible, of any of the foregoing, including proceeds of
insurance covering any or all of the Collateral, and any and all Accounts,
Equipment, General Intangibles, Inventory, Negotiable Collateral, Investment
Property, money, deposit accounts, or other tangible or intangible property
resulting from the sale or other disposition of the Collateral, or any portion
thereof or interest therein, and the proceeds thereof.
"Corporate Guarantors" means Leisure Time
Casinos and Resorts, Inc. and Leisure Time Technology, Inc.
"Equipment" means all of Borrower's present
and hereafter acquired machinery, machine tools, motors, equipment, furniture,
furnishings, fixtures, vehicles (including motor vehicles and trailers), tools,
parts, dies, jigs, goods, including, without limitation, all items of equipment
and other personal property located on the Vessels (except for the equipment
listed on Schedule "E-2" attached hereto--which equipment is specifically
excluded herefrom), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located. Notwithstanding the
foregoing, "Equipment" shall not include (i) the Vegas Express, or (ii) any
vessels acquired by Borrower after the Closing Date (except to the extent such
after-acquired vessel(s) constitute proceeds of the Leisure Lady).
"Event of Default" has the meaning set
forth in Section 8.
"First Preferred Ship Mortgage" means the
first preferred ship mortgage executed by Borrower in connection with the Term
Loan that encumbers the Leisure Lady and secures the Term Loan.
"Foothill Expenses" means all: reasonable
costs or expenses (including taxes, photocopying, notarization,
telecommunication, and insurance premiums) required to be paid by Borrower
under any of the Loan Documents that are paid or advanced by Foothill;
documentation, filing, recording, publication, appraisal (including periodic
Collateral appraisals), and search fees assessed, paid, or incurred by Foothill
in connection with Foothill's transactions with Borrower; costs and expenses
incurred by Foothill in the disbursement of funds to Borrower (by wire transfer
or otherwise); charges paid or incurred by Foothill resulting from the dishonor
of checks; costs and expenses paid or incurred by Foothill to correct any
default or enforce any provision of the Loan Documents, or in gaining
possession of, maintaining, handling, preserving, removing (including, but not
limited to, all costs and expenses incurred by Foothill with respect to any
obligations of Foothill under a landlord's or mortgagee's waiver and consent
entered into in connection with the Loan Documents), storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, whether or not a sale is consummated; costs and expenses paid
or incurred by Foothill in examining Borrower's Books; costs and expenses of
third party claims or any other suit paid or incurred by Foothill in enforcing
or defending the Loan Documents;
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<PAGE> 3
and Foothill's reasonable attorneys' fees and expenses incurred in advising,
structuring, drafting, reviewing, administering, amending, terminating,
enforcing (including attorneys' fees and expenses incurred in connection with a
"workout", a "restructuring", or an Insolvency Proceeding concerning Borrower
or any guarantor of the Obligations), defending, or concerning the Loan
Documents, whether or not suit is brought.
"Freights" means all presently existing and
hereafter arising (i) freights, hire and other monies earned and to be earned,
due or to become due, or paid or payable to, or for the account of, Borrower,
of whatsoever nature, arising out of or as a result of the ownership and
operation by Borrower or its agents of the Vessels, (ii) all monies and claims
for moneys due and to become due to Borrower and all claims for damages arising
out of the breach of any and all present and future charter parties, bills of
lading, contracts and other engagements of affreightment or for the carriage or
transportation of cargo, mail and/or passengers, and operations of every kind
whatsoever of the Vessels and in and to any and all claims and causes of action
for money, loss or damages that may accrue or belong to Borrower, its
successors and assigns, arising out of or in any way connected with the present
or future use, operation or management of the Vessels or arising out of or in
any way connected with any and all present and further requisitions, charter
parties, bills of lading, contracts and other engagements of affreightment or
the carriage or transportation of cargo, mail and/or passengers, and other
operations of the Vessels, (iii) all monies and claims for monies due and to
become due to Borrower, and all claims for damages in respect of the actual or
constructive total loss of or requisition of use of or title to the Vessels,
and (iv) any proceeds of the foregoing. Notwithstanding anything to the
contrary herein, and so long as no Event of Default has occurred and is
continuing, any gaming or other revenue generated in the normal and customary
operation of the Vessels may be retained and used by Borrower for general
working capital purposes.
"GAAP" means generally accepted accounting
principles as in effect from time to time in the United States, consistently
applied.
"General Intangibles" means all of
Borrower's present and future general intangibles and other personal property
(including choses or things in action, goodwill, patents, trade names,
trademarks, service marks, copyrights, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
monies due under any royalty or licensing agreements, infringement claims,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax
refund claims) other than goods and Accounts, and Borrower's Books relating to
any of the foregoing; excluding, however, any general intangibles (including,
without limitation, licenses) which by their terms are not transferrable or
assignable (or which attempted transfer or assignment would be void).
"Guarantors" means, collectively, the
Corporate Guarantors and Alan Johnson, individually.
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<PAGE> 4
"Insolvency Proceeding" means any
proceeding commenced by or against any person or entity under any provision of
the United States Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency law, including assignments for the benefit of creditors, formal or
informal moratoria, compositions, extensions generally with its creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Inventory" means all present and future
inventory in which Borrower has any interest, including goods held for sale or
lease or to be furnished under a contract of service and all of Borrower's
present and future raw materials, work in process, finished goods, and packing
and shipping materials, wherever located, and any documents of title
representing any of the above, and Borrower's Books relating to any of the
foregoing.
"Investment Property" means all Borrower's
present and hereafter acquired investment property, securities (certificated
and uncertificated), security entitlements, security accounts, and any interest
in any of the foregoing, and all replacements, substitutions, and additions to
any of the foregoing, wherever located.
"Judicial Officer or Assignee" means any
trustee, receiver, controller, custodian, assignee for the benefit of
creditors, or any other person or entity having powers or duties like or
similar to the powers and duties of a trustee, receiver, controller, custodian,
or assignee for the benefit of creditors.
"Leisure Lady" means the vessel known as
the "Leisure Lady", United States Coast Guard Official No. 671576, more fully
described on Exhibit "A" attached hereto.
"Loan Documents" means, collectively, this
Agreement, the Term Note, the First Preferred Ship Mortgage, and any other
agreement entered into in connection with this Agreement, together with all
alterations, amendments, changes, extensions, modifications, refinancings,
refundings, renewals, replacements, restatements, or supplements, of or to any
of the foregoing.
"Negotiable Collateral" means all of
Borrower's present and future letters of credit, notes, drafts, instruments,
documents, leases, and chattel paper, and Borrower's Books relating to any of
the foregoing.
"Obligations" means all loans, advances,
debts, principal, interest (including any interest that, but for the provisions
of the United States Bankruptcy Code, would have accrued), premiums,
liabilities (including all amounts charged to Borrower's loan account pursuant
to any agreement authorizing Foothill to charge Borrower's loan account),
obligations, fees, lease payments, guaranties, covenants, and duties owing by
Borrower to Foothill of any kind and description (whether pursuant to or
evidenced by the Loan Documents, by any note or other instrument, or by any
other agreement between Foothill and
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<PAGE> 5
Borrower, and whether or not for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from
Borrower to others that Foothill may have obtained by assignment or otherwise,
and further including all interest not paid when due and all Foothill Expenses
that Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise. All Obligations shall accrue interest and the Monthly Service
Charges at the rate(s) set forth in the Term Note from the date such
Obligations arise, and such interest and Monthly Service Charges shall in turn
be deemed "Obligations" for all purposes under this Agreement and shall be due
and payable when interest and Monthly Service Charges are due and payable under
the Term Note.
"Pay-Off Letters" means letters, in form
and substance reasonably satisfactory to Foothill, from other lenders, secured
creditors, or lessors respecting the amount necessary to (a) repay in full all
of the obligations of Borrower owing to such lenders, secured creditors, and/or
lessors and (b) obtain (i) terminations/releases of all of the security
interests or liens existing in favor of such lenders, secured creditors, and/or
lessors in and to the properties or assets of Borrower and (ii) good and
marketable title to such properties or assets (in the case of leased property).
"Permitted Liens" means: (a) liens and
security interests held by Foothill; (b) liens for unpaid taxes that are not
yet due and payable; (c) purchase money security interests and liens of lessors
under capital leases, and so long as the security interest or lien only secures
the purchase price of the asset and does not encumber any other assets of the
Borrower; and (d) any liens or encumbrances permitted under the terms and
conditions of the First Preferred Ship Mortgage.
"Permitted Protest" means the right of
Borrower to protest any lien, tax, rental payment, or other charge, other than
any such lien or charge that secures the Obligations, provided (i) a reserve
with respect to such obligation is established on the books of Borrower in an
amount that is reasonably satisfactory to Foothill, (ii) any such protest is
instituted and diligently prosecuted by Borrower in good faith, and (iii)
Foothill is satisfied that, while any such protest is pending, there will be no
impairment of the enforceability, validity, or priority of any of the liens or
security interests of Foothill in and to the property or assets of Borrower.
"Term Loan" means the loan made by Foothill
to Borrower in connection with this Agreement, which loan is further evidenced
by the Term Note.
"Term Note" means that certain Secured
Promissory Note, of even date herewith, by Borrower to the order of Foothill,
in the original principal amount of Three Million Dollars ($3,000,000), and any
extensions, renewals, replacements, or substitutions therefor.
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<PAGE> 6
"Vessels" means the vessels described on
Exhibit E-1 attached hereto and by this reference made a part hereof.
1.2 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto.
1.3 Code. Any terms used in this Agreement
which are defined in the Code shall be construed and defined as set forth in
the Code unless otherwise defined herein.
1.4 Construction. Unless the context of this
Agreement clearly requires otherwise, references to the plural include the
singular, to the singular include the plural, and the term "including" is not
limiting. The words "hereof," "herein," "hereby," "hereunder," and similar
terms in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. Section, subsection, clause, and
exhibit references are to this Agreement unless otherwise specified.
1.5 Schedules and Exhibits. All of the
schedules and exhibits attached to this Agreement shall be deemed incorporated
herein by reference.
2. FEES.
Borrower shall pay to Foothill the following fees:
2.1 Closing Fee. A one time closing fee of
Thirty Thousand Dollars ($30,000) which is earned, in full, on the Closing Date
and is due and payable by Borrower to Foothill in connection with this
Agreement on the Closing Date;
2.2 Annual Fee. An annual fee equal to one
percent (1%) of the outstanding principal balance of the Obligations (as of
November 1, 1999, and each anniversary thereafter), which shall be due and
payable by Borrower to Foothill in connection with this Agreement on November
1, 1999, and on each anniversary of such date occurring thereafter; and
2.3 Appraisal and Documentation Fees.
Foothill's customary appraisal fee of Seven Hundred Fifty Dollars ($750) per
day per appraiser, plus out-of-pocket expenses for each appraisal of the
Collateral performed by Foothill or its agents.
3. CONDITIONS TO EFFECTIVENESS: TERM OF AGREEMENT.
3.1 Conditions Precedent. The obligation of
Foothill to make the loan evidenced by the Term Note is subject to the
fulfillment, to the satisfaction of Foothill and its counsel, of each of the
following conditions on or before the Closing Date:
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<PAGE> 7
(a) The Closing Date shall occur on or
before October 30, 1998;
(b) Other than with respect to
Permitted Liens (if any), Borrower's existing lenders, creditors, and lessors
shall have executed and delivered Pay-Off Letters, UCC termination statements,
bills of sale, and other documentation evidencing the termination of their
liens and security interests in the assets of Borrower (and the transfer of
title to such assets to Borrower, in the case of leased property) or a
subordination agreement in form and substance satisfactory to Foothill in its
sole discretion;
(c) Foothill shall have received
copies of Borrower's and each Corporate Guarantor's By-laws and Articles or
Certificates of Incorporation, as amended, modified, or supplemented to the
Closing Date, certified by the Secretaries of Borrower and the Corporate
Guarantors;
(d) Foothill shall have received
certificates of corporate status with respect to Borrower and each Corporate
Guarantor, dated within ten (10) days of the Closing Date, by the
Secretary(ies) of State of the states of incorporation of Borrower and each
Corporate Guarantor, which certificate shall indicate that Borrower and each
Corporate Guarantor is in good standing in such state(s);
(e) Foothill shall have received a
certificate from the Secretaries of Borrower and each Corporate Guarantor
attesting to the resolutions of Borrower's and each Corporate Guarantor's Board
of Directors authorizing their execution and delivery of this Agreement and the
other Loan Documents to which each is a party and authorizing specific officers
of Borrower and each Corporate Guarantor to execute same;
(f) Foothill shall have received
certificates of corporate status with respect to Borrower, each dated within
ten (10) days of the Closing Date, such certificates to be issued by the
Secretary of State of the states in which its failure to be duly qualified or
licensed would have a material adverse effect on the financial condition or
assets of Borrower, which certificates shall indicate that Borrower is in good
standing;
(g) Foothill shall have received the
insurance certificates, certified copies of policies, required by Section 6.8
hereof and as required by the First Preferred Ship Mortgage, along with a
438BFU Lender's Loss Payable Endorsement naming Foothill as sole loss payee,
all in form and substance satisfactory to Foothill and its counsel;
(h) Foothill shall have received each
of the following documents and agreements, in form and substance satisfactory
to Foothill and its counsel, duly executed, and each such document and
agreement shall be in full force and effect:
(1) This Agreement;
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(2) The Term Note;
(3) The First Preferred Ship Mortgage;
(4) Continuing Guaranties from Alan
Johnson, individually, Leisure
Time Casinos & Resorts, Inc., and
Leisure Time Technology, Inc.;
(5) Equipment Security Agreement and
UCC-1 Financing Statements from
Leisure Time Technology, Inc.;
(6) Assignment of Insurances; and
(7) Such other documents and
instruments as Foothill shall deem
necessary or desirable to ensure
that Foothill has a first priority
perfected security interest in and
lien on the Collateral;
(i) Foothill shall have received
searches reflecting the filing of its financing statements and fixture filing;
(j) Foothill shall have received
evidence that the First Preferred Ship Mortgage has been duly filed with and
recorded by the United States Coast Guard, and that all other steps deemed
necessary or desirable by Foothill have been duly completed in order for
Foothill to have obtained a first priority perfected security interest in and
lien on the Leisure Lady;
(k) Foothill shall have received
landlord and mortgagee waivers from the lessors and mortgagees of the locations
where the Equipment is located;
(l) Foothill shall have received a
written opinion of Borrower's legal counsel in form and substance satisfactory
to Foothill with respect to the transactions governed by the Loan Documents;
(m) Foothill shall have received the
Closing Fee referenced in Section 2.1, all of Foothill Expenses incurred as of
the Closing Date, and all other costs and expenses incurred by Foothill in
connection herewith, including without limitation, audit fees, search fees,
appraisal fees, documentation, recording and filing fees, and the fees and
costs of Morgan, Lewis and Bockius LLP, for the negotiation, preparation and
documentation of the Loan Documents;
(n) All representations and warranties
set forth in this
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Agreement and the other Loan Documents are true and correct as of the Closing
Date, no "Event of Default" has occurred under this Agreement or any of the
other Loan Documents, and all of the Loan Documents are in full force and
effect; and
(o) All other documents and legal
matters in connection with the transactions contemplated by this Agreement
shall have been delivered or executed or recorded and shall be in form and
substance satisfactory to Foothill and its counsel.
3.2 Term. This Agreement shall become effective
upon the execution and delivery hereof by Borrower and Foothill, and shall
continue in full force and effect until all Obligations have been indefeasibly
paid in full.
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby
grants to Foothill a continuing security interest in all currently existing and
hereafter acquired or arising Collateral in order to secure prompt repayment of
any and all Obligations and in order to secure prompt performance by Borrower
of each of its covenants and duties under the Loan Documents. Foothill's
security interest in the Collateral shall attach to all Collateral without
further act on the part of Foothill or Borrower.
4.2 Delivery of Additional Documentation
Required. Borrower shall execute and deliver to Foothill, prior to or
concurrently with Borrower's execution and delivery of this Agreement and at
any time thereafter at the request of Foothill, all financing statements,
continuation financing statements, fixture filings, security agreements,
chattel mortgages, pledges, assignments, endorsements of certificates of title,
applications for title, affidavits, reports, notices, letters of authority, and
all other documents that Foothill may reasonably request, in form satisfactory
to Foothill, to perfect and continue perfected Foothill's security interests in
the Collateral and in order to fully consummate all of the transactions
contemplated under the Loan Documents.
4.3 Power of Attorney. Borrower hereby
irrevocably makes, constitutes, and appoints Foothill (and any of Foothill's
officers, employees, or agents designated by Foothill) as Borrower's true and
lawful attorney, with power to: (a) sign the name of Borrower on any of the
documents described in Section 4.2 or on any other similar documents to be
executed, recorded, or filed in order to perfect or continue perfected
Foothill's security interest in the Collateral; (b) at any time that an Event
of Default has occurred or Foothill deems itself insecure, endorse Borrower's
name on any checks, notices, acceptances, money orders, drafts, or other item
of payment or security that may come into Foothill's possession; (c) at any
time that an Event of Default has occurred or Foothill deems itself insecure,
make, settle, and adjust all claims under Borrower's policies of insurance in
respect of the Collateral and make all determinations and decisions with
respect to such policies of insurance. The appointment of Foothill as
Borrower's attorney, and each and every
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one of Foothill's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Foothill's obligation to provide advances hereunder is terminated.
4.4 Right to Inspect. Foothill (through any of
its officers, employees, or agents) shall have the right, from time to time
hereafter, to inspect Borrower's Books and to check, test, and appraise the
Collateral in order to verify Borrower's financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Prior Encumbrances. Borrower has good and
indefeasible title to the Collateral, free and clear of liens, claims, security
interests, or encumbrances except for Permitted Liens. None of the Collateral
has been purchased by Borrower within the six (6) months period preceding the
Closing Date, except for sales to Borrower in the ordinary course of the
seller's business.
5.2 Location of Equipment. The Equipment is not
now and shall not at any time hereafter be stored with a bailee, warehouseman,
or similar party without Foothill's prior written consent. Borrower shall keep
the Equipment only on the Leisure Lady or at the following locations: (1) 1284
Miller Road, Avon, Ohio 44011, or (2) 920 Frontage Road, Greenville, South
Carolina.
None of the Equipment has been located, during the
six (6) month period prior to the Closing Date, in any jurisdiction other than
the county(ies) and state(s) set forth in this Section.
5.3 Location of Chief Executive Office. The
chief executive office of Borrower is located at the address indicated in the
first paragraph of this Agreement and Borrower covenants and agrees that it
will not, without thirty (30) days prior written notification to Foothill,
relocate such chief executive office.
5.4 Fictitious Business Name(s). Borrower uses
only the following Fictitious Business Names and none other: [none].
5.5 Due Organization and Qualification.
Borrower is and shall at all times hereafter be duly organized and existing and
in good standing under the laws of the state of its incorporation and qualified
and licensed to do business in, and in good standing in, any state in which the
conduct of its business or its ownership of the Collateral requires that it be
so qualified.
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5.6 Due Authorization; No Conflict. The
execution, delivery, and performance of the Loan Documents are within
Borrower's corporate powers, have been duly authorized, and are not in conflict
with nor constitute a breach of any provision contained in Borrower's Articles
or Certificate of Incorporation, or By-laws, nor will they constitute an event
of default under any material agreement to which Borrower is a party.
5.7 Litigation. There are no actions or
proceedings pending by or against Borrower before any court or administrative
agency and Borrower does not have knowledge or belief of any pending,
threatened, or imminent litigation, governmental investigations, or claims,
complaints, actions, or prosecutions involving Borrower or any guarantor of the
Obligations, except for ongoing collection matters in which the Borrower is the
plaintiff.
5.8 No Material Adverse Change in Financial
Condition. All financial statements relating to Borrower or any guarantor of
the Obligations that have been or may hereafter be delivered by Borrower to
Foothill have been prepared in accordance with GAAP and fairly present
Borrower's and such guarantor's financial condition as of the date thereof and
Borrower's and such guarantor's results of operations for the period then
ended. There has not been a material adverse change in the financial condition
of Borrower or any guarantor since the date of the latest financial statements
submitted to Foothill on or before the Closing Date.
5.9 Solvency. Borrower's assets at a fair
valuation exceed the amount of all of its debts at a fair valuation and
Borrower is able to pay all of its debts (including trade debts and contingent
liabilities) as they become due.
5.10 Environmental Condition. None of Borrower's
properties or assets has ever been used by Borrower or, to the best of
Borrower's knowledge, by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any hazardous waste or
hazardous substance in violation of any law, statute, rule, regulation, or
policy of any federal or state governmental agency. None of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute. No lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned or operated by Borrower. Borrower has not received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal or state governmental agency concerning any action or omission by
Borrower resulting in the releasing or disposing of hazardous waste or
hazardous substances into the environment.
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5.11 Reliance by Foothill; Cumulative. Each
warranty and representation contained in this Agreement shall be conclusively
presumed to have been relied on by Foothill regardless of any investigation
made or information possessed by Foothill. The warranties and representations
set forth herein shall be cumulative and in addition to any and all other
warranties and representations that Borrower shall now or hereinafter give, or
cause to be given, to Foothill.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any
credit hereunder shall be available and until payment in full of the
Obligations, and unless Foothill shall otherwise consent in writing, Borrower
shall do all of the following:
6.1 Financial Statements, Reports,
Certificates. Borrower agrees to deliver to Foothill: (a) as soon as available,
but in any event within thirty (30) days after the end of each month during
each of Borrower's fiscal years, a company prepared balance sheet, income
statement, and cash flow statement covering Borrower's operations during such
period; and (b) as soon as available, but in any event within ninety (90) days
after the end of each of Borrower's fiscal years, financial statements of
Borrower for each such fiscal year, reviewed by independent certified public
accountants acceptable to Foothill and certified, without any qualifications,
by such accountants to have been prepared in accordance with GAAP, together
with a certificate of such accountants addressed to Foothill stating that such
accountants do not have knowledge of the existence of any event or condition
constituting an Event of Default, or that would, with the passage of time or
the giving of notice, constitute an Event of Default. Such reviewed financial
statements shall include a balance sheet, profit and loss statement, and cash
flow statement, and such accountants' letter to management. Borrower shall have
issued written instructions to its independent certified public accountants
authorizing them to communicate with Foothill and to release to Foothill
whatever financial information concerning Borrower that Foothill may request.
If Borrower is a parent company of one or more subsidiaries, or affiliates, or
is a subsidiary or affiliate of another company, then, in addition to the
financial statements referred to above, Borrower agrees to deliver financial
statements prepared on a consolidating basis so as to present Borrower and each
such related entity separately, and on a consolidated basis.
Borrower hereby irrevocably authorizes and directs all
auditors, accountants, or other third parties to deliver to Foothill, at
Borrower's expense, copies of Borrower's financial statements, papers related
thereto, and other accounting records of any nature in their possession, and to
disclose to Foothill any information they may have regarding Borrower's
business affairs and financial conditions.
6.2 Other Reports. Borrower agrees to deliver
to Foothill by no later than the fifteenth (15th) day of each month, an
accounts receivable and accounts payable aging report as of the end of the
prior calendar month. Borrower agrees to deliver to Foothill within
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three (3) business days after Borrower's payroll taxes are due, evidence that
such payroll taxes have been timely and fully paid.
6.3 Tax Returns. Borrower agrees to deliver to
Foothill copies of each of Borrower's future federal income tax returns, and
any amendments thereto, within thirty (30) days of the filing thereof with the
Internal Revenue Service.
6.4 Guarantor Reports. Borrower agrees to cause
any guarantor of any of the Obligations to deliver its annual financial
statements at the time when Borrower provides its reviewed financial statements
to Foothill and copies of all federal income tax returns as soon as the same
are available and in any event no later than thirty (30) days after the same
are required to be filed by law.
6.5 Title to Equipment. Upon Foothill's
request, Borrower shall immediately deliver to Foothill, properly endorsed, any
and all evidences of ownership of, certificates of title, or applications for
title to any items of Equipment.
6.6 Maintenance of Equipment. Borrower shall
keep and maintain the Equipment in good operating condition and repair, and
make all necessary replacements thereto so that the value and operating
efficiency thereof shall at all times be maintained and preserved. Borrower
shall not permit any item of Equipment to become a fixture to real estate or an
accession to other property, and the Equipment is now and shall at all times
remain personal property.
6.7 Taxes. All assessments and taxes, whether
real, personal, or otherwise, due or payable by, or imposed, levied, or
assessed against Borrower or any of its property have been paid, and shall
hereafter be paid in full, before delinquency or before the expiration of any
extension period. Borrower shall make due and timely payment or deposit of all
federal, state, and local taxes, assessments, or contributions required of it
by law, and will execute and deliver to Foothill, on demand, appropriate
certificates attesting to the payment or deposit thereof. Borrower shall make
timely payment or deposit of all tax payments and withholding taxes required of
it by applicable laws, including those laws concerning F.I.C.A., F.U.T.A.,
state disability, and local, state, and federal income taxes, and shall, upon
request, furnish Foothill with proof satisfactory to Foothill indicating that
Borrower has made such payments or deposits.
6.8 Insurance.
(a) Borrower, at its expense, shall
keep the Collateral insured against "all risks" including loss or damage by
fire, theft, explosion, sprinklers, and all other hazards and risks, and in the
full insurable value thereof. Borrower also shall maintain public liability,
product liability, and property damage insurance relating to Borrower's
ownership and use of the Collateral, as well as insurance against larceny,
embezzlement, and criminal misappropriation.
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(b) All such policies of insurance
shall be in such form, with such companies, and in such amounts as may be
satisfactory to Foothill. All such policies of insurance (except those of
public liability and property damage) shall contain a 438BFU lender's loss
payable endorsement, or an equivalent endorsement in a form satisfactory to
Foothill, showing Foothill as loss payee thereof, and shall contain a waiver of
warranties, and shall specify that the insurer must give at least ten (10) days
prior written notice to Foothill before canceling its policy for any reason.
Borrower shall deliver to Foothill certified copies of such policies of
insurance and evidence of the payment of all premiums therefor. All proceeds
payable under any such policy shall be payable to Foothill to be applied on
account of the Obligations.
6.9 Foothill Expenses. Borrower shall
immediately and without demand reimburse Foothill for all sums expended by
Foothill which constitute Foothill Expenses and Borrower hereby authorizes and
approves all advances and payments by Foothill for items constituting Foothill
Expenses. Any Foothill Expenses not paid promptly by Borrower shall constitute
Obligations and shall accrue interest at the rate and in the manner of
Obligations existing under the Term Note.
6.10 No Setoffs or Counterclaims. All payments
hereunder and under the other Loan Documents made by or on behalf of Borrower
shall be made without setoff or counterclaim and free and clear of, and without
deduction or withholding for or on account of, any federal, state or local
taxes.
6.11 Compliance with Laws. Borrower shall comply
with all applicable laws, rules, and regulations. Without limiting the
generality of the foregoing, Borrower shall (i) at all times operate the
Vessels in accordance with all applicable laws, rules and regulations, and (ii)
not be permitted to place any slot machines, similar gaming equipment, or other
gaming equipment on the Leisure Lady unless Foothill determines in Foothill's
discretion that it would not violate any applicable law.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any
credit hereunder shall be available and until payment in full of the
Obligations, Borrower will not do any of the following without Foothill's prior
written consent:
7.1 Liens. Create, incur, assume, or permit to
exist, directly or indirectly, any lien on or with respect to any of the
Collateral, of any kind, whether now owned or hereafter acquired, or any income
or profits therefrom, except for Permitted Liens.
7.2 Restrictions on Fundamental Changes. Enter
into any
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acquisition, merger, consolidation, reorganization, or recapitalization, or
reclassify its capital stock, or liquidate, wind up, or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, assign, lease,
transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business, property, or assets,
whether now owned or hereafter acquired, or acquire by purchase or otherwise
all or substantially all the assets, stock, or other evidence of beneficial
ownership of any person or entity.
7.3 Extraordinary Transactions and Disposal of
Collateral. Sell, lease, or otherwise dispose of, move, relocate, or transfer,
whether by sale or otherwise, any of the Collateral. Notwithstanding the
foregoing, Borrower shall maintain ownership of the Vessels at all times,
unless Foothill consents (in Foothill's sole discretion) to a transfer to
another affiliate entity (on terms and conditions satisfactory to Foothill in
Foothill's sole discretion).
7.4 Change Name. Change Borrower's name,
business structure, or identity, or add any new fictitious name.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall
constitute an event of default (each, an "Event of Default") under this
Agreement:
8.1 If Borrower fails to pay when due and
payable or when declared due and payable, any portion of the Obligations
(whether of principal, interest (including any interest which, but for the
provisions of the United States Bankruptcy Code, would have accrued on such
amounts), fees and charges due Foothill, taxes, reimbursement of Foothill
Expenses, or otherwise);
8.2 If Borrower fails or neglects to perform,
keep, or observe any term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Foothill;
8.3 If there is a material impairment of the
prospect of repayment of any portion of the Obligations owing to Foothill or a
material impairment of the value or priority of Foothill's security interests
in the Collateral;
8.4 Except as (and only to the extent)
expressly permitted in the First Preferred Ship Mortgage with respect to the
Leisure Lady, if any material portion of Borrower's assets is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes into the
possession of any Judicial Officer or Assignee;
8.5 If an Insolvency Proceeding is commenced by
Borrower;
8.6 If an Insolvency Proceeding is commenced
against Borrower;
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8.7 If Borrower is enjoined, restrained, or in
any way prevented by court order from continuing to conduct all or any material
part of its business affairs;
8.8 Except as (and only to the extent)
expressly permitted in the First Preferred Ship Mortgage with respect to the
Leisure Lady, if a notice of lien, levy, or assessment is filed of record with
respect to any of Borrower's assets by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether choate or
otherwise, upon any of Borrower's assets and the same is not paid on the
payment date thereof;
8.9 If a judgment or other claim becomes a lien
or encumbrance upon any material portion of Borrower's assets;
8.10 If there is a default in any material
agreement to which Borrower is a party with third parties resulting in a right
by such third parties, whether or not exercised, to accelerate the maturity of
Borrower's indebtedness thereunder;
8.11 If any misstatement or misrepresentation
exists now or hereafter in any warranty, representation, statement, or report
made to Foothill by Borrower or any officer, employee, agent, or director of
Borrower, or if any such warranty or representation is withdrawn by any officer
or director; or
8.12 If the obligation of any guarantor or other
third party under any Loan Document is limited or terminated by operation of
law or by the guarantor or other third party thereunder, or any such guarantor
or other third party becomes the subject of an Insolvency Proceeding.
9. FOOTHILL'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence of
an Event of Default Foothill may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrower:
(a) Declare all Obligations, whether
evidenced by this Agreement, by any of the other Loan Documents, or otherwise,
immediately due and payable;
(b) Terminate this Agreement and any
of the other Loan Documents as to any future liability or obligation of
Foothill, but without affecting Foothill's rights and security interest in the
Collateral and without affecting the Obligations;
(c) Without notice to or demand upon
Borrower or any guarantor, make such payments and do such acts as Foothill
considers necessary or reasonable
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to protect its security interest in the Collateral. Borrower agrees to assemble
the Collateral if Foothill so requires, and to make the Collateral available to
Foothill as Foothill may designate. Borrower authorizes Foothill to enter the
premises where the Collateral is located, to take and maintain possession of
the Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or lien that in Foothill's determination appears to be
prior or superior to its security interest and to pay all expenses incurred in
connection therewith. With respect to any of Borrower's owned premises,
Borrower hereby grants Foothill a license to enter into possession of such
premises and to occupy the same, without charge, for up to one hundred twenty
(120) days in order to exercise any of Foothill's rights or remedies provided
herein, at law, in equity, or otherwise;
(d) Without notice to Borrower (such
notice being expressly waived) set off and apply to the Obligations any and all
(i) balances and deposits of Borrower held by Foothill, or (ii) indebtedness at
any time owing to or for the credit or the account of Borrower held by
Foothill;
(e) Store, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. Foothill is hereby granted a license or other right to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Collateral,
advertising for sale and selling any Collateral and Borrower's rights under all
licenses and all franchise agreements shall inure to Foothill's benefit;
(f) Sell the Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places
(including Borrower's premises) as Foothill determines is commercially
reasonable. It is not necessary that the Collateral be present at any such
sale;
(g) Foothill may credit bid and
purchase at any public sale.
Foothill shall give notice of the disposition of the Collateral as follows:
(i) Foothill shall give Borrower
and each holder of a security interest in the Collateral who
has filed with Foothill a written request for notice, a
notice in writing of the time and place of public sale, or,
if the sale is a private sale or some other disposition other
than a public sale is to be made of the Collateral, then the
time on or after which the private sale or other disposition
is to be made;
(ii) The notice shall be
personally delivered or mailed, postage prepaid, to Borrower
as provided in Section 12, at least five (5) calendar days
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before the date fixed for the sale, or at least five (5)
calendar days before the date on or after which the private
sale or other disposition is to be made, unless the
Collateral is perishable or threatens to decline speedily in
value. Notice to persons other than Borrower claiming an
interest in the Collateral shall be sent to such addresses as
they have furnished to Foothill; and
(iii) If the sale is to be a
public sale, Foothill also shall give notice of the time and
place by publishing a notice one time at least five (5)
calendar days before the date of the sale in a newspaper of
general circulation in the county in which the sale is to be
held.
9.2 Deficiency; Excess Proceeds. Any deficiency
that exists after disposition of the Collateral as provided above will be paid
immediately by Borrower. Any excess will be returned, without interest and
subject to the rights of third parties, by Foothill to Borrower.
9.3 Remedies Cumulative. Foothill's rights and
remedies under this Agreement, the Loan Documents, and all other agreements
shall be cumulative. Foothill shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by Foothill of one right or remedy shall be deemed an election, and no
waiver by Foothill of any Event of Default shall be deemed a continuing waiver.
No delay by Foothill shall constitute a waiver, election, or acquiescence by
it.
100 TAXES AND EXPENSES REGARDING THE COLLATERAL
Except with respect to Permitted Protests, if
Borrower fails to pay any monies (whether taxes, rents, assessments, insurance
premiums, or otherwise) due to third persons or entities, or fails to make any
deposits or furnish any required proof of payment or deposit, all as required
under the terms of this Agreement, then, to the extent that Foothill determines
that such failure by Borrower could have a material adverse effect on
Foothill's interests in the Collateral, in its discretion and without prior
notice to Borrower, Foothill may do any or all of the following: (a) make
payment of the same or any part thereof; or (b) obtain and maintain insurance
policies of the type described in Section 6.8, and take any action with respect
to such policies as Foothill deems prudent. Any amounts paid or deposited by
Foothill shall constitute Foothill Expenses, shall be immediately charged to
Borrower and become additional Obligations, shall bear interest at the then
applicable rate set forth in the Term Note, and shall be secured by the
Collateral. Any payments made by Foothill shall not constitute an agreement by
Foothill to make similar payments in the future or a waiver by Foothill of any
Event of Default under this Agreement. Foothill need not inquire as to, or
contest the validity of, any such expense, tax, security interest, encumbrance,
or lien and the receipt of the usual official notice for the payment thereof
shall be conclusive evidence that the same was validly due and owing.
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110 WAIVERS; INDEMNIFICATION
11.1 Demand; Protest; etc. Borrower waives
demand, protest, notice of protest, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by Foothill on
which Borrower may in any way be liable.
11.2 Foothill's Liability for Collateral. So
long as Foothill complies with its obligations, if any, under Section 9207 of
the Code, Foothill shall not in any way or manner be liable or responsible for:
(a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring
or arising in any manner or fashion from any cause; (c) any diminution in the
value thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other person. All risk of loss, damage, or destruction of
the Collateral shall be borne by Borrower.
11.3 Indemnification. Borrower agrees to
indemnify Foothill and its officers, employees, and agents and hold Foothill
harmless against: (a) all obligations, demands, claims, and liabilities claimed
or asserted by any other party, and (b) all losses in any way suffered,
incurred, or paid by Foothill as a result of or in any way arising out of,
following, or consequential to transactions with Borrower whether under this
Agreement, or otherwise. This provision shall survive the termination of this
Agreement.
120 NOTICES
Unless otherwise provided in this Agreement, all
notices or demands by any party relating to this Agreement or any other
agreement entered into in connection therewith shall be in writing and (except
for financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or by
prepaid telex, TWX, telefacsimile, or telegram (with messenger delivery
specified) to Borrower or to Foothill, as the case may be, at its addresses set
forth below:
If to Borrower: LEISURE TIME CRUISE CORPORATION
1284 Miller Road
Avon, Ohio 44011
Attn: Mr. Alan Johnson.
Telecopy No.:
-------------------
19
<PAGE> 20
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn.: Small Business Lending Division Manager
Telecopy No.: 310-477-5853
The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other. All
notices or demands sent in accordance with this Section 12, other than notices
by Foothill in connection with Sections 9504 or 9505 of the Code, shall be
deemed received on the earlier of the date of actual receipt or three (3)
calendar days after the deposit thereof in the mail. Borrower acknowledges and
agrees that notices sent by Foothill in connection with Sections 9504 or 9505
of the Code shall be deemed sent when deposited in the mail or transmitted by
telefacsimile or other similar method set forth above.
130 CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE
SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. EACH OF BORROWER AND FOOTHILL WAIVES, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE
OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 13. BORROWER AND FOOTHILL HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND FOOTHILL
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.
20
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140 DESTRUCTION OF BORROWER'S DOCUMENTS
All documents, agings, or other papers delivered to
Foothill may be destroyed or otherwise disposed of by Foothill four (4) months
after they are delivered to or received by Foothill, unless Borrower requests,
in writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrower's expense, for their return.
150 GENERAL PROVISIONS
15.1 Effectiveness. This Agreement shall be
binding and deemed effective when executed by Borrower and Foothill.
15.2 Successors and Assigns. This Agreement
shall bind and inure to the benefit of the respective successors and assigns of
each of the parties; provided, however, that Borrower may not assign this
Agreement or any rights or duties hereunder without Foothill's prior written
consent and any prohibited assignment shall be absolutely void. No consent to
an assignment by Foothill shall release Borrower from its Obligations. Foothill
may assign this Agreement and its rights and duties hereunder. Foothill
reserves the right to sell, assign, transfer, negotiate, or grant
participations in all or any part of, or any interest in Foothill's rights and
benefits hereunder. In connection therewith, Foothill may disclose all
documents and information which Foothill now or hereafter may have relating to
Borrower or Borrower's business. To the extent that Foothill assigns its rights
and obligations hereunder to a third party, Foothill shall thereafter be
released from such assigned obligations to Borrower and such assignment shall
effect a novation between Borrower and such third party.
15.3 Section Headings. Headings and numbers have
been set forth herein for convenience only. Unless the contrary is compelled by
the context, everything contained in each paragraph applies equally to this
entire Agreement.
15.4 Interpretation. Neither this Agreement nor
any uncertainty or ambiguity herein shall be construed or resolved against
Foothill or Borrower, whether under any rule of construction or otherwise. On
the contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of all parties hereto.
15.5 Severability of Provisions. Each provision
of this Agreement shall be severable from every other provision of this
Agreement for the purpose of determining the legal enforceability of any
specific provision.
15.6 Amendments in Writing. This Agreement
cannot be changed or terminated orally. All prior agreements, understandings,
representations, warranties, and
21
<PAGE> 22
negotiations, if any, are merged into this Agreement.
15.7 Counterparts. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one
and the same Agreement.
15.8 Revival and Reinstatement of Obligations.
If the incurrence or payment of the Obligations by Borrower or any guarantor of
the Obligations or the transfer by either or both of such parties to Foothill
of any property of either or both of such parties should for any reason
subsequently be declared to be improper under any state or federal law relating
to creditors' rights, including, without limitation, provisions of the United
States Bankruptcy Code relating to fraudulent conveyances, preferences, and
other voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if Foothill is required to repay or
restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Foothill is required to repay or restore,
and as to all reasonable costs, expenses and attorneys' fees of Foothill
related thereto, the liability of Borrower or such guarantor shall
automatically be revived, reinstated, and restored and shall exist as though
such Voidable Transfer had never been made.
15.9 Integration. This Agreement, together with
the other Loan Documents, reflects the entire understanding of the parties with
respect to the transactions contemplated hereby and shall not be contradicted,
modified, or qualified by any other agreement, oral or written, whether before
or after the date hereof.
22
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed at Los Angeles, California.
"Borrower"
LEISURE TIME CRUISE CORPORATION,
a Colorado corporation
By: /s/
-----------------------------
Print Name:
Title:
Accepted and effective this ___th day of October, 1998.
"Foothill"
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/
--------------------------
Print Name:
Its:
23
<PAGE> 24
SCHEDULE E-1
VESSELS
1. Name: LEISURE LADY
Official No.: 671576
Hailing Port: NEW YORK, NEW YORK
Gross Tons: 88
Net Tons: 88
Built: 1984 (Chesapeake Shipbuilding, Maryland)
Length Overall: 137 feet
Depth: 7.5 feet
2. Name: VEGAS EXPRESS
Official No.: 594643
24
<PAGE> 25
SCHEDULE "E-2"
EQUIPMENT EXCLUDED FROM DEFINITION OF COLLATERAL
All equipment located on the Vegas Express as of the Closing Date and any
additional equipment acquired after the Closing Date by Borrower for use on the
Vegas Express (other than the video gaming machines owned by Leisure Time
Technology, Inc. described on Schedule "E-3" attached hereto (which are
currently located in Lorain County, Ohio and Greenville, South Carolina)).
25
<PAGE> 26
SCHEDULE "E-3"
SEE ATTACHED LIST OF EQUIPMENT OWNED BY
LEISURE TIME TECHNOLOGY, INC. (IN WHICH FOOTHILL SHALL HAVE A SECURITY INTEREST)
26
<PAGE> 1
EXHIBIT 10.25
FIRST PREFERRED SHIP MORTGAGE
THIS FIRST PREFERRED SHIP MORTGAGE made effective as of October 9,
1998, by and between LEISURE TIME CRUISE CORPORATION, a Colorado corporation
whose address is 4258 Communications Drive, Norcross, Georgia 30093 (the
"Mortgagor"), and FOOTHILL CAPITAL CORPORATION, a California corporation whose
address is 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California
90025-3333 (the "Mortgagee"). The Mortgagee shall be a mortgagee in 100% of the
Vessel described below.
WITNESSETH:
MORTGAGE AMOUNT: THE AMOUNT OF THE DIRECT OR CONTINGENT OBLIGATIONS
THAT ARE OR MAY BECOME SECURED BY THIS FIRST PREFERRED SHIP MORTGAGE, EXCLUDING
INTEREST, MONTHLY SERVICE FEES, EXPENSES AND OTHER FEES, IS $3,000,000.00.
WHEREAS, the Mortgagor is the sole owner of the whole of the following
vessel:
Name: Leisure Lady
Official No.: 671576
Hailing Port: NEW YORK, NEW YORK
Gross Tons: 88
Net Tons: 88
Built: 1984 (Chesapeake Shipbuilding, Maryland)
Length Overall: 137.0 feet
Depth: 7.5 feet
which vessel is duly documented under and pursuant to the laws of the United
States; and
WHEREAS, the Mortgagor is justly indebted to Mortgagee in the principal
sum of up to Three Million Dollars ($3,000,000.00) (hereinafter referred to as
the "Principal Sum"), and interest and monthly service fees thereon, which
indebtedness is evidenced, inter alia, by a certain Security Agreement, between
Mortgagor, among other parties, and Mortgagee (the "Security Agreement"), and a
Secured Promissory Note in the amount of the Principal Sum, executed by
Mortgagor, in favor of Mortgagee (the "Note"), each of even date herewith, and
copies of which are attached hereto as Exhibit A; and
WHEREAS, the Principal Sum, all interest thereon, monthly service fees,
all late charges as set forth in the Security Agreement, the Note, the
Guaranties, all other costs and expenses incurred by the Mortgagee in the
enforcement and administration of the Security Agreement, the Note, the
Guaranties, and this First Preferred Ship Mortgage, and any and all future
advances as may be made from Mortgagee to Mortgagor the total of which, however,
shall not exceed the Principal Sum, shall be collectively referred to hereafter
as the "Secured Obligations"; and
WHEREAS, the Mortgagor, for the purpose of securing payment to the
Mortgagee of the Secured Obligations, as more fully set forth herein, has duly
executed and delivered this First Preferred Ship Mortgage on LEISURE LADY to the
Mortgagee;
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
In consideration of the foregoing recitals and of the sum of One Dollar
($1.00) to the Mortgagor duly paid by the Mortgagee at and before the sealing
and delivery of these presents, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, and in order to secure the payment
of the Secured Obligations, the Mortgagor, by these presents, does grant,
bargain, sell, convey, transfer, assign, remise, mortgage set over, pledge,
create a security interest in, and confirm to the Mortgagee, its successors and
assigns, the following described property:
The whole of all that certain vessel designated and known as LEISURE
LADY, Official No. 671576, together with all her engines, boilers, machinery,
masts, spars, motors, tools, booms, cranes, rigs, pumps, pipe, tanks, anchors,
cables, rigging, tackle, apparel, fixtures, furniture, boats, chains, equipment,
supplies, fittings, and all her other
<PAGE> 2
appurtenances thereunto appertaining and belonging, whether aboard or removed
from the said vessel, together with any and all additions, improvements, and/or
replacements which may hereafter be made to, on or in said Vessel or any part
thereof, whether on board or not, and in or to her equipment and appurtenances
aforesaid, and all rents, charters, charter parties, charter hire, freights,
sub-freights, cargoes, operating agreements and revenues, lighterage, and all
issues, revenues, profits and proceeds of any of the foregoing, but in no event
shall the Vessel include: (a) any accounts of Mortgagor arising in connection
with the operation of the Vessel by Mortgagor, or the containers, gensets,
chassis or other equipment described in clause (b), and (b) any containers,
gensets, chassis, or other equipment leased by Mortgagor and used on or in
connection with the operation of the Vessel, all of the foregoing being
hereinafter referred to as the "Vessel."
TO HAVE AND TO HOLD all of the Vessel unto the Mortgagee, its successors and
assigns, forever upon the terms herein set forth to secure the performance and
observance of and compliance with the covenants, terms and conditions in this
First Preferred Ship Mortgage and the Security Agreement and Note contained
therein; provided, however, that if the Mortgagor shall pay, or cause to be
paid, to the Mortgagee, its successors or assigns, the debt aforesaid, with
interest and the monthly service fee thereon, as and when the same shall become
due and payable by maturity or otherwise, under the terms and in the manner
provided in the Security Agreement, the Note and this Preferred Ship Mortgage,
and keeps, performs and observes all and singular the covenants and promises in
the Security Agreement and the Note and in these presents expressed to be kept,
performed, and observed by or on the part of the Mortgagor, then this First
Preferred Ship Mortgage and thc estate and rights hereby granted shall cease.
PAYMENT SCHEDULE: The Mortgagor shall pay or cause to be paid to thc
Mortgagee, its successors or assigns, the Principal Sum with the interest and
the monthly service fee thereon, in accordance with the terms and conditions of
thc Security Agreement and the Note.
MORTGAGE OBLIGATION: The Mortgagor hereby agrees to pay the Principal
Sum and the interest and the monthly service fee thereon as stipulated, and to
fulfill, perform and observe each and every one of the covenants, agreements,
and conditions contained in this First Preferred Ship Mortgage and in the Note
and the Security Agreement; and hereby covenants and agrees to and with the
Mortgagee, its successors and assigns, that the Vessel and the appurtenances
thereunto appertaining and belonging, and all additions, improvements and/or
replacements which may hereafter be made to, on or in said Vessel are to become
subject hereto, and are to be held subject to this First Preferred Ship Mortgage
and the further covenants, representations, warranties, conditions and uses
hereinafter set forth as follows:
Article 1. Corporate Representations and Warranties. Corporate representations
and warranties shall be as set forth in Section 5 of the Security Agreement.
Article 2. Validity of Mortgage. The Mortgagor covenants that this First
Preferred Ship Mortgage is and will be a valid and enforceable obligation of the
Mortgagor in accordance with its terms.
Article 3. Ownership of Vessel. The Mortgagor warrants that it is and shall
continue to be a citizen of the United States as defined and within the meaning
of the Shipping Act of 1916, as amended, 46 App. U.S.C. Section 802, and a
corporation established under the laws of the United States or of a State, whose
president or other chief executive officer and chairman of its board of
directors are citizens of the United States and no more of its directors are
noncitizens than a minority of the number necessary to constitute a quorum,
within the meaning of Section 7 of the Act of August 26, 1983, P.L. 98-89, 97
Stat. 585, as amended, 46 U.S.C. Section 12102, as amended. The Mortgagor
warrants that it is the true, lawful and sole owner of the whole of the Vessel,
including her engines, boilers, machinery, masts, anchors, cables, rigging,
tackle, apparel, furniture, small boats, and all other appurtenances, and that
its ownership is free and clear of all suits, liens, claims, charges, or
encumbrances of any kind or nature except for (a) liens arising prior to the
date of this First Preferred Ship Mortgage which arose in the ordinary course of
business and by operation of law, which liens are no greater than approximately
$5,000.00 as of this date and (b) liens granted to Mortgagee, and that all
action necessary and required by law for the execution and delivery of this
First Preferred Ship Mortgage has been duly and effectively taken, and that this
First Preferred Ship Mortgage is a valid and binding obligation of the Mortgagor
enforceable in accordance with its terms, and that it will forever warrant and
defend its title and possession for the benefit of the Mortgagee against any and
all claims and demands.
2
<PAGE> 3
Article 4. Insurance.
(a) The Mortgagor at its own cost and expense as long as any part of
the Secured Obligations are unpaid shall keep the Vessel insured with
responsible underwriters in good standing and reasonably satisfactory to the
Mortgagee fully and adequately protecting the Vessel and the Mortgagee's
interest therein against any marine perils and disasters and all hazards, risks,
or liabilities in any way arising out of the ownership, operation or maintenance
of the Vessel, as provided in the aforesaid Security Agreement, including but
not limited to insurance as follows:
(i) Marine Hull and Machinery and Increased Value insurance in
an amount not less than the full market value of the Vessel, with
responsible underwriters and under policy forms satisfactory to the
Mortgagee, covering the hull and all equipment and appurtenances of the
Vessel against all usual marine risks subject, with respect to an
accident, occurrence, or event that does not result in an actual or
constructive total loss of the Vessel, to no deductible in excess of
$5,000.
(ii) Protection and Indemnity Insurance with underwriters and
under policy forms and in amounts reasonably satisfactory to the
Mortgagee.
(iii) When and while the Vessel is laid up, and in lieu of the
aforesaid insurance referred to in paragraph (i) of this section, Port
Risk Insurance on the Vessel may be taken out by the Mortgagor under
forms of port risk policies and with underwriters satisfactory to the
Mortgagee.
(iv) Insurance protecting against claims under the
Longshoremen's and Harbor Workers, Compensation Act, Workmen's
Compensation and public liability.
(v) Upon the request of the Mortgagee, Mortgagee's Interest
Insurance, including Breach of Warranty insurance if reasonably
available, with responsible underwriters and under policy forms
satisfactory to Mortgagee.
(vi) Collision and property damage insurance with underwriters
and under policy forms and in amounts satisfactory to the Mortgagee.
(vii) Wreck removal and fire insurance with underwriters and
under policy forms and in amounts satisfactory to the Mortgagee.
(viii) Insurance against loss of hire and strikes with a daily
indemnity of not less than $ 10,000.00 per day, commencing after 3 days
and continuing for up to 21 days per instance.
(ix) MII Additional Perils (Pollution) insurance with
underwriters and under policy forms and in amounts satisfactory to the
Mortgagee.
(b) All Hull and Machinery insurance shall be taken out in the name of
the Mortgagor, but all losses shall be payable to the Mortgagee for distribution
by it, as its interests may appear, except that: (i) in thc case of a total
loss, the Mortgagee consents that the underwriters pay direct to the Mortgagor
the amount by which the total loss exceeds the amount then due under the
Mortgage, the Security Agreement, and the Note; and (ii) in the event of a
partial loss, if there is not a default under this First Preferred Ship
Mortgage, the Mortgagee agrees that the underwriters may pay directly for
repairs, salvage, or other charges and/or reimburse the Mortgagor therefor;
however, (iii) in any event, if the amount of the partial loss is less than
$5,000, Mortgagee consents that the underwriters may pay directly to the
Mortgagor. If the Mortgagor is in default under this First Preferred Ship
Mortgage, the Security Agreement, or the Note, the Mortgagee shall be entitled
to receive the proceeds of any such insurance and shall apply such proceeds in
the manner provided in Article 10(f).
(c) All insurance shall be taken out in the names of the Mortgagor and
any bareboat charterer, with Mortgagee named as an additional insured or loss
payee as follows; (i) Hull and Machinery Insurance and Port Risk Insurance shall
name the Mortgagee as first preferred Mortgagee and loss payee; (ii) Protection
& Indemnity Insurance shall name the Mortgagee as an additional insured.
3
<PAGE> 4
(d) With respect to both the Mortgagee's Interest and the MII
Additional Perils (Pollution) policies, Mortgagor shall effect and maintain, or,
at the option of the Mortgagee from time to time, reimburse to the Mortgagee on
the Mortgagee's first demand from time to time all costs and expenses incurred
by the Mortgagee in effecting and maintaining, on such terms, in such amounts as
is customary in the industry, and with such insurers as the Mortgagee shall
consider reasonably appropriate.
(e) Copies of all policies, binders and cover notes, together with an
original underwriter's certificates, shall be delivered to the Mortgagee from
time to time upon its request for approval and custody.
(f) Mortgagor will pay or cause to be paid the premiums on and costs of
all such insurance and all renewals thereof, when and as the same become
payable, and will forthwith furnish to Mortgagee evidence satisfactory to the
Mortgagee that the same has been paid if requested by the Mortgagee.
(g) The Mortgagor will keep the aforesaid insurance and renewals
thereof valid at all times while this First Preferred Ship Mortgage remains in
force, will comply and will cause any charterer or subcharterer to comply with
all Institute Warranties and Clauses, and will not suffer or permit the Vessel
to engage in any voyage or to carry any cargo not permitted by the policies of
insurance in effect at the time of the voyage, nor do, omit, neglect, or permit
to be done anything whereby any insurance, whether procured by the Mortgagor or
Mortgagee, is or is liable to be impaired or defeated. If at any time (i)
Mortgagor shall fail to deliver to and maintain with the Mortgagee, upon
request, original policies or other insurance documents and other evidence
satisfactory to the Mortgagee that the insurance has been effected and
maintained as hereinabove and in the Security Agreement required or (ii) any
insurance required to be maintained hereunder or under the Security Agreement is
canceled, terminated or fails to be renewed without replacement coverage
complying with the requirements hereof and of the Security Agreement, then the
Mortgagee may procure the insurance, and from the date of such expenditure the
costs and expenses thereof, with interest and the monthly service fee at the
rates provided in the Note, shall be an additional indebtedness due from the
Mortgagor secured by this First Preferred Ship Mortgage and shall be paid by the
Mortgagor on demand. The Mortgagee shall not be under any obligation to procure
any such insurance.
(h) Each insurance policy shall prohibit cancellation or substantial
modification by the insurer without the written consent of both the Mortgagor
and the Mortgagee, or, in the absence of such consent, without at least 10 days'
prior written notice to Mortgagor and Mortgagee. Mortgagor shall request that
its P&I Club shall give the Mortgagee as much notice as possible of Mortgagor's
failure to renew its entry in the Club, and in any event Mortgagor shall so
notify Bank immediately if its entry in the Club is not renewed.
(i) Each insurance policy shall provide that there shall be no recourse
against the Mortgagee for premiums in respect thereof.
(j) On the date hereof and on or before April 30 of each year
thereafter, the Mortgagor will furnish to the Mortgagee a report signed by a
recognized marine insurance broker(s) selected by the Mortgagor and reasonably
satisfactory to the Mortgagee with respect to the insurance maintained under
this First Preferred Ship Mortgage (including, without limitation, as to each
policy, its number, the amount, the insurer, the named assureds, the type of
risk, the loss payees and the expiration date).
Article 5. Environmental Matters
(a) The Mortgagor shall operate the Vessel in material compliance with
all Environmental Laws, including but not limited to the Oil Pollution Act of
1990. The Mortgagor has a Vessel Response Plan and a Spill Prevention Plan and
Contingency Plan in force.
(b) The Mortgagor shall indemnify and hold harmless the Mortgagee and
its successors and assigns from and against all losses, costs, injuries, damages
(including consequential, punitive or treble damages) and expenses (including
attorneys' fees and disbursements) and, at the Mortgagee's request, defend any
indemnified person under this provision against any action, suit, or other
proceeding resulting from, arising out of or in any way connected directly or
indirectly with any violation of or liability under any Environmental Law with
respect to the ownership, custody, management, operation or control of the
Vessel or the generation of waste by, or the transportation of waste from, the
Vcssel.
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<PAGE> 5
(c) The Mortgagor shall maintain a Certificate of Financial
Responsibility issued by the United States pursuant to the Federal Water
Pollution Control Act, and any other applicable legislation.
Article 6. Creation of Liens.
(a) Neither the Mortgagor, the managing owner, ship's husband, master,
or any other person to whom the management of the Vessel may be entrusted, or
any charterer or subcharterer shall have any right, power or authority to
create, incur, or permit to be placed or imposed on the Vessel any liens or
encumbrances whatsoever, other than Ordinary Maritime Liens, which liens consist
of (a) liens in favor of Mortgagee or (b) statutory liens for crew's wages,
wages of stevedores, or for salvage (including contract salvage), or general
average or (c) liens arising in the ordinary course of business prior to the
date hereof or (d) other liens incurred in the ordinary course of business which
are not past due, but only to the extent that such other liens are subordinate
to the lien of this First Preferred Ship Mortgage.
(b) The Mortgagor shall carry a properly certified copy of this First
Preferred Ship Mortgage with the ship's papers and shall exhibit the same to any
person having business with the Vessel which may give rise to any lien other
than for crew's wages or salvage, or to the sale, mortgage or other conveyance
thereof. The Mortgagor shall place and keep prominently in the pilot house,
master's cabin, or engine room of the Vessel a printed or typewritten notice
written as follows:
"This Vessel is owned by Leisure Time Cruise Corporation and is
subject to a First Preferred Ship Mortgage dated effective as of
October 9, 1998, in favor of FOOTHILL CAPITAL CORPORATION under
authority of the Act of November 23, 1988, P.L. 100-710, as
amended, and under the terms of said Mortgage, neither the owner,
the master nor any other person has any right, power or authority
to create, incur or permit to be imposed upon this vessel, its
freights, sub-freights, cargoes, profits, hire, charter hire or
revenues, any liens whatsoever, other than for crew's wages or
salvage, including contract salvage or general average."
(c) In the event that a claim for salvage is asserted against the
Vessel, Mortgagor and/or Mortgagee, the Mortgagor shall discharge any ultimate
lien, liability and/or judgment. Any amount paid by the Mortgagee, whether in
settlement of a claim or in satisfaction of a judgment, shall be a debt which is
part of the Secured Obligations, the repayment of which is secured by the lien
of this First Preferred Ship Mortgage and shall be payable when demanded by the
Mortgagee, with interest and the monthly service fee at the rates provided in
the Note, from the date of payment by the Mortgagee.
(d) In the event that the title or ownership of the Vessel shall be
requisitioned, purchased or taken by thc United States of America or any
government of any other country or any department, agency or representative
thereof, pursuant to any present or future law, proclamation, decree, order or
otherwise, the lien of this First Preferred Ship Mortgage shall be deemed to
attach to the claim for compensation, and the compensation, purchase price,
reimbursement or award for such requisition, purchase or other taking of such
title or ownership is hereby declared payable to Mortgagee, who shall be
entitled to receive the same and shall apply it to the prepayment of the Note;
and in the event of any such requisition, purchase or taking, the Mortgagor
shall promptly execute and deliver to Mortgagee such documents, if any, as in
the opinion of counsel for Mortgagee may be necessary or useful to facilitate or
expedite the collection by Mortgagee of such compensation, purchase price,
reimbursement or award.
(e) In the event that the United States of America or any government of
any other country or any department, agency or representative thereof shall not
take the title or ownership of the Vessel but shall requisition, charter, or in
any manner take over the use of such Vessel pursuant to any present or future
law, proclamation, decree, order or otherwise, and in the event Mortgagor is in
default of the terms of this First Preferred Ship Mortgage, all charter hire and
compensation resulting therefrom shall be payable to Mortgagee, and if, as a
result of such requisitioning, chartering or taking of the use of such Vessel
such government, department, agency or representative thereof shall pay or
become liable to pay any sum by reason of the loss of or injury to or
depreciation of the Vessel any such sum is hereby made payable to Mortgagee, and
in the event of any such requisitioning, chartering or taking of the use of the
Vessel, the Mortgagor shall promptly execute and deliver to Mortgagee such
documents, if any, and shall promptly do and perform such acts, if any, as in
the opinion of counsel for Mortgagee may be necessary or useful to facilitate or
expedite the collection by Mortgagee of such claims arising out of the
requisitioning, chartering or taking of the use of such Vessel.
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Article 7. Maintenance of Vessel.
(a) The Vessel is tight, staunch, strong and well and sufficiently
tackled, appareled, victualed, fitted, manned, furnished, and equipped, and in
every respect seaworthy and in good running condition and repair and in all
respects fit for service. At all times, at its own cost and expense, the
Mortgagor will exercise due diligence to maintain and preserve the Vessel in as
good condition, working order and repair as at the time of the execution of this
First Preferred Ship Mortgage, ordinary wear and tear and depreciation excepted,
and will maintain the Vessel in accordance with good marine maintenance practice
and procedures and applicable legal or regulatory requirements for the service
in which it then is or will be engaged, and in such condition as will enable her
to pass such inspection as may be required by marine underwriters as a condition
of their writing such insurance and in such amounts as is required under this
First Preferred Ship Mortgage. Furthermore, if the vessel is not temporarily
laid-up, the Mortgagor will cause the Vessel to be periodically inspected,
drydocked and recoated (hull paint), and its machinery overhauled in accordance
with normal marine practices or as may be required by the United States Coast
Guard or applicable Classification Society.
(b) The Mortgagor shall afford the Mortgagee or its authorized
representatives, at their own risk and expense, full and complete access to the
Vessel for the purpose of inspecting the same and her cargoes and papers.
(c) Mortgagor shall certify as often as required by Mortgagee that all
wage and other claims which give rise to liens have been paid, but in the
absence of a default or a potential default, no more often than once a quarter.
(d) The Mortgagor will keep the Vessel duly documented as a vessel of
the United States, under the flag of the United States, and will not suffer or
permit it to be operated in any manner prohibited by the laws or regulations
applicable to the Vessel under its certificate of documentation or its
classification, and will duly comply with all laws and governmental regulations
and contracts applicable to the Vessel and its operation. Mortgagor will never
operate the Vessel outside the navigational limits of the insurance carried
pursuant to Article 4.
(e) Mortgagor shall keep the Vessel in such condition as will entitle
her to the highest classification and rating for a Vessel of the same age, trade
and type in the American Bureau of Shipping (NABSO) or such other classification
society as shall be acceptable to Mortgagee, and, upon request, Mortgagor shall
furnish to Mortgagee a certificate by such classification bureau or society in
which the Vessel is then entered that such classification is maintained.
(f) The Mortgagor will furnish the Mortgagee within thirty (30) days
after receipt by the Mortgagor, copies of all Certificates of Inspection
delivered by the United States Coast Guard and/or Inspection Reports with
respect to the Vessel delivered by the American Bureau of Shipping, including
(as may apply) Annual Classification Surveys, Special Periodic or Continuous
Surveys, Annual Load-Line Surveys and Drydock Surveys.
Article 8. Release of Vessel. If a libel should be filed against the Vessel or
if the Vessel is otherwise levied against, attached, arrested or taken into
custody by virtue of any legal proceedings in any court, the Mortgagor will,
within thirty (30) days thereafter, cause the Vessel to be released and the lien
to be discharged.
Article 9. Payment of Charges. The Mortgagee shall have the right, but shall be
under no obligation, to make any payments and to do any acts which, under the
terms of this First Preferred Ship Mortgage, the Mortgagor is required to make
or do, but the making of any such payment or the doing of any such act by the
Mortgagee shall not relieve the Mortgagor of any default in that respect or
constitute in any respect a waiver of such default. The Mortgagor will reimburse
the Mortgagee promptly, with interest and the monthly service fee at the rate or
rates provided in the Note, for any and all payments and expenditures so made by
it and for any and all advances and expenses made or incurred by the Mortgagee
at any time in taking possession of Vessel or otherwise protecting its rights
hereunder and for any and all damages sustained by the Mortgagee from or by
reason of any default or defaults of the Mortgagor and such payments,
expenditures, advances and expenses shall be and are secured by this First
Preferred Ship Mortgage.
Article 10. Events of Default: Remedies.
(a) The following shall constitute "Events of Default" hereunder:
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(i) If the Mortgagor shall (a) sell or transfer, or attempt to
sell or transfer by operation of law or otherwise, its interest in the
Vessel, except as permitted in the Security Agreement, or (b) permit
the attachment of any suit, lien, claim, charge or encumbrance of any
kind (i) in excess of $5,000 in the aggregate at any time if the Vessel
is in drydock, (ii) which is not released within 30 days after it first
attaches if the Vessel is in drydock, (iii) in excess of $5,000 in the
aggregate at any time if the Vessel is not in drydock and the costs
relate to items other than non-drydock repairs made while the Vessel is
at port, and (iv) which is not released within 30 days after it first
attaches if the Vessel is not in drydock and the costs relate to items
other than non-drydock repairs made while the Vessel is at port; or
(ii) If the Mortgagor shall remove or attempt to remove the
Vessel beyond the limits of the United States, save on voyages with the
intention of returning to the United States, or shall abandon the
Vessel; or
(iii) If the Vessel shall be libeled and levied upon or taken
by virtue of any attachment or execution against the Mortgagor and such
libel or levy is not released by Mortgagor within 30 days; or
(iv) The occurrence of an "Event of Default" under the
Security Agreement;
(v) If the Mortgagor shall fail to pay any Secured Obligation
when due; or
(vi) The title or ownership of the Vessel shall be
requisitioned, purchased or taken by the government of any country or
by any department, agency or representative thereof and there shall not
have been paid to Mortgagee an amount in cash in United States dollars
equal to the fair value of such Vessel within ninety (90) days after
such event occurs;
(b) Upon the occurrence of an Event of Default the Mortgagee may:
(i) Declare the Secured Obligations to be due and payable
forthwith, whereupon such Secured Obligations shall become and be
immediately due and payable;
(ii) Exercise all of thc rights, powers and remedies in
foreclosure and otherwise given to thc Mortgagee by thc provisions of
Chapter 313 of title 46), United States Code, and acts amendatory
thereof and supplemental thereto;
(iii) Recover judgment for any amount due on the debt and
collect the same out of any property of the Mortgagor without its
security under this First Preferred Ship Mortgage being in any way
affected or impaired thereby;
(iv) Demand and receive all freights, hires, charter hires,
earnings/or profits of the Vessel, due or to become due from any person
whomsoever;
(v) With or without legal process re-enter and take possession
of the Vessel at any time wherever it may be found and, without being
responsible for loss or damage, hold, lease, charter, operate or
otherwise use the Vessel for such time and on such terms as the
Mortgagee may deem advisable and collect and retain all freights,
hires, earnings, and/or other moneys due or to become due and arising
therefrom, and/or if it seems desirable to the Mortgagee, and without
being responsible for loss or damage, with or without possession, sell
the Vessel free from any claim by the Mortgagor in admiralty, in
equity, at law or by statute, after first giving notice of the time and
place of sale, with a general description of the property, by
publishing such notice in such manner as may be required by applicable
rules of court and as may be reasonably calculated to give adequate
notice of the sale to potential buyers through trade publication, via
brokers, or otherwise, and by mailing a similar notice to the Mortgagor
at its last known business address on the day of first publication.
Such sale may be held at any place and at such time as the Mortgagee
may specify, and in such manner as the Mortgagee may deem advisable,
and may be conducted without bringing the Vessel to the place of sale,
and the Mortgagee may become a purchaser at the sale. From time to time
the Mortgagee may adjourn any such sale by announcement at the time and
place appointed for such sale or by any adjourned sale; and without
notice or publication, the Mortgagee may make such sale at the time and
place to which the same shall be so adjourned.
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(vi) Bring suit at law, in equity or in admiralty, as it may
be advised, to recover judgment for any and all amounts due, and
collect the same from Mortgagor and/or out of any and all property of
Mortgagor whether covered by this First Preferred Ship Mortgage or
otherwise;
(vii) Commence a civil action in rem to foreclose this First
Preferred Ship Mortgage and obtain an order to sell, and sell, the
Vessel, pursuant to the provisions of the Act of November 23, 1988,
P.L. 100-710, 102 Stat. 4735, as amended, 46 U.S.C. 31325 and 31326, or
their successor provisions, or by other judicial process as may be
provided in the statutes.
(c) Mortgagor hereby consents to thc appointment of a custodian of the
Vessel by Mortgagee with thc costs thereof to be a cost of the sale to be paid
from the proceeds of the sale or by Mortgagor.
(d) Each and every power or remedy herein specifically given to the
Mortgagee shall be cumulative and shall be in addition to every other power or
remedy herein specifically given or now or hereafter existing at law, in equity,
in admiralty or by statute, and each and every power or remedy, whether
specifically herein given or otherwise so existing may be exercised from time to
time and as often and at such order as may be deemed expedient by the Mortgagee,
and the exercise or the beginning of the exercise of any power or remedy shall
not be deemed a waiver of the right to exercise at the same time or thereafter
any other power or remedy. No delay or omission by the Mortgagee in the exercise
of any right or power accruing upon any Event of Default shall be construed to
be a waiver of such default or any acquiescence therein; nor shall the
acceptance by the Mortgagee of any security or of any payment after such default
or any payment on account of any past default be deemed a waiver of any right to
take advantage of any other default or of any past default not completely cured
thereby.
(e) If, at any time after an Event of Default and previous to the
actual sale of the Vessel by the Mortgagee or to any foreclosure proceedings,
the Mortgagor completely cures all Events of Default and pays all expenses,
advances and damages to the Mortgagee consequent on such Event of Default with
interest and the monthly service fee at the rates provided in the Security
Agreement, then the Mortgagee shall accept such payment and cure and restore the
Mortgagor to its former position, but such actions shall not affect any
subsequent Event of Default, nor impair any rights consequent thereon.
(f) The proceeds of any sale, and the net earnings of any charter,
operation or other use of the Vessel by the Mortgagee under any of the powers
herein specified, and the proceeds of any Judgment collected by the Mortgagee
for any default hereunder and the proceeds of any insurance or of any claim for
damages on account of the Vessel, received by the Mortgagee while exercising any
such power, and any and all other proceeds collected by the Mortgagee, or in any
proceedings hereunder, the application of which has not elsewhere been
specifically provided for, shall be applied as follows:
First: To payment of all expenses and charges, including expenses of
any sale, expense of any retaking, attorney's fees, court costs, and
any other expenses made or incurred by the Mortgagee in the protection
of its rights hereunder, and to the payment of any damages sustained by
the Mortgagee from any default of the Mortgagor hereunder with interest
as provided herein; and to provide adequate indemnity against liens
having priority over this First Preferred Ship Mortgage.
Second: To the payment of the balance due and outstanding upon thc
Secured Obligations or otherwise due under the Note and Security
Agreement, including accrued and unpaid interest and monthly service
fees to the date of such payment, with such payment to be applied pro
rata to such outstanding principal, interest, and monthly service fees
and to the payment of all other unpaid items, costs or expenses
constituting part of the Secured Obligations.
Third: Any surplus thereafter remaining shall be paid to the Mortgagor.
(g) Any sale of the Vessel made in pursuance of this First Preferred
Ship Mortgage, whether under the power of sale hereby granted or any judicial
proceedings, shall operate to divest all right, title, and interest of any
nature whatsoever of the Mortgagor therein and thereto, and shall bar the
Mortgagor, its successors and assigns, and all persons claiming by, through, or
under them. At any such sale Mortgagee or other holder of the Note (the
"holder/purchaser")
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may bid for and purchase such Vessel and upon compliance with the terms of the
sale may hold, retain and dispose of such property without further
accountability therefor. In case of any such sale the holder/purchaser shall be
entitled, for the purpose of making settlement or payment for the property
purchased, to use and apply the Note or any portion thereof in order that there
may be credited against the amount remaining due and unpaid thereon the sums
payable to the holder/purchaser out of the net proceeds of such sale after
allowing for the costs and expense of sale and other charges; and thereupon the
holder/purchaser shall be credited, on account of such purchase price, with the
net proceeds that shall have been so credited upon the Note. No purchaser shall
be bound to inquire whether notice has been given, or whether any default has
occurred, or as to the propriety of the sale or as to the application of the
proceeds thereof.
(h) Whenever any right to enter and take possession of the Vessel
accrues to Mortgagee, it may require the Mortgagor to deliver, and the Mortgagor
shall on demand, at its own cost and expense, deliver such Vessel to Mortgagee
as demanded. If any legal proceedings shall be taken to enforce any rights under
this First Preferred Ship Mortgage, Mortgagee shall be entitled as a matter of
right to the appointment of a receiver of the Vessel and the freights, hire,
earnings, issues, revenues, income and profits due or to become due and arising
from the operation thereof.
(i) Mortgagee is hereby appointed attorney-in-fact of the Mortgagor to
execute and deliver to any purchaser and is hereby vested with full power and
authority to make, in the name and in behalf of the Mortgagor, a good conveyance
of the title to the Vessel so sold. In the event of any sale of the Vessel,
under any power herein contained, the Mortgagor will, if and when required by
Mortgagee, execute such form of conveyance of such Vessel as Mortgagee may
direct or approve.
(j) Mortgagee is hereby appointed attorney-in-fact of the Mortgagor
upon the happening of any Event of Default, in the name of the Mortgagor to
demand, collect, receive, compromise and sue for, so far as may be permitted by
law, all freights, hire, earnings, tolls, rents, issues, revenues, income and
profits of the Vessel and all amounts due from underwriters under any insurance
thereon as payment of losses or as return premiums or otherwise, salvage awards
and recoveries, recoveries in general average or otherwise, and all other sums,
due or to become due at thc time of the happening of any Event of Default in
respect to the Vessel, or in respect of any insurance thereof from any person
whomsoever, and to make, give and execute in the name of the Mortgagor
acceptances, receipts, releases, or other discharges for the same, whether under
seal or otherwise, and to endorse and accept in the name of the Mortgagor the
other instruments in writing with respect to the foregoing. All amounts so
received shall first be applied to operating expenses and then to unpaid
interest and then to unpaid principal on the Note.
(k) If the Mortgagor shall default in the observance or performance of
any of the covenants, conditions or agreements in this First Preferred Ship
Mortgage on its part to be performed or observed (and such default shall
constitute an Event of Default), the Mortgagee may in its discretion, but shall
be under no obligation to, do all acts and make all expenditures necessary to
remedy such default, including, without limitation of the foregoing, entry upon
the Vessel to make repairs, and the Mortgagor shall forthwith reimburse the
Mortgagee, with interest at the Interest Rate, for any and all expenditures so
made or incurred and, until the Mortgagor has so reimbursed the Mortgagee for
such expenditures, the amount thereof shall be a debt due from the Mortgagor to
the Mortgagee secured by a first priority claim on the Vessel, provided, that
the making of any such expenditure shall not relieve the Mortgagor from the
consequences of any such default. The Mortgagor shall also forthwith reimburse
the Mortgagee, with interest at the Interest Rate and with a monthly service
fee, for any and all advances made or expenses of Mortgagee at any time in
taking the Vessel or otherwise protecting its rights hereunder, and for any and
all damages sustained by the Mortgagee from or by reason of any default or
defaults of the Mortgagor, and the amount of such advances, expenses and damages
shall be a debt due from the Mortgagor to the Mortgagee secured by a first
priority claim on the Vessel.
(l) In the event that the Vessel shall be arrested or detained by a
marshal or other officer of any court of law, equity or admiralty jurisdiction
or by any government or other authority, and shall not be released from arrest
or detention within thirty days from the date of arrest or detention, the
Mortgagor hereby irrevocably authorizes and empowers the Mortgagee and its
appointee or appointees, with full power of substitution, in the name and at the
expense of the Mortgagor, to apply for, claim and receive or take possession of
the Vessel with all rights and powers that the Mortgagor might have and exercise
in any such event. The Mortgagor also irrevocably authorizes and empowers any
such persons to appear, in the name of the Mortgagor, or against the Vessel in
any court of any country or nation of the world where a suit is pending against
the Vessel, because of or on account of any alleged lien against the Vessel from
which the same has not been released, and to take such proceedings as they or
any of them may deem proper for the defense of such suit and for the release of
the Vessel therefrom in the event that the Mortgagor shall not be taking
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proceedings reasonably satisfactory to Mortgagee, and in such case all
expenditures made or incurred by Mortgagee or its appointees for the purpose of
such defense or discharge shall be a debt due from the Mortgagor, its successors
and assigns, to Mortgagee, and shall be secured by the lien of this First
Preferred Ship Mortgage in like manner and extent as if the amount and
description thereof were written herein.
Article 11. Possession Prior to Default. Until one or more of the Events of
Default hereinbefore described shall happen, the Mortgagor shall retain actual
possession of the Vessel, and manage, operate and use the same and collect,
receive, take and use and enjoy the earnings, income, rents, freights, issues
and profits thereof.
Article 12. Statutory Compliance.
(a) The Mortgagor shall comply with and satisfy all applicable
formalities and provisions of the laws and regulations of the United States of
America, including but not limited to the provisions of 46 U.S.C. Chapter 313 et
seq., as amended, including without limitation the provisions of the Act of
November 23, 1988, P.L. 100-710, 102 Stat. 4735, as amended, in order to
perfect, establish and maintain this First Preferred Ship Mortgage, and any
supplement or amendment thereto upon the Vessel and upon all renewals, as a
first preferred mortgage thereunder, and the Mortgagor shall not sell, mortgage,
transfer, nor merge or consolidate with any other person, firm or corporation,
or dissolve, nor change the flag, name or the port of documentation of the
Vessel, without the written consent of the Mortgagee first obtained. Any such
written consent to any one sale, merger, consolidation, transfer, mortgage or
change of flag, name or port of documentation, shall not be deemed or held to be
a waiver of this provision in respect to any subsequent sale, merger,
consolidation, transfer, mortgage or change of flag, name or port of
documentation.
(b) The Mortgagor will pay and discharge, when due and payable from
time to time, all taxes, assessments, and governmental charges, fines and
penalties lawfully imposed upon the Vessel; provided, however, that the
Mortgagor may omit to pay any such tax, assessment, governmental charge, fine or
penalty, so long as it, in good faith and by appropriate legal proceedings,
shall contest the validity thereof and the Mortgagor shall set aside on its
books adequate reserves in the opinion of the Mortgagor with respect to any such
tax, assessment, charge, fine or penalty so contested, unless and until
foreclosure, distraint, sale or other similar proceedings shall have been
commenced with respect to the property which is subject to any such tax,
assessment, charge, fine or penalty. The right of the Mortgagor to contest the
validity of any claim contemplated by this Article 12 shall in no event be
construed as permitting any libel, attachment or other seizure of the Vessel,
under process or color of legal authority to remain undissolved or undischarged
for a period in excess of 30 days.
Article 13. Further Assurances. In the event that this First Preferred Ship
Mortgage, the Security Agreement, or the Note, or any provision of this First
Preferred Ship Mortgage, the Security Agreement, or the Note is deemed
invalidated, in whole or in part, by any present or future law or court
decision, the Mortgagor shall execute such other or further instruments, as in
the opinion of counsel for the Mortgagee, will carry out the true intent and
spirit of this First Preferred Ship Mortgage. From time to time, the Mortgagor
shall execute such other assurances as, in the opinion of such counsel, may be
required more effectually to subject the Vessel herein mortgaged or intended to
be mortgaged to the payment of the Note secured by this First Preferred Ship
Mortgage.
Article 14. Lawful Operation. The Mortgagor covenants and agrees to comply with
all the laws of the United States of America and/or any subdivision thereof
where the Vessel may be, pertaining to its operation. The Mortgagor will not
cause or permit the Vessel to be used in any manner contrary to law and will not
engage in any unlawful trade or carry any cargo that will expose the Vessel to
penalty, forfeiture, or capture, and will not do, or suffer or permit to be
done, anything which can or may injuriously affect the registration or
enrollment or flag of the Vessel under the laws and regulations of the United
States. Mortgagee does not authorize or consent to any act, failure or omission
on the part of the Mortgagor or any other person which would permit or give rise
to the risk of forfeiture of the Vessel for a violation of any law of the United
States or any other governmental authority.
Article 15. Copy of Entire Agreement. The Mortgagor acknowledges receipt from
the Mortgagee of a true copy of this First Preferred Ship Mortgage which
comprises the entire agreement between the parties respecting the mortgage of
the Vessel, and supersedes any and all other agreements respecting the Vessel,
except as otherwise specifically provided herein.
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Article 16. Continuity of Provisions. All the covenants, stipulation and
agreements contained in this First Preferred Ship Mortgage shall be binding upon
and inure to the benefit of the Mortgagor, its successors and assigns, and the
Mortgagee, its successors and assigns. Throughout this First Preferred Ship
Mortgage, the singular shall include the plural.
Article 17. Applicable Law. This instrument shall be construed in accordance
with the statutory and maritime law of the United States, and, where such law is
silent or inapplicable, then under the laws of the State of California.
Article 18. Separate Discharge. Although it is not intended that this First
Preferred Ship Mortgage include any property other than the Vessel, if any
determination is made at any time that for any reason this First Preferred Ship
Mortgage does include any property other than a "Vessel" within the meaning of
Chapter 313 of title 46, United States Code, such property may be separately
discharged from the lien of this First Preferred Ship Mortgage, but only with
the consent of the Mortgagee, by the payment of .01% of the said total amount.
Article 19. Notice. Any notice required or permitted hereunder shall be
sufficient if given in the manner provided in the Security Agreement.
Article 20. Defined Terms. Any capitalized terms which are not otherwise defined
herein shall have the respective meanings, if any, assigned thereto in the
Security Agreement.
Article 21. Remedies Not Exclusive. Each and every right, power and remedy given
to the Mortgagee in this First Preferred Ship Mortgage or in the other Loan
Documents shall be cumulative and shall be in addition to every other right,
power and remedy herein specifically given or now or hereafter existing at law,
in equity, in admiralty, or by statute, and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and as often and in such order as may be determined by the
Mortgagee, and the exercise or thc beginning of the exercise of any right, power
or remedy shall not be construed to be a waiver of the right to exercise at the
same time or thereafter any other right, power or remedy. No delay or omission
by the Mortgagee in the exercise of any right, power or remedy shall impair any
such right, power or remedy or be construed to be a waiver of any default or to
be any acquiescence therein nor shall the acceptance by thc Mortgagee or any
Holder of any security or of any payment of or on account of the Note maturing
after a default or of any payment on account of any past default be construed to
be a waiver of any right to take advantage of any future default or of any past
default not completely cured thereby.
IN WITNESS WHEREOF, the Mortgagor has caused these presents to be
executed and attested by its duly authorized officers as of the day and year
first above written.
Attest: LEISURE TIME CRUISE CORPORATION,
a Colorado corporation
By: /s/ Elden W. Rance By: /s/ Alan N. Johnson
--------------------------------- ----------------------------------
Print Name: Elden W. Rance Print Name: Alan N. Johnson
Title: CFO Title: President
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ACKNOWLEDGMENT
STATE OF GEORGIA
COUNTY OF GWINNETT
BEFORE ME, the undersigned authority, personally appeared Alan N. Johnson , to
me well known and known to be the person described in and who executed foregoing
instrument, and acknowledged to and before me that he executed said instrument
for the purpose therein expressed.
WITNESS my hand and official seal this 9th day of October, 1998.
/s/ Karen S. Lewis
- --------------------------
NOTARY PUBLIC
My Commission Expires: 11/19/2001
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EXHIBIT 10.26
EQUIPMENT SECURITY AGREEMENT
This EQUIPMENT SECURITY AGREEMENT, is entered into as of October 9,
1998, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, and LEISURE TIME TECHNOLOGY,
INC., a Georgia corporation ("Obligor"), with its chief executive office located
at 1284 Miller Road, Avon, Ohio 44011.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Agreement" means this Equipment Security Agreement and any
extensions, riders, supplements, notes, amendments, or modifications to or in
connection with this Equipment Security Agreement.
"Borrower" means Leisure Time Cruise Corporation, a Colorado
corporation.
"Closing Date" means the date on which Foothill makes the loan
to Borrower as evidenced by the Term Note.
"Code" means the California Uniform Commercial Code.
"Collateral" means: Obligor's Books; the Equipment; and the
proceeds and products, whether tangible or intangible, of any of the foregoing
including proceeds of insurance covering any or all of the Collateral, and any
and all accounts, equipment, general intangibles, chattel paper, inventory,
negotiable instruments or other negotiable collateral, money, deposit accounts,
investment property, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of the Collateral, or any
portion thereof or interest therein, and the proceeds thereof.
"Equipment" means the video gaming machines described on
SCHEDULE E-1 attached hereto, the products and proceeds thereof, any interest in
any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions, enhancements, upgrades, and improvements
to any of the foregoing, in each case whether now owned or existing or hereafter
arising or acquired and wherever located, and all general intangibles and
chattel paper related to or arising from any of the foregoing.
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"Event of Default" has the meaning set forth in Section 8.
"Foothill Expenses" means all: reasonable costs or expenses
(including taxes, photocopying, notarization, telecommunication, and insurance
premiums) required to be paid by Obligor under the Agreement, Guaranty, or any
other documents executed in connection therewith, that are paid or advanced by
Foothill; documentation, filing, recording, publication, appraisal (including
periodic Collateral appraisals), and search fees assessed, paid, or incurred by
Foothill in connection with Foothill's transactions with Obligor; costs and
expenses incurred by Foothill in the disbursement of funds to Obligor (by wire
transfer or otherwise); charges paid or incurred by Foothill resulting from the
dishonor of checks; costs and expenses paid or incurred by Foothill to correct
any default or enforce any provision of this Agreement or the Guaranty, or in
gaining possession of, maintaining, handling, preserving, removing (including,
but not limited to, all costs and expenses incurred by Foothill with respect to
any obligations of Foothill under a landlord's or mortgagee's waiver and consent
entered into in connection with this Agreement or the Guaranty), storing,
shipping, selling, preparing for sale, or advertising to sell the Collateral, or
any portion thereof, whether or not a sale is consummated; costs and expenses
paid or incurred by Foothill in examining Obligor's Books; costs and expenses of
third party claims or any other suit paid or incurred by Foothill in enforcing
or defending this Agreement or the Guaranty; and Foothill's reasonable
attorneys' fees and expenses incurred in advising, structuring, drafting,
reviewing, administering, amending, terminating, enforcing (including attorneys'
fees and expenses incurred in connection with a "workout", a "restructuring," or
an Insolvency Proceeding concerning Obligor or any guarantor of the
Obligations), defending, or concerning this Agreement or the Guaranty, whether
or not suit is brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"Guaranty" means that certain Continuing Guaranty of even date
herewith, executed by Obligor in favor of Foothill, pursuant to which Obligor
guarantees the obligations of Borrower contained in that certain Security
Agreement of even date herewith, by and between Borrower and Foothill, the Term
Note, and the other loan documents executed by Borrower in connection therewith.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extensions generally with its creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
"Judicial Officer or Assignee" means any trustee, receiver,
controller, custodian, assignee for the benefit of creditors, or any other
person or entity having powers or duties like or similar to the powers and
duties of a trustee, receiver, controller, custodian, or
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assignee for the benefit of creditors.
"Obligations" means all loans, advances, debts, principal,
interest (including any interest that, but for the provisions of the United
States Bankruptcy Code, would have accrued), premiums, liabilities (including
all amounts charged to Obligor's loan account pursuant to any agreement
authorizing Foothill to charge Obligor's loan account), obligations, fees, lease
payments, guaranties, covenants, and duties owing by Obligor to Foothill of any
kind and description (whether pursuant to or evidenced by this Agreement or the
Guaranty, by any note or other instrument, or by any other agreement between
Foothill and Obligor, and whether or not for the payment of money), whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, and including any debt, liability, or obligation owing
from Obligor to others that Foothill may have obtained by assignment or
otherwise, and further including all interest not paid when due and all Foothill
Expenses that Obligor is required to pay or reimburse by this Agreement or the
Guaranty, by law, or otherwise. All Obligations shall accrue interest at the
rate(s) set forth in the Term Note from the date such Obligations arise, and
such interest shall in turn be deemed "Obligations" for all purposes under this
Agreement and shall be due and payable when interest is due and payable under
the Term Note. Without limiting the generality of the foregoing, Obligations
shall include all obligations of Obligor under the Guaranty.
"Obligor's Books" means all of Obigor's books and records
including: ledgers; records indicating, summarizing, or evidencing Obligor's
assets or liabilities, or the Collateral; all information relating to Obligor's
business operations or financial condition; and all computer programs, disc or
tape files, printouts, runs, or other computer prepared information, and the
equipment containing such information.
"Pay-Off Letters" means letters, in form and substance
reasonably satisfactory to Foothill, from other lenders and secured creditors
respecting the amount necessary to repay in full all of the obligations of
Obligor owing to such lenders and secured creditors and obtain
terminations/releases of all of the security interests or liens existing in
favor of such lenders and secured creditors in and to the properties or assets
of Obligor.
"Permitted Liens" means: (a) liens and security interests held
by Foothill; (b) liens for unpaid taxes that are not yet due and payable; and
(c) liens and security interests set forth on SCHEDULE P-1 attached hereto but
no extensions, renewals, refinancings or replacements thereof to the extent they
increase the principal or interest of, or extend the maturity of, the
obligations secured by such liens.
"Permitted Protest" means the right of Obligor to protest any
lien, tax, rental payment, or other charge, other than any such lien or charge
that secures the Obligations, provided (i) a reserve with respect to such
obligation is established on the books of Obligor in an amount that is
reasonably satisfactory to Foothill, (ii) any such protest is instituted and
diligently prosecuted by Obligor in good faith, and (iii) Foothill is satisfied
that,
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while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the liens or security interests
of Foothill in and to the property or assets of Obligor.
"Term Note" means that certain Secured Promissory Note, of even
date herewith, executed by Obligor to the order of Foothill, in the original
principal amount of Three Million Dollars ($3,000,000), and any extensions,
renewals, replacements, or substitutions therefor.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto.
1.3 Code. Any terms used in this Agreement which are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
1.4 Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, to the
singular include the plural, and the term "including" is not limiting. The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Section, subsection, clause, and exhibit references are to this
Agreement unless otherwise specified.
1.5 Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. CONDITIONS TO EFFECTIVENESS: TERM OF AGREEMENT.
2.1 Conditions Precedent. The obligation of Foothill to make the
loan evidenced by the Term Note is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions
precedent on or before the Closing Date:
2.1.1 the Closing Date shall occur on or before October 30,
1998;
2.1.2 Other than with respect to Permitted Liens, Obligor's
existing lenders or creditors shall have executed and delivered Pay-Off Letters,
UCC termination statements and other documentation evidencing the termination of
their liens and security interests in the assets of Obligor or a subordination
agreement in form and substance satisfactory to Foothill in its sole discretion;
2.1.3 Foothill shall have received copies of Obligor's By-laws
and Articles or Certificate of Incorporation, as amended, modified, or
supplemented to the Closing Date, certified by the Secretary of Obligor;
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2.1.4 Foothill shall have received a certificate of corporate
status with respect to Obligor, dated within ten (10) days of the Closing Date,
by the Secretary of State of the state of incorporation of Obligor, which
certificate shall indicate that Obligor is in good standing in such state;
2.1.5 Foothill shall have received a certificate from the
Secretary of Obligor attesting to the resolutions of Obligor's Board of
Directors authorizing its execution and delivery of this Agreement, the
Guaranty, and any other documents to which Obligor is a party and authorizing
specific officers of Obligor to execute same;
2.1.6 Foothill shall have received certificates of corporate
status with respect to Obligor, each dated within ten (10) days of the Closing
Date, such certificates to be issued by the Secretary of State of the states in
which its failure to be duly qualified or licensed would have a material adverse
effect on the financial condition or assets of Obligor, which certificates shall
indicate that Obligor is in good standing;
2.1.7 Foothill shall have received the insurance certificates
and certified copies of policies required by Section 5.7 hereof along with a
438BFU Lender's Loss Payable Endorsement naming Foothill as sole loss payee, all
in form and substance satisfactory to Foothill and its counsel;
2.1.8 Foothill shall have received each of the following
documents, in form and substance satisfactory to Foothill and its counsel, duly
executed, and each such document shall be in full force and effect:
(1) This Agreement;
(2) Guaranty;
(3) Such other documents and instruments as Foothill shall
deem necessary or desirable to ensure that Foothill
has a first priority perfected security interest in
and lien on the Collateral;
2.1.9 Foothill shall have received searches reflecting the
filing of its financing statements and fixture filings, and shall have received
certificates of title with respect to the Collateral which shall have been duly
executed in order to perfect all of the security interests granted to Foothill;
2.1.10 Foothill shall have received landlord and mortgagee
waivers from the lessors and mortgagees of the locations where the Equipment is
located;
2.1.11 Foothill shall have received all of Foothill Expenses
incurred as
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of the Closing Date, and all other costs and expenses incurred by Foothill in
connection herewith, including audit fees, search fees, appraisal fees,
documentation, recording and filing fees, and the fees and costs of any attorney
services required for the negotiation, preparation and documentation of this
Agreement, the Guaranty, and any other document reasonably required by Foothill
in connection with this Agreement;
2.1.12 All representations and warranties set forth in this
Agreement, the Guaranty, and any other documents required by Foothill are true
and correct as of the Closing Date, no "Event of Default" has occurred under
this Agreement or any of the other documents reasonably required by Foothill,
and all of such documents are in full force and effect; and
2.1.13 All other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to Foothill
and its counsel.
2.2 Term; Automatic Renewal. This Agreement shall become
effective upon the execution and delivery hereof by Obligor and Foothill, and
shall continue in full force and effect until all Obligations have been
indefeasibly paid in full.
3. CREATION OF SECURITY INTEREST
3.1 Grant of Security Interest. Obligor hereby grants to Foothill a
continuing security interest in all currently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Obligor of each of its
covenants and duties under this Agreement, the Guaranty, or any other documents
reasonably required by Foothill. Foothill's security interest in the Collateral
shall attach to all Collateral without further act on the part of Foothill or
Obligor.
3.2 Delivery of Additional Documentation Required. Obligor shall
execute and deliver to Foothill, prior to or concurrently with Obligor's
execution and delivery of this Agreement and at any time thereafter at the
request of Foothill, all financing statements, continuation financing
statements, fixture filings, security agreements, chattel mortgages, pledges,
assignments, endorsements of certificates of title, applications for title,
affidavits, reports, notices, letters of authority, and all other documents that
Foothill may reasonably request, in form satisfactory to Foothill, to perfect
and continue perfected Foothill's security interests in the Collateral and in
order to fully consummate all of the transactions contemplated hereunder.
3.3 Power of Attorney. Obligor hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Obligor's true and lawful attorney, with
power to: (a) sign the name of Obligor on any of
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the documents described in Section 3.2 or on any other similar documents to be
executed, recorded, or filed in order to perfect or continue perfected
Foothill's security interest in the Collateral; (b) at any time that an Event of
Default has occurred or Foothill deems itself insecure, endorse Obligor's name
on any checks, notices, acceptances, money orders, drafts, or other item of
payment or security that may come into Foothill's possession; and (c) at any
time that an Event of Default has occurred or Foothill deems itself insecure,
make, settle, and adjust all claims under Obligor's policies of insurance in
respect of the Collateral and make all determinations and decisions with respect
to such policies of insurance. The appointment of Foothill as Obligor's
attorney, and each and every one of Foothill's rights and powers, being coupled
with an interest, is irrevocable until all of the Obligations have been fully
repaid and performed and Foothill's obligation to provide advances hereunder is
terminated.
3.4 Right to Inspect. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect Obligor's Books and to check, test, and appraise the Collateral in order
to verify Obligor's financial condition or the amount, quality, value, condition
of, or any other matter relating to, the Collateral.
4. REPRESENTATIONS AND WARRANTIES.
Obligor represents and warrants as follows:
4.1 Prior Encumbrances. Obligor has good and indefeasible title to
the Collateral, free and clear of liens, claims, security interests, or
encumbrances except for Permitted Liens. None of the Collateral has been
purchased by Obligor within the six (6) month period preceding the Closing Date,
except for sales to Obligor in the ordinary course of the seller's business.
None of the personal property described on Schedule E-1 is leased.
4.2 Location of Equipment. The Equipment is not now and shall not at
any time hereafter be stored with a bailee, warehouseman, or similar party
without Foothill's prior written consent. Obligor shall keep the Equipment only
at the following locations: (1) 1284 Miller Road, Avon, Ohio 44011, or (2) 920
Frontage Road, Greenville, South Carolina.
None of the Equipment has been located, during the six (6) month
period prior to the Closing Date, in any jurisdiction other than the county(ies)
and state(s) set forth in this Section 4.2.
4.3 Location of Chief Executive Office; Fictitious Names. The chief
executive office of Obligor is located at the address indicated in the first
paragraph of this Agreement and Obligor covenants and agrees that it will not,
without thirty (30) days prior written notification to Foothill, relocate such
chief executive office. Obligor does not operate under or otherwise use any
fictitious names or trade names other than: [none].
4.4 Due Organization and Qualification. Obligor is and shall at all
times
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hereafter be duly organized and existing and in good standing under the laws of
the state of its incorporation and qualified and licensed to do business in, and
in good standing in, any state in which the conduct of its business or its
ownership of the Collateral requires that it be so qualified.
4.5 Due Authorization; No Conflict. The execution, delivery, and
performance of this Agreement, the Guaranty, and any other documents reasonably
required by Foothill are within Obligor's corporate powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Obligor's Articles or Certificate of Incorporation, or
Bylaws, nor will they constitute an event of default under any material
agreement to which Obligor is a party.
4.6 Litigation. There are no actions or proceedings pending by or
against Obligor before any court or administrative agency and Obligor does not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Obligor or any guarantor of the Obligations, except for ongoing
collection matters in which the Obligor is the plaintiff.
4.7 No Material Adverse Change in Financial Condition. All financial
statements relating to Obligor or any guarantor of the Obligations that have
been or may hereafter be delivered by Obligor to Foothill have been prepared in
accordance with GAAP and fairly present Obligor's financial condition as of the
date thereof and Obligor's results of operations for the period then ended.
There has not been a material adverse change in the financial condition of
Obligor or any guarantor since the date of the latest financial statements
submitted to Foothill on or before the Closing Date.
4.8 Solvency. Obligor's assets at a fair valuation exceed the amount
of all of its debts at a fair valuation and Obligor is able to pay all of its
debts (including trade debts and contingent liabilities) as they become due.
4.9 Environmental Condition. None of Obligor's properties or assets
has ever been used by Obligor or, to the best of Obligor's knowledge, by
previous owners or operators in the disposal of, or to produce, store, handle,
treat, release, or transport, any hazardous waste or hazardous substance in
violation of any law, statute, rule, regulation, or policy of any federal or
state governmental agency. None of Obligor's properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a hazardous waste or hazardous substance disposal site, or a
candidate for closure pursuant to any environmental protection statute. No lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned or operated by Obligor. Obligor has
not received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal or state governmental agency concerning
any action or omission by Obligor resulting in the releasing or disposing of
hazardous waste or hazardous substances into the environment.
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4.10 Reliance by Foothill; Cumulative. Each warranty and
representation contained in this Agreement shall be conclusively presumed to
have been relied on by Foothill regardless of any investigation made or
information possessed by Foothill. The warranties and representations set forth
herein shall be cumulative and in addition to any and all other warranties and
representations that Obligor shall now or hereinafter give, or cause to be
given, to Foothill.
5. AFFIRMATIVE COVENANTS.
Obligor covenants and agrees that, so long as any credit under this
Agreement, the Guaranty, or any other documents reasonably required by Foothill
shall be available and until payment in full of the Obligations, and unless
Foothill shall otherwise consent in writing, Obligor shall do all of the
following:
5.1 Financial Statements, Reports, Certificates. Obligor agrees to
deliver to Foothill: (a) as soon as available, but in any event within thirty
(30) days after the end of each month during each of Obligor's fiscal years, a
company prepared balance sheet, income statement, and cash flow statement
covering Obligor's operations during such period; and (b) as soon as available,
but in any event within ninety (90) days after the end of each of Obligor's
fiscal years, financial statements of Obligor for each such fiscal year,
reviewed by independent certified public accountants acceptable to Foothill and
certified, without any qualifications, by such accountants to have been prepared
in accordance with GAAP, together with a certificate of such accountants
addressed to Foothill stating that such accountants do not have knowledge of the
existence of any event or condition constituting an Event of Default, or that
would, with the passage of time or the giving of notice, constitute an Event of
Default. Such reviewed financial statements shall include a balance sheet,
profit and loss statement, and cash flow statement, and such accountants' letter
to management. Obligor shall have issued written instructions to its independent
certified public accountants authorizing them to communicate with Foothill and
to release to Foothill whatever financial information concerning Obligor that
Foothill may request. If Obligor is a parent company of one or more
subsidiaries, or affiliates, or is a subsidiary or affiliate of another company,
then, in addition to the financial statements referred to above, Obligor agrees
to deliver financial statements prepared on a consolidating basis so as to
present Obligor and each such related entity separately, and on a consolidated
basis.
Obligor hereby irrevocably authorizes and directs all auditors,
accountants, or other third parties to deliver to Foothill, at Obligor's
expense, copies of Obligor's financial statements, papers related thereto, and
other accounting records of any nature in their possession, and to disclose to
Foothill any information they may have regarding Obligor's business affairs and
financial conditions.
5.2 Tax Returns. Obligor agrees to deliver to Foothill copies of
each of Obligor's future federal income tax returns, and any amendments thereto
as soon as the same
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are available and in any event no later than thirty (30) days after the same are
required to be filed by law.
5.3 Guarantor Reports. Obligor agrees to cause any guarantor of any
of the Obligations to deliver its annual financial statements at the time when
Obligor provides its reviewed financial statements to Foothill and copies of all
federal income tax returns as soon as the same are available and in any event no
later than thirty (30) days after the same are required to be filed by law.
5.4 Title to Equipment. Upon Foothill's request, Obligor shall
immediately deliver to Foothill, properly endorsed, any and all evidences of
ownership of, certificates of title, or applications for title to any items of
Equipment.
5.5 Maintenance of Equipment. Obligor shall keep and maintain the
Equipment in good operating condition and repair, and make all necessary
replacements thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Obligor shall not permit any item of
Equipment to become a fixture to real estate or an accession to other property,
and the Equipment is now and shall at all times remain personal property.
5.6 Taxes. All assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Obligor or
any of its property have been paid, and shall hereafter be paid in full, before
delinquency or before the expiration of any extension period. Obligor shall make
due and timely payment or deposit of all federal, state, and local taxes,
assessments, or contributions required of it by law, and will execute and
deliver to Foothill, on demand, appropriate certificates attesting to the
payment or deposit thereof. Obligor shall make timely payment or deposit of all
tax payments and withholding taxes required of it by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state,
and federal income taxes, and shall, upon request, furnish Foothill with proof
satisfactory to Foothill indicating that Obligor has made such payments or
deposits.
5.7 Insurance.
(a) Obligor, at its expense, shall keep the Collateral insured
against "all risks" including loss or damage by fire, theft, explosion,
sprinklers, and all other hazards and risks, and in the full insurable value
thereof. Obligor also shall maintain public liability, product liability, and
property damage insurance relating to Obligor's ownership and use of the
Collateral, as well as insurance against larceny, embezzlement, and criminal
misappropriation.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as may be satisfactory to Foothill. All such
policies of insurance (except those of public liability and property damage)
shall contain a 438BFU
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lender's loss payable endorsement, or an equivalent endorsement in a form
satisfactory to Foothill, showing Foothill as loss payee thereof, and shall
contain a waiver of warranties, and shall specify that the insurer must give at
least ten (10) days prior written notice to Foothill before canceling its policy
for any reason. Obligor shall deliver to Foothill certified copies of such
policies of insurance and evidence of the payment of all premiums therefor. All
proceeds payable under any such policy shall be payable to Foothill to be
applied on account of the Obligations.
5.8 Foothill Expenses. Obligor shall immediately and without demand
reimburse Foothill for all sums expended by Foothill which constitute Foothill
Expenses and Obligor hereby authorizes and approves all advances and payments by
Foothill for items constituting Foothill Expenses. Any Foothill Expenses not
paid promptly by Obligor shall constitute Obligations and shall accrue interest
at the rate and in the manner of Obligations existing under the Term Note.
5.9 No Setoffs or Counterclaims. All payments hereunder, under the
Guaranty and any other documents reasonably required by Foothill made by or on
behalf of Obligor shall be made without setoff or counterclaim and free and
clear of, and without deduction or withholding for or on account of, any
federal, state or local taxes.
6. NEGATIVE COVENANTS.
Obligor covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the Obligations, Obligor will
not do any of the following without Foothill's prior written consent:
6.1 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any lien on or with respect to any of the Collateral, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens.
6.2 Restrictions on Fundamental Changes. Enter into any acquisition,
merger, consolidation, reorganization, or recapitalization, or reclassify its
capital stock, or liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, assign, lease, transfer, or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business, property, or assets, whether now owned or
hereafter acquired, or acquire by purchase or otherwise all or substantially all
the assets, stock, or other evidence of beneficial ownership of any person or
entity.
6.3 Extraordinary Transactions and Disposal of Collateral. Sell,
lease, or otherwise dispose of, move, relocate, or transfer, whether by sale or
otherwise, any of the Collateral.
6.4 Change Name. Change Obligor's name, business structure, or
identity,
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or add any new fictitious name.
7. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
7.1 If Obligor fails to pay when due and payable or when declared
due and payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the United States
Bankruptcy Code, would have accrued on such amounts), fees and charges due
Foothill, taxes, reimbursement of Foothill Expenses, or otherwise);
7.2 If Obligor fails or neglects to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in this Agreement,
the Guaranty, in any other documents reasonably required by Foothill, or in any
other present or future agreement between Obligor and Foothill;
7.3 If there is a material impairment of the prospect of repayment
of any portion of the Obligations owing to Foothill or a material impairment of
the value or priority of Foothill's security interests in the Collateral;
7.4 If any material portion of Obligor's assets is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes into the
possession of any Judicial Officer or Assignee;
7.5 If an Insolvency Proceeding is commenced by Obligor;
7.6 If an Insolvency Proceeding is commenced against Obligor;
7.7 If Obligor is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
7.8 If a notice of lien, levy, or assessment is filed of record with
respect to any of Obligor's assets by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether choate or
otherwise, upon any of Obligor's assets and the same is not paid on the payment
date thereof;
7.9 If a judgment or other claim becomes a lien or encumbrance upon
any material portion of Obligor's assets;
7.10 If there is a default in any material agreement to which
Obligor is a
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party with third parties resulting in a right by such third parties, whether or
not exercised, to accelerate the maturity of Obligor's indebtedness thereunder;
7.11 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Foothill
by Obligor or any officer, employee, agent, or director of Obligor, or if any
such warranty or representation is withdrawn by any officer or director; or
7.12 If the obligation of any guarantor or other third party under
any Loan Document is limited or terminated by operation of law or by any
guarantor or other third party thereunder, or any guarantor or other third party
becomes the subject of an Insolvency Proceeding.
8. FOOTHILL'S RIGHTS AND REMEDIES
8.1 Rights and Remedies. Upon the occurrence of an Event of Default
Foothill may, at its election, without notice of its election and without
demand, do any one or more of the following, all of which are authorized by
Obligor:
8.1.1 Declare all Obligations, whether evidenced by this
Agreement, the Guaranty, or by any other documents reasonably required by
Foothill, or otherwise, immediately due and payable;
8.1.2 Terminate this Agreement and any other documents
reasonably required by Foothill as to any future liability or obligation of
Foothill, but without affecting Foothill's rights and security interest in the
Collateral and without affecting the Obligations;
8.1.3 Without notice to or demand upon Obligor or any guarantor,
make such payments and do such acts as Foothill considers necessary or
reasonable to protect its security interest in the Collateral. Obligor agrees to
assemble the Collateral if Foothill so requires, and to make the Collateral
available to Foothill as Foothill may designate. Obligor authorizes Foothill to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien that in Foothill's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Obligor's owned
premises, Obligor hereby grants Foothill a license to enter into possession of
such premises and to occupy the same, without charge, for up to one hundred
twenty (120) days in order to exercise any of Foothill's rights or remedies
provided herein, at law, in equity, or otherwise;
8.1.4 Without notice to Obligor (such notice being expressly
waived) set off and apply to the Obligations any and all (i) balances and
deposits of Obligor
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held by Foothill, or (ii) indebtedness at any time owing to or for the credit or
the account of Obligor held by Foothill;
8.1.5 Store, maintain, repair, prepare for sale, advertise for
sale, and sell (in the manner provided for herein) the Collateral. Foothill is
hereby granted a license or other right to use, without charge, Obligor's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, advertising for sale and
selling any Collateral and Obligor's rights under all licenses and all franchise
agreements shall inure to Foothill's benefit;
8.1.6 Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Obligor's premises) as Foothill
determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale;
8.1.7 Foothill may credit bid and purchase any of the Collateral
at any public sale. Foothill shall give notice of the disposition of the
Collateral as follows:
(1) Foothill shall give Obligor and each holder of a
security interest in the Collateral who has filed with Foothill a written
request for notice, a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some other disposition other than a public
sale is to be made of the Collateral, then the time on or after which the
private sale or other disposition is to be made;
(2) The notice shall be personally delivered or mailed,
postage prepaid, to Obligor as provided in Section 11, at least five (5)
calendar days before the date fixed for the sale, or at least five (5) calendar
days before the date on or after which the private sale or other disposition is
to be made, unless the Collateral is perishable or threatens to decline speedily
in value. Notice to persons other than Obligor claiming an interest in the
Collateral shall be sent to such addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill also
shall give notice of the time and place by publishing a notice one time at least
five (5) calendar days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
8.2 Deficiency; Excess Proceeds. Any deficiency that exists after
disposition of the Collateral as provided above will be paid immediately by
Obligor. Any excess will be returned, without interest and subject to the rights
of third parties, by Foothill to Obligor.
8.3 Remedies Cumulative. Foothill's rights and remedies under this
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Agreement, the other Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by
Foothill of one right or remedy shall be deemed an election, and no waiver by
Foothill of any Event of Default shall be deemed a continuing waiver. No delay
by Foothill shall constitute a waiver, election, or acquiescence by it.
9. TAXES AND EXPENSES REGARDING THE COLLATERAL
Except with respect to Permitted Protests, if Obligor fails to pay
any monies (whether taxes, rents, assessments, insurance premiums, or otherwise)
due to third persons or entities, or fails to make any deposits or furnish any
required proof of payment or deposit, all as required under the terms of this
Agreement, then, to the extent that Foothill determines that such failure by
Obligor could have a material adverse effect on Foothill's interests in the
Collateral, in its discretion and without prior notice to Obligor, Foothill may
do any or all of the following: (a) make payment of the same or any part
thereof; or (b) obtain and maintain insurance policies of the type described in
Section 5.7, and take any action with respect to such policies as Foothill deems
prudent. Any amounts paid or deposited by Foothill shall constitute Foothill
Expenses, shall be immediately charged to Obligor and become additional
Obligations, shall bear interest at the then applicable rate set forth in the
Term Note, and shall be secured by the Collateral. Any payments made by Foothill
shall not constitute an agreement by Foothill to make similar payments in the
future or a waiver by Foothill of any Event of Default under this Agreement.
Foothill need not inquire as to, or contest the validity of, any such expense,
tax, security interest, encumbrance, or lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
10. WAIVERS; INDEMNIFICATION
10.1 Demand; Protest; etc. Obligor waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Foothill on which Obligor may in any way be
liable.
10.2 Foothill's Liability for Equipment. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code, Foothill
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other person. All risk of loss, damage, or destruction of the Collateral
shall be borne by Obligor.
10.3 Indemnification. Obligor agrees to indemnify Foothill and its
officers,
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employees, and agents and hold Foothill harmless against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party, and (b)
all losses in any way suffered, incurred, or paid by Foothill as a result of or
in any way arising out of, following, or consequential to transactions with
Obligor whether under this Agreement, or otherwise. This provision shall survive
the termination of this Agreement.
11. NOTICES
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other agreement entered into in
connection therewith shall be in writing and (except for financial statements
and other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by registered or certified mail,
postage prepaid, return receipt requested, or by prepaid telex, TWX,
telefacsimile, or telegram (with messenger delivery specified) to Obligor or to
Foothill, as the case may be, at its addresses set forth below:
If to Obligor: LEISURE TIME TECHNOLOGY, INC.
1284 Miller Road
Avon, Ohio 44011
Attention: Mr. Alan Johnson
Telecopy No.
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attention: Small Business Lending Division Manager
Telecopy No. 310-477-5853
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 11, other
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or three
(3) calendar days after the deposit thereof in the mail. Obligor acknowledges
and agrees that notices sent by Foothill in connection with Sections 9504 or
9505 of the Code shall be deemed sent when deposited in the mail or transmitted
by telefacsimile or other similar method set forth above.
12. DESTRUCTION OF OBLIGOR'S DOCUMENTS
All documents, agings, or other papers delivered to Foothill may be
destroyed or otherwise disposed of by Foothill four (4) months after they are
delivered to or received by Foothill, unless Obligor requests, in writing, the
return of said documents, schedules, or other
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papers and makes arrangements, at Obligor's expense, for their return.
13. GENERAL PROVISIONS
13.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Obligor and Foothill.
13.2 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and assigns of each of the parties;
provided, however, that Obligor may not assign this Agreement or any rights or
duties hereunder without Foothill's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Foothill
shall release Obligor from its Obligations. Foothill may assign this Agreement
and/or any other documents reasonably required by Foothill and its rights and
duties hereunder and thereunder. Foothill reserves the right to sell, assign,
transfer, negotiate, or grant participations in all or any part of, or any
interest in Foothill's rights and benefits hereunder and/or under any other
documents reasonably required by Foothill. In connection therewith, Foothill may
disclose all documents and information which Foothill now or hereafter may have
relating to Obligor or Obligor's business. To the extent that Foothill assigns
its rights and obligations hereunder and/or under any other documents reasonably
required by Foothill to a third party, Foothill shall thereafter be released
from such assigned obligations to Obligor and such assignment shall effect a
novation between Obligor and such third party.
13.3 Section Headings. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each paragraph applies equally to this entire Agreement.
13.4 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Obligor,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
13.5 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
13.6 Amendments in Writing. This Agreement cannot be changed or
terminated orally. All prior agreements, understandings, representations,
warranties, and negotiations, if any, are merged into this Agreement.
13.7 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed
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and delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.
13.8 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by Obligor or any guarantor of the Obligations or the
transfer by either or both of such parties to Foothill of any property of either
or both of such parties should for any reason subsequently be declared to be
improper under any state or federal law relating to creditors' rights, including
provisions of the United States Bankruptcy Code relating to fraudulent
conveyances, preferences, and other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if Foothill is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that Foothill is required to repay
or restore, and as to all reasonable costs, expenses and attorneys' fees of
Foothill related thereto, the liability of Obligor or such guarantor shall
automatically be revived, reinstated, and restored and shall exist as though
such Voidable Transfer had never been made.
13.9 Integration. This Agreement, together with the Guaranty and
any other documents reasonably required by Foothill, reflects the entire
understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted, modified, or qualified by any other
agreement, oral or written, whether before or after the date hereof.
14. CHOICE OF LAW AND VENUE; JURY TRIAL
WAIVER THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE
OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY. EACH OF OBLIGOR AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 15. OBLIGOR AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS,
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TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY
CLAIMS. OBLIGOR AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed at Los Angeles, California.
LEISURE TIME TECHNOLOGY, INC.,
a Georgia corporation
By: /s/
--------------------------------------
Print Name:
Title:
Accepted and effective this 9th day of October, 1998
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/
-------------------------------
Print Name:
Title:
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SCHEDULE E-1
List of Equipment
(continues on the following pages)
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SCHEDULE P-1
List of Permitted Liens
[NONE]
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EXHIBIT 10.27
CONTINUING GUARANTY
THIS CONTINUING GUARANTY ("Guaranty"), dated as of October 9, 1998, is
executed and delivered by LEISURE TIME TECHNOLOGY, INC., a Georgia corporation
("Guarantor"), in favor of FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), with reference to the following:
RECITALS
A. Leisure Time Cruise Corporation, a Colorado corporation
("Borrower"), and Foothill are, contemporaneously herewith, entering into
certain Loan Documents (as defined below); and
B. In order to induce Foothill to extend financial accommodations to
Borrower pursuant to the Loan Documents, and in consideration thereof, and in
consideration of any loans or other financial accommodations heretofore or
hereafter extended by Foothill to Borrower, whether pursuant to the Loan
Documents or otherwise, Guarantor has agreed to guarantee the Guaranteed
Obligations (defined below).
NOW, THEREFORE, in consideration of the foregoing, Guarantor hereby
agrees, in favor of Foothill, as follows:
1. Definitions and Construction.
(a) Definitions. The following terms, as used in this Guaranty,
shall have the following meanings:
"Bankruptcy Code" means The Bankruptcy Reform Act of 1978 (11
U.S.C. Sections 101-1330), as amended or supplemented from time to time, and any
successor statute, and any and all rules issued or promulgated in connection
therewith.
"Guaranteed Obligations" means any and all obligations,
indebtedness, or liabilities of any kind or character owed by Borrower to
Foothill including all such obligations, indebtedness, or liabilities, whether
for principal, interest (including any interest which, but for the application
of the provisions of the Bankruptcy Code, would have accrued on such amounts),
premium, reimbursement obligations, fees, costs, expenses (including, attorneys'
fees), or indemnity obligations, whether heretofore, now, or hereafter made,
incurred, or created, whether voluntarily or involuntarily made, incurred, or
created, whether secured or unsecured (and if secured, regardless of the nature
or extent of the security), whether absolute or contingent, liquidated or
unliquidated, determined or indeterminate, whether Borrower is liable
individually or jointly with others, and whether recovery is or hereafter
becomes barred by any statute of limitations or otherwise becomes
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unenforceable for any reason whatsoever, including any act or failure to act by
Foothill.
"Loan Documents" shall mean that certain Security Agreement,
of even date herewith, between Foothill and Borrower, that certain Secured
Promissory Note in the principal amount of THREE MILLION DOLLARS ($3,000,000)
issued by Borrower in connection therewith, and those documents, instruments,
and agreements which either now or in the future exist among Borrower,
Guarantor, or any affiliate of Borrower, on the one hand, and Foothill, on the
other hand, and any amendments, modifications, or supplements to any of the
foregoing.
(b) Construction. Unless the context of this Guaranty clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, and the term "including" is not limiting. The
words "hereof," "herein," "hereby," "hereunder," and other similar terms refer
to this Guaranty as a whole and not to any particular provision of this
Guaranty. Any reference herein to any of the Loan Documents includes any and all
alterations, amendments, extensions, modifications, renewals, or supplements
thereto or thereof, as applicable. Neither this Guaranty nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Guarantor,
whether under any rule of construction or otherwise. On the contrary, this
Guaranty has been reviewed by Guarantor, Foothill, and their respective counsel,
and shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of Foothill
and Guarantor.
2. Guaranteed Obligations. Guarantor hereby irrevocably and
unconditionally guarantees to Foothill, as and for its own debt, until final and
indefeasible payment thereof has been made, (a) payment of the Guaranteed
Obligations, in each case when and as the same shall become due and payable,
whether at maturity, pursuant to a mandatory prepayment requirement, by
acceleration, or otherwise; it being the intent of Guarantor that the guaranty
set forth herein shall be a guaranty of payment and not a guaranty of
collection; and (b) the punctual and faithful performance, keeping, observance,
and fulfillment by Borrower of all of the agreements, conditions, covenants, and
obligations of Borrower contained in the Loan Documents.
3. Continuing Guaranty. This Guaranty includes Guaranteed
Obligations arising under successive transactions continuing, compromising,
extending, increasing, modifying, releasing, or renewing the Guaranteed
Obligations, changing the interest rate, payment terms, or other terms and
conditions thereof, or creating new or additional Guaranteed Obligations after
prior Guaranteed Obligations have been satisfied in whole or in part. To the
maximum extent permitted by law, Guarantor hereby waives any right to revoke
this Guaranty as to future indebtedness. If such a revocation is effective
notwithstanding the foregoing waiver, Guarantor acknowledges and agrees that (a)
no such revocation shall be effective until written notice thereof has been
received by Foothill, (b) no such revocation shall apply to any Guaranteed
Obligations in existence on such date (including, any subsequent
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continuation, extension, or renewal thereof, or change in the interest rate,
payment terms, or other terms and conditions thereof), (c) no such revocation
shall apply to any Guaranteed Obligations made or created after such date to the
extent made or created pursuant to a legally binding commitment of Foothill in
existence on the date of such revocation, (d) no payment by Guarantor, Borrower,
or from any other source, prior to the date of such revocation shall reduce the
maximum obligation of Guarantor hereunder, and (e) any payment by Borrower or
from any source other than Guarantor, subsequent to the date of such revocation,
shall first be applied to that portion of the Guaranteed Obligations as to which
the revocation is effective and which are not, therefore, guaranteed hereunder,
and to the extent so applied shall not reduce the maximum obligation of
Guarantor hereunder.
4. Performance Under This Guaranty. In the event that Borrower fails
to make any payment of any Guaranteed Obligations on or before the due date
thereof, or if Borrower shall fail to perform, keep, observe, or fulfill any
other obligation referred to in clause (b) of Section 2 hereof in the manner
provided in the Loan Documents, Guarantor immediately shall cause such payment
to be made or each of such obligations to be performed, kept, observed, or
fulfilled.
5. Primary Obligations. This Guaranty is a primary and original
obligation of Guarantor, is not merely the creation of a surety relationship,
and is an absolute, unconditional, and continuing guaranty of payment and
performance which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity or
irregularity with respect to the Loan Documents. Guarantor agrees that it is
directly, jointly and severally with any other guarantor of the Guaranteed
Obligations, liable to Foothill, that the obligations of Guarantor hereunder are
independent of the obligations of Borrower or any other guarantor, and that a
separate action may be brought against Guarantor whether such action is brought
against Borrower or any other guarantor or whether Borrower or any such other
guarantor is joined in such action. Guarantor agrees that its liability
hereunder shall be immediate and shall not be contingent upon the exercise or
enforcement by Foothill of whatever remedies it may have against Borrower or any
other guarantor, or the enforcement of any lien or realization upon any security
Foothill may at any time possess. Guarantor agrees that any release which may be
given by Foothill to Borrower or any other guarantor shall not release
Guarantor. Guarantor consents and agrees that Foothill shall be under no
obligation to marshal any assets of Borrower or any other guarantor in favor of
Guarantor, or against or in payment of any or all of the Guaranteed Obligations.
6. Waivers.
(a) To the maximum extent permitted by law, Guarantor hereby
waives: (1) notice of acceptance hereof; (2) notice of any loans or other
financial accommodations made or extended under the Loan Documents or the
creation or existence of any Guaranteed Obligations; (3) notice of the amount of
the Guaranteed Obligations, subject, however, to Guarantor's right to make
inquiry of Foothill to ascertain the amount of the
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Guaranteed Obligations at any reasonable time; (4) notice of any adverse change
in the financial condition of Borrower or of any other fact that might increase
Guarantor's risk hereunder; (5) notice of presentment for payment, demand,
protest, and notice thereof as to any promissory notes or other instruments
among the Loan Documents; (6) notice of any event of default under the Loan
Documents; and (7) all other notices (except if such notice is specifically
required to be given to Guarantor hereunder or under any Loan Document to which
Guarantor is a party) and demands to which Guarantor might otherwise be
entitled.
(b) To the maximum extent permitted by law, Guarantor hereby
waives the right by statute or otherwise to require Foothill to institute suit
against Borrower or to exhaust any rights and remedies which Foothill has or may
have against Borrower. In this regard, Guarantor agrees that it is bound to the
payment of all Guaranteed Obligations, whether now existing or hereafter
accruing, as fully as if such Guaranteed Obligations were directly owing to
Foothill by Guarantor. Guarantor further waives any defense arising by reason of
any disability or other defense (other than the defense that the Guaranteed
Obligations shall have been fully and finally performed and indefeasibly paid)
of Borrower or by reason of the cessation from any cause whatsoever of the
liability of Borrower in respect thereof.
(c) To the maximum extent permitted by law, Guarantor hereby
waives: (1) any rights to assert against Foothill any defense (legal or
equitable), set-off, counterclaim, or claim which Guarantor may now or at any
time hereafter have against Borrower or any other party liable to Foothill; (2)
any defense, set-off, counterclaim, or claim, of any kind or nature, arising
directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed Obligations or any
security therefor; (3) any defense based upon or arising out of an election of
remedies by Foothill including any defense based upon an election of remedies by
Foothill under the provisions of Sections 580d and 726 of the California Code of
Civil Procedure, or any similar law of California or any other jurisdiction; (4)
the benefit of any statute of limitations affecting Guarantor's liability
hereunder or the enforcement thereof, and any act which shall defer or delay the
operation of any statute of limitations applicable to the Guaranteed Obligations
shall similarly operate to defer or delay the operation of such statute of
limitations applicable to Guarantor's liability hereunder; (5) all rights and
defenses arising out of an election of remedies by Foothill, even though that
election of remedies, such as nonjudicial foreclosure with respect to security
for the Guaranteed Obligations, has destroyed the Guarantors' rights of
subrogation and reimbursement against Borrower by the operation of Section 580d
of the California Code of Civil Procedure or otherwise; and (6) all rights and
defenses that Guarantor may have because the Guaranteed Obligations are secured
by real property or an estate for years. As to clause "(6)" of this paragraph
6(c), this waiver means, among other things: (i) Foothill may collect from
Guarantor without first foreclosing on any real or personal property collateral
pledged by Borrower; and (ii) if Foothill forecloses on any real property (or an
estate for years) pledged by Borrower: (A) the amount of the Guaranteed
Obligations may be reduced only by the price for which that collateral is sold
at the foreclosure sale, even if the
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collateral is worth more than the sale price, and (B) Foothill may collect from
Guarantor even if Foothill, by foreclosing on the real property collateral, has
destroyed any right Guarantor may have to collect from Borrower. The waiver in
clause "(6)" of this paragraph 6(c) is an unconditional and irrevocable waiver
of any rights and defenses that Guarantor may have because Borrower's debt is
secured by real property or an estate for years. These rights and defenses
include, but are not limited to, any rights or defenses based upon Section 580a,
580b, 580d, or 726 of the California Code of Civil Procedure.
(d) To the maximum extent permitted by law, Guarantor hereby
waives any right of subrogation or reimbursement Guarantor has or may have as
against Borrower with respect to the Guaranteed Obligations. In addition,
Guarantor hereby waives any right to proceed against Borrower, now or hereafter,
for contribution, indemnity, reimbursement, and any other suretyship rights and
claims, whether direct or indirect, liquidated or contingent, whether arising
under express or implied contract or by operation of law, which Guarantor may
now have or hereafter have as against the Borrower with respect to the
Guaranteed Obligations. Guarantor also hereby waives any rights to recourse to
or with respect to any asset of Borrower. Guarantor agrees that in light of the
immediately foregoing waivers, the execution of this Guaranty shall not be
deemed to make Guarantor a "creditor" of Borrower, and that for purposes of
Sections 547 and 550 of the Bankruptcy Code Guarantor shall not be deemed a
"creditor" of Borrower.
(e) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY WAIVES, TO THE MAXIMUM
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHTS, BENEFITS, SANCTIONS, OR DEFENSES
ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE
SECTIONS 2787 TO 2855, INCLUSIVE, CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS
580a, 580b, 580c, 580d, AND 726, AND CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA
CIVIL CODE.
7. Releases. Guarantor consents and agrees that, without notice to or
by Guarantor and without affecting or impairing the obligations of Guarantor
hereunder, Foothill may, by action or inaction:
(a) compromise, settle, extend the duration or the time for the
payment of, or discharge the performance of, or may refuse to or otherwise not
enforce the Loan Documents;
(b) release all or any one or more parties to any one or more of the
Loan Documents or grant other indulgences to Borrower in respect thereof;
(c) amend or modify in any manner and at any time (or from time to
time) any of the Loan Documents;
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(d) increase or decrease at any time (or from time to time) the
amount of the Guaranteed Obligations, the amount or rate of interest applicable
thereto, and/or the amount of fees or other charges imposed in connection
therewith; or
(e) release or substitute any other guarantor, if any, of the
Guaranteed Obligations, or enforce, exchange, release, or waive any security for
the Guaranteed Obligations or any other guaranty of the Guaranteed Obligations,
or any portion thereof.
8. No Election. Foothill shall have the right to seek recourse against
Guarantor to the fullest extent provided for herein, and no election by Foothill
to proceed in one form of action or proceeding, or against any party, or on any
obligation, shall constitute a waiver of Foothill's right to proceed in any
other form of action or proceeding or against other parties unless Foothill has
expressly waived such right in writing. Specifically, but without limiting the
generality of the foregoing, no action or proceeding by Foothill under any
document or instrument evidencing the Guaranteed Obligations shall serve to
diminish the liability of Guarantor under this Guaranty except to the extent
that Foothill finally and unconditionally shall have realized indefeasible
payment by such action or proceeding.
9. Indefeasible Payment. The Guaranteed Obligations shall not be
considered indefeasibly paid for purposes of this Guaranty unless and until all
payments to Foothill are no longer subject to any right on the part of any
person, including Borrower, Borrower as a debtor in possession, or any trustee
(whether appointed under the Bankruptcy Code or otherwise) of Borrower's assets
to invalidate or set aside such payments or to seek to recoup the amount of such
payments or any portion thereof, or to declare same to be fraudulent or
preferential. Until such full and final performance and indefeasible payment of
the Guaranteed Obligations whether by Guarantor or Borrower, Foothill shall have
no obligation whatsoever to transfer or assign its interest in the Loan
Documents to Guarantor. In the event that, for any reason, any portion of such
payments to Foothill is set aside or restored, whether voluntarily or
involuntarily, after the making thereof, then the obligation intended to be
satisfied thereby shall be revived and continued in full force and effect as if
said payment or payments had not been made, and Guarantor shall be liable for
the full amount Foothill is required to repay plus any and all costs and
expenses (including attorneys' fees) paid by Foothill in connection therewith.
10. Financial Condition of Borrower. Guarantor represents and warrants
to Foothill that Guarantor is currently informed of the financial condition of
Borrower and of all other circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the Guaranteed Obligations.
Guarantor further represents and warrants to Foothill that Guarantor has read
and understands the terms and conditions of the Loan Documents. Guarantor hereby
covenants that Guarantor will continue to keep informed of Borrower's financial
condition, the financial condition of other guarantors, if any, and of all other
circumstances which bear upon the risk of nonpayment or nonperformance of the
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Guaranteed Obligations.
11. Subordination. Guarantor hereby agrees that any and all present and
future indebtedness of Borrower owing to Guarantor is postponed in favor of and
subordinated to payment, in full, in cash, of the Guaranteed Obligations. In
this regard, no payment of any kind whatsoever shall be made with respect to
such indebtedness until the Guaranteed Obligations have been indefeasibly paid
in full.
12. Payments; Application. All payments to be made hereunder by
Guarantor shall be made in lawful money of the United States of America at the
time of payment, shall be made in immediately available funds, and shall be made
without deduction (whether for taxes or otherwise) or offset. All payments made
by Guarantor hereunder shall be applied as follows: first, to all costs and
expenses (including attorneys' fees) incurred by Foothill in enforcing this
Guaranty or in collecting the Guaranteed Obligations; second, to all accrued and
unpaid interest, premium, if any, and fees owing to Foothill constituting
Guaranteed Obligations; and third, to the balance of the Guaranteed Obligations.
13. Attorneys' Fees and Costs. Guarantor agrees to pay, on demand, all
reasonable attorneys' fees and all other costs and expenses which may be
incurred by Foothill in the enforcement of this Guaranty or in any way arising
out of, or consequential to the protection, assertion, or enforcement of the
Guaranteed Obligations (or any security therefor), whether or not suit is
brought.
14. Indemnification. Guarantor agrees to indemnify Foothill and hold
Foothill harmless against all obligations, demands, or liabilities asserted by
any party and against all losses in any way suffered, incurred, or paid by
Foothill as a result of or in any way arising out of, following, or
consequential to Foothill's transactions with Borrower.
15. Notices. All notices or demands by Guarantor or Foothill to the
other relating to this Guaranty shall be in writing and either personally served
or sent by registered or certified mail, postage prepaid, return receipt
requested, or by prepaid telex, telefacsimile, or telegram, and shall be deemed
to be given for purposes of this Guaranty on the day that such writing is
received by the party to whom it is sent. Unless otherwise specified in a notice
sent or delivered in accordance with the provisions of this section, such
writing shall be sent, if to Guarantor, at Guarantor's address set forth on the
signature page hereof, and if to Foothill, then as follows:
Foothill Capital Corporation
11111 Santa Monica Boulevard, Suite 1500
Los Angeles, California 90025-3333
Attn: Small Business Lending Division
16. Cumulative Remedies. No remedy under this Guaranty or under any
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Loan Document is intended to be exclusive of any other remedy, but each and
every remedy shall be cumulative and in addition to any and every other remedy
given hereunder or under any Loan Document, and those provided by law or in
equity. No delay or omission by Foothill to exercise any right under this
Guaranty shall impair any such right nor be construed to be a waiver thereof. No
failure on the part of Foothill 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.
17. Books and Records. Guarantor agrees that Foothill's books and
records showing the account between Foothill and Borrower shall be admissible in
any action or proceeding and shall be binding upon Guarantor for the purpose of
establishing the items therein set forth and shall constitute prima facie proof
thereof.
18. Severability of Provisions. Any provision of this Guaranty which is
prohibited or unenforceable under applicable law, shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
19. Entire Agreement; Amendments. This Guaranty constitutes the entire
agreement between Guarantor and Foothill pertaining to the subject matter
contained herein. This Guaranty may not be altered, amended, or modified, nor
may any provision hereof be waived or noncompliance therewith consented to,
except by means of a writing executed by both Guarantor and Foothill. Any such
alteration, amendment, modification, waiver, or consent shall be effective only
to the extent specified therein and for the specific purpose for which given. No
course of dealing and no delay or waiver of any right or default under this
Guaranty shall be deemed a waiver of any other, similar or dissimilar right or
default or otherwise prejudice the rights and remedies hereunder.
20. Successors and Assigns. The death of Guarantor shall not terminate
this Guaranty. This Guaranty shall be binding upon Guarantor's heirs, executors,
administrators, representatives, successors, and assigns and shall inure to the
benefit of the successors and assigns of Foothill; provided, however, Guarantor
shall not assign this Guaranty or delegate any of its duties hereunder without
Foothill's prior written consent. Any assignment without the consent of Foothill
shall be absolutely void. In the event of any assignment or other transfer of
rights by Foothill, the rights and benefits herein conferred upon Foothill shall
automatically extend to and be vested in such assignee or other transferee.
21. Separate Property. Any married individual who signs this Guaranty
in his or her individual capacity hereby expressly agrees that recourse may be
had against his or her separate property for all Guaranteed Obligations
hereunder.
22. Choice of Law and Venue. THE VALIDITY OF THIS GUARANTY, ITS
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS
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OF GUARANTOR AND FOOTHILL, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
GUARANTOR HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS GUARANTY SHALL BE TRIED AND DETERMINED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, OR, AT THE
SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR
HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION.
23. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION,
CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS GUARANTY, OR IN ANY WAY CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
DEALINGS OF GUARANTOR AND FOOTHILL WITH RESPECT TO THIS GUARANTY, OR THE
TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO THE MAXIMUM
EXTENT PERMITTED BY LAW, GUARANTOR HEREBY AGREES THAT ANY SUCH ACTION, CAUSE OF
ACTION, CLAIM, DEMAND, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A
JURY AND THAT FOOTHILL MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY
COURT OR OTHER TRIBUNAL AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR TO THE
WAIVER OF ITS RIGHT TO TRIAL BY JURY.
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IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date set forth in the first paragraph hereof.
LEISURE TIME TECHNOLOGY, INC.,
a Georgia corporation
By: /s/
-------------------------------------
Print Name:
Title:
Guarantor's
Address: 4258 Communications Drive
Norcross, Georgia 30093
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EXHIBIT 10.28
CONTINUING GUARANTY
THIS CONTINUING GUARANTY ("Guaranty"), dated as of October 9,
1998, is executed and delivered by LEISURE TIME CASINOS & RESORTS, INC., a
Colorado corporation ("Guarantor"), in favor of FOOTHILL CAPITAL CORPORATION, a
California corporation ("Foothill"), with reference to the following:
RECITALS
A. Leisure Time Cruise Corporation, a Colorado corporation
("Borrower"), and Foothill are, contemporaneously herewith, entering into
certain Loan Documents (as defined below); and
B. In order to induce Foothill to extend financial
accommodations to Borrower pursuant to the Loan Documents, and in consideration
thereof, and in consideration of any loans or other financial accommodations
heretofore or hereafter extended by Foothill to Borrower, whether pursuant to
the Loan Documents or otherwise, Guarantor has agreed to guarantee the
Guaranteed Obligations (defined below).
NOW, THEREFORE, in consideration of the foregoing, Guarantor
hereby agrees, in favor of Foothill, as follows:
1. Definitions and Construction.
(a) Definitions. The following terms, as used in
this Guaranty, shall have the following meanings:
"Bankruptcy Code" means The Bankruptcy
Reform Act of 1978 (11 U.S.C. Sections 101-1330), as amended or supplemented
from time to time, and any successor statute, and any and all rules issued or
promulgated in connection therewith.
"Guaranteed Obligations" means any and all
obligations, indebtedness, or liabilities of any kind or character owed by
Borrower to Foothill including all such obligations, indebtedness, or
liabilities, whether for principal, interest (including any interest which, but
for the application of the provisions of the Bankruptcy Code, would have accrued
on such amounts), premium, reimbursement obligations, fees, costs, expenses
(including, attorneys' fees), or indemnity obligations, whether heretofore, now,
or hereafter made, incurred, or created, whether voluntarily or involuntarily
made, incurred, or created, whether secured or unsecured (and if secured,
regardless of the nature or extent of the security), whether absolute or
contingent, liquidated or unliquidated, determined or indeterminate, whether
Borrower is liable individually or jointly with others, and whether recovery is
or hereafter becomes barred by any statute of limitations or otherwise becomes
unenforceable for any reason whatsoever, including any act or failure to act by
Foothill.
<PAGE> 2
"Loan Documents" shall mean that certain
Security Agreement, of even date herewith, between Foothill and Borrower, that
certain Secured Promissory Note in the principal amount of THREE MILLION DOLLARS
($3,000,000) issued by Borrower in connection therewith, and those documents,
instruments, and agreements which either now or in the future exist among
Borrower, Guarantor, or any affiliate of Borrower, on the one hand, and
Foothill, on the other hand, and any amendments, modifications, or supplements
to any of the foregoing.
(b) Construction. Unless the context of this
Guaranty clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, and the term
"including" is not limiting. The words "hereof," "herein," "hereby,"
"hereunder," and other similar terms refer to this Guaranty as a whole and not
to any particular provision of this Guaranty. Any reference herein to any of the
Loan Documents includes any and all alterations, amendments, extensions,
modifications, renewals, or supplements thereto or thereof, as applicable.
Neither this Guaranty nor any uncertainty or ambiguity herein shall be construed
or resolved against Foothill or Guarantor, whether under any rule of
construction or otherwise. On the contrary, this Guaranty has been reviewed by
Guarantor, Foothill, and their respective counsel, and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of Foothill and Guarantor.
2. Guaranteed Obligations. Guarantor hereby irrevocably and
unconditionally guarantees to Foothill, as and for its own debt, until final and
indefeasible payment thereof has been made, (a) payment of the Guaranteed
Obligations, in each case when and as the same shall become due and payable,
whether at maturity, pursuant to a mandatory prepayment requirement, by
acceleration, or otherwise; it being the intent of Guarantor that the guaranty
set forth herein shall be a guaranty of payment and not a guaranty of
collection; and (b) the punctual and faithful performance, keeping, observance,
and fulfillment by Borrower of all of the agreements, conditions, covenants, and
obligations of Borrower contained in the Loan Documents.
3. Continuing Guaranty. This Guaranty includes Guaranteed
Obligations arising under successive transactions continuing, compromising,
extending, increasing, modifying, releasing, or renewing the Guaranteed
Obligations, changing the interest rate, payment terms, or other terms and
conditions thereof, or creating new or additional Guaranteed Obligations after
prior Guaranteed Obligations have been satisfied in whole or in part. To the
maximum extent permitted by law, Guarantor hereby waives any right to revoke
this Guaranty as to future indebtedness. If such a revocation is effective
notwithstanding the foregoing waiver, Guarantor acknowledges and agrees that (a)
no such revocation shall be effective until written notice thereof has been
received by Foothill, (b) no such revocation shall apply to any Guaranteed
Obligations in existence on such date (including, any subsequent
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continuation, extension, or renewal thereof, or change in the interest rate,
payment terms, or other terms and conditions thereof), (c) no such revocation
shall apply to any Guaranteed Obligations made or created after such date to the
extent made or created pursuant to a legally binding commitment of Foothill in
existence on the date of such revocation, (d) no payment by Guarantor, Borrower,
or from any other source, prior to the date of such revocation shall reduce the
maximum obligation of Guarantor hereunder, and (e) any payment by Borrower or
from any source other than Guarantor, subsequent to the date of such revocation,
shall first be applied to that portion of the Guaranteed Obligations as to which
the revocation is effective and which are not, therefore, guaranteed hereunder,
and to the extent so applied shall not reduce the maximum obligation of
Guarantor hereunder.
4. Performance Under This Guaranty. In the event that Borrower
fails to make any payment of any Guaranteed Obligations on or before the due
date thereof, or if Borrower shall fail to perform, keep, observe, or fulfill
any other obligation referred to in clause (b) of Section 2 hereof in the manner
provided in the Loan Documents, Guarantor immediately shall cause such payment
to be made or each of such obligations to be performed, kept, observed, or
fulfilled.
5. Primary Obligations. This Guaranty is a primary and
original obligation of Guarantor, is not merely the creation of a surety
relationship, and is an absolute, unconditional, and continuing guaranty of
payment and performance which shall remain in full force and effect without
respect to future changes in conditions, including any change of law or any
invalidity or irregularity with respect to the Loan Documents. Guarantor agrees
that it is directly, jointly and severally with any other guarantor of the
Guaranteed Obligations, liable to Foothill, that the obligations of Guarantor
hereunder are independent of the obligations of Borrower or any other guarantor,
and that a separate action may be brought against Guarantor whether such action
is brought against Borrower or any other guarantor or whether Borrower or any
such other guarantor is joined in such action. Guarantor agrees that its
liability hereunder shall be immediate and shall not be contingent upon the
exercise or enforcement by Foothill of whatever remedies it may have against
Borrower or any other guarantor, or the enforcement of any lien or realization
upon any security Foothill may at any time possess. Guarantor agrees that any
release which may be given by Foothill to Borrower or any other guarantor shall
not release Guarantor. Guarantor consents and agrees that Foothill shall be
under no obligation to marshal any assets of Borrower or any other guarantor in
favor of Guarantor, or against or in payment of any or all of the Guaranteed
Obligations.
6. Waivers.
(a) To the maximum extent permitted by law, Guarantor
hereby waives: (1) notice of acceptance hereof; (2) notice of any loans or other
financial accommodations made or extended under the Loan Documents or the
creation or existence of any Guaranteed Obligations; (3) notice of the amount of
the Guaranteed Obligations, subject, however, to Guarantor's right to make
inquiry of Foothill to ascertain the amount of the
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Guaranteed Obligations at any reasonable time; (4) notice of any adverse change
in the financial condition of Borrower or of any other fact that might increase
Guarantor's risk hereunder; (5) notice of presentment for payment, demand,
protest, and notice thereof as to any promissory notes or other instruments
among the Loan Documents; (6) notice of any event of default under the Loan
Documents; and (7) all other notices (except if such notice is specifically
required to be given to Guarantor hereunder or under any Loan Document to which
Guarantor is a party) and demands to which Guarantor might otherwise be
entitled.
(b) To the maximum extent permitted by law, Guarantor
hereby waives the right by statute or otherwise to require Foothill to institute
suit against Borrower or to exhaust any rights and remedies which Foothill has
or may have against Borrower. In this regard, Guarantor agrees that it is bound
to the payment of all Guaranteed Obligations, whether now existing or hereafter
accruing, as fully as if such Guaranteed Obligations were directly owing to
Foothill by Guarantor. Guarantor further waives any defense arising by reason of
any disability or other defense (other than the defense that the Guaranteed
Obligations shall have been fully and finally performed and indefeasibly paid)
of Borrower or by reason of the cessation from any cause whatsoever of the
liability of Borrower in respect thereof.
(c) To the maximum extent permitted by law, Guarantor
hereby waives: (1) any rights to assert against Foothill any defense (legal or
equitable), set-off, counterclaim, or claim which Guarantor may now or at any
time hereafter have against Borrower or any other party liable to Foothill; (2)
any defense, set-off, counterclaim, or claim, of any kind or nature, arising
directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed Obligations or any
security therefor; (3) any defense based upon or arising out of an election of
remedies by Foothill including any defense based upon an election of remedies by
Foothill under the provisions of Sections 580d and 726 of the California Code of
Civil Procedure, or any similar law of California or any other jurisdiction; (4)
the benefit of any statute of limitations affecting Guarantor's liability
hereunder or the enforcement thereof, and any act which shall defer or delay the
operation of any statute of limitations applicable to the Guaranteed Obligations
shall similarly operate to defer or delay the operation of such statute of
limitations applicable to Guarantor's liability hereunder; (5) all rights and
defenses arising out of an election of remedies by Foothill, even though that
election of remedies, such as nonjudicial foreclosure with respect to security
for the Guaranteed Obligations, has destroyed the Guarantors' rights of
subrogation and reimbursement against Borrower by the operation of Section 580d
of the California Code of Civil Procedure or otherwise; and (6) all rights and
defenses that Guarantor may have because the Guaranteed Obligations are secured
by real property or an estate for years. As to clause "(6)" of this paragraph
6(c), this waiver means, among other things: (i) Foothill may collect from
Guarantor without first foreclosing on any real or personal property collateral
pledged by Borrower; and (ii) if Foothill forecloses on any real property (or an
estate for years) pledged by Borrower: (A) the amount of the Guaranteed
Obligations may be reduced only by the price for which that collateral is sold
at the foreclosure sale, even if the
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collateral is worth more than the sale price, and (B) Foothill may collect from
Guarantor even if Foothill, by foreclosing on the real property collateral, has
destroyed any right Guarantor may have to collect from Borrower. The waiver in
clause "(6)" of this paragraph 6(c) is an unconditional and irrevocable waiver
of any rights and defenses that Guarantor may have because Borrower's debt is
secured by real property or an estate for years. These rights and defenses
include, but are not limited to, any rights or defenses based upon Section 580a,
580b, 580d, or 726 of the California Code of Civil Procedure.
(d) To the maximum extent permitted by law, Guarantor
hereby waives any right of subrogation or reimbursement Guarantor has or may
have as against Borrower with respect to the Guaranteed Obligations. In
addition, Guarantor hereby waives any right to proceed against Borrower, now or
hereafter, for contribution, indemnity, reimbursement, and any other suretyship
rights and claims, whether direct or indirect, liquidated or contingent, whether
arising under express or implied contract or by operation of law, which
Guarantor may now have or hereafter have as against the Borrower with respect to
the Guaranteed Obligations. Guarantor also hereby waives any rights to recourse
to or with respect to any asset of Borrower. Guarantor agrees that in light of
the immediately foregoing waivers, the execution of this Guaranty shall not be
deemed to make Guarantor a "creditor" of Borrower, and that for purposes of
Sections 547 and 550 of the Bankruptcy Code Guarantor shall not be deemed a
"creditor" of Borrower.
(e) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR
OTHER PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY WAIVES, TO THE
MAXIMUM EXTENT PERMITTED BY LAW, ANY AND ALL RIGHTS, BENEFITS, SANCTIONS, OR
DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA
CIVIL CODE SECTIONS 2787 TO 2855, INCLUSIVE, CALIFORNIA CODE OF CIVIL PROCEDURE
SECTIONS 580a, 580b, 580c, 580d, AND 726, AND CHAPTER 2 OF TITLE 14 OF THE
CALIFORNIA CIVIL CODE.
7. Releases. Guarantor consents and agrees that, without
notice to or by Guarantor and without affecting or impairing the obligations of
Guarantor hereunder, Foothill may, by action or inaction:
(a) compromise, settle, extend the duration or the time for
the payment of, or discharge the performance of, or may refuse to or otherwise
not enforce the Loan Documents;
(b) release all or any one or more parties to any one or
more of the Loan Documents or grant other indulgences to Borrower in respect
thereof;
(c) amend or modify in any manner and at any time (or from
time to time) any of the Loan Documents;
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(d) increase or decrease at any time (or from time to time)
the amount of the Guaranteed Obligations, the amount or rate of interest
applicable thereto, and/or the amount of fees or other charges imposed in
connection therewith; or
(e) release or substitute any other guarantor, if any, of
the Guaranteed Obligations, or enforce, exchange, release, or waive any security
for the Guaranteed Obligations or any other guaranty of the Guaranteed
Obligations, or any portion thereof.
8. No Election. Foothill shall have the right to seek recourse
against Guarantor to the fullest extent provided for herein, and no election by
Foothill to proceed in one form of action or proceeding, or against any party,
or on any obligation, shall constitute a waiver of Foothill's right to proceed
in any other form of action or proceeding or against other parties unless
Foothill has expressly waived such right in writing. Specifically, but without
limiting the generality of the foregoing, no action or proceeding by Foothill
under any document or instrument evidencing the Guaranteed Obligations shall
serve to diminish the liability of Guarantor under this Guaranty except to the
extent that Foothill finally and unconditionally shall have realized
indefeasible payment by such action or proceeding.
9. Indefeasible Payment. The Guaranteed Obligations shall not
be considered indefeasibly paid for purposes of this Guaranty unless and until
all payments to Foothill are no longer subject to any right on the part of any
person, including Borrower, Borrower as a debtor in possession, or any trustee
(whether appointed under the Bankruptcy Code or otherwise) of Borrower's assets
to invalidate or set aside such payments or to seek to recoup the amount of such
payments or any portion thereof, or to declare same to be fraudulent or
preferential. Until such full and final performance and indefeasible payment of
the Guaranteed Obligations whether by Guarantor or Borrower, Foothill shall have
no obligation whatsoever to transfer or assign its interest in the Loan
Documents to Guarantor. In the event that, for any reason, any portion of such
payments to Foothill is set aside or restored, whether voluntarily or
involuntarily, after the making thereof, then the obligation intended to be
satisfied thereby shall be revived and continued in full force and effect as if
said payment or payments had not been made, and Guarantor shall be liable for
the full amount Foothill is required to repay plus any and all costs and
expenses (including attorneys' fees) paid by Foothill in connection therewith.
10. Financial Condition of Borrower. Guarantor represents and
warrants to Foothill that Guarantor is currently informed of the financial
condition of Borrower and of all other circumstances which a diligent inquiry
would reveal and which bear upon the risk of nonpayment of the Guaranteed
Obligations. Guarantor further represents and warrants to Foothill that
Guarantor has read and understands the terms and conditions of the Loan
Documents. Guarantor hereby covenants that Guarantor will continue to keep
informed of Borrower's financial condition, the financial condition of other
guarantors, if any, and of all other circumstances which bear upon the risk of
nonpayment or nonperformance of the Guaranteed Obligations.
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11. Subordination. Guarantor hereby agrees that any and all
present and future indebtedness of Borrower owing to Guarantor is postponed in
favor of and subordinated to payment, in full, in cash, of the Guaranteed
Obligations. In this regard, no payment of any kind whatsoever shall be made
with respect to such indebtedness until the Guaranteed Obligations have been
indefeasibly paid in full.
12. Payments; Application. All payments to be made hereunder
by Guarantor shall be made in lawful money of the United States of America at
the time of payment, shall be made in immediately available funds, and shall be
made without deduction (whether for taxes or otherwise) or offset. All payments
made by Guarantor hereunder shall be applied as follows: first, to all costs and
expenses (including attorneys' fees) incurred by Foothill in enforcing this
Guaranty or in collecting the Guaranteed Obligations; second, to all accrued and
unpaid interest, premium, if any, and fees owing to Foothill constituting
Guaranteed Obligations; and third, to the balance of the Guaranteed Obligations.
13. Attorneys' Fees and Costs. Guarantor agrees to pay, on
demand, all reasonable attorneys' fees and all other costs and expenses which
may be incurred by Foothill in the enforcement of this Guaranty or in any way
arising out of, or consequential to the protection, assertion, or enforcement of
the Guaranteed Obligations (or any security therefor), whether or not suit is
brought.
14. Indemnification. Guarantor agrees to indemnify Foothill
and hold Foothill harmless against all obligations, demands, or liabilities
asserted by any party and against all losses in any way suffered, incurred, or
paid by Foothill as a result of or in any way arising out of, following, or
consequential to Foothill's transactions with Borrower.
15. Notices. All notices or demands by Guarantor or Foothill
to the other relating to this Guaranty shall be in writing and either personally
served or sent by registered or certified mail, postage prepaid, return receipt
requested, or by prepaid telex, telefacsimile, or telegram, and shall be deemed
to be given for purposes of this Guaranty on the day that such writing is
received by the party to whom it is sent. Unless otherwise specified in a notice
sent or delivered in accordance with the provisions of this section, such
writing shall be sent, if to Guarantor, at Guarantor's address set forth on the
signature page hereof, and if to Foothill, then as follows:
Foothill Capital Corporation
11111 Santa Monica Boulevard, Suite 1500
Los Angeles, California 90025-3333
Attn: Small Business Lending Division
16. Cumulative Remedies. No remedy under this Guaranty or
under any
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Loan Document is intended to be exclusive of any other remedy, but each and
every remedy shall be cumulative and in addition to any and every other remedy
given hereunder or under any Loan Document, and those provided by law or in
equity. No delay or omission by Foothill to exercise any right under this
Guaranty shall impair any such right nor be construed to be a waiver thereof. No
failure on the part of Foothill 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.
17. Books and Records. Guarantor agrees that Foothill's books
and records showing the account between Foothill and Borrower shall be
admissible in any action or proceeding and shall be binding upon Guarantor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof.
18. Severability of Provisions. Any provision of this Guaranty
which is prohibited or unenforceable under applicable law, shall be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
19. Entire Agreement; Amendments. This Guaranty constitutes
the entire agreement between Guarantor and Foothill pertaining to the subject
matter contained herein. This Guaranty may not be altered, amended, or modified,
nor may any provision hereof be waived or noncompliance therewith consented to,
except by means of a writing executed by both Guarantor and Foothill. Any such
alteration, amendment, modification, waiver, or consent shall be effective only
to the extent specified therein and for the specific purpose for which given. No
course of dealing and no delay or waiver of any right or default under this
Guaranty shall be deemed a waiver of any other, similar or dissimilar right or
default or otherwise prejudice the rights and remedies hereunder.
20. Successors and Assigns. The death of Guarantor shall not
terminate this Guaranty. This Guaranty shall be binding upon Guarantor's heirs,
executors, administrators, representatives, successors, and assigns and shall
inure to the benefit of the successors and assigns of Foothill; provided,
however, Guarantor shall not assign this Guaranty or delegate any of its duties
hereunder without Foothill's prior written consent. Any assignment without the
consent of Foothill shall be absolutely void. In the event of any assignment or
other transfer of rights by Foothill, the rights and benefits herein conferred
upon Foothill shall automatically extend to and be vested in such assignee or
other transferee.
21. [RESERVED]
22. Choice of Law and Venue. THE VALIDITY OF THIS GUARANTY,
ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF GUARANTOR
AND FOOTHILL, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE
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STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. TO THE
MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR HEREBY AGREES THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS GUARANTY SHALL BE TRIED AND
DETERMINED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER
COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. TO THE MAXIMUM
EXTENT PERMITTED BY LAW, GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE
TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.
23. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY
LAW, GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION,
CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS GUARANTY, OR IN ANY WAY CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
DEALINGS OF GUARANTOR AND FOOTHILL WITH RESPECT TO THIS GUARANTY, OR THE
TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO THE MAXIMUM
EXTENT PERMITTED BY LAW, GUARANTOR HEREBY AGREES THAT ANY SUCH ACTION, CAUSE OF
ACTION, CLAIM, DEMAND, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A
JURY AND THAT FOOTHILL MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY
COURT OR OTHER TRIBUNAL AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR TO THE
WAIVER OF ITS RIGHT TO TRIAL BY JURY.
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IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty as of the date set forth in the first paragraph hereof.
LEISURE TIME CASINOS & RESORTS, INC.,
a Colorado corporation
By: /s/
Print Name:
Title:
Guarantor's
Address: 4258 Communications Drive
Norcross, Georgia 30093
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EXHIBIT 10.29
CONTINUING GUARANTY
THIS CONTINUING GUARANTY ("Guaranty"), dated as of October 9, 1998, is
executed and delivered by ALAN N. JOHNSON, an individual ("Guarantor"), in
favor of FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"),
with reference to the following:
RECITALS
A. Leisure Time Cruise Corporation, a Colorado corporation
("Borrower"), and Foothill are, contemporaneously herewith, entering into
certain Loan Documents (as defined below); and
B. In order to induce Foothill to extend financial accommodations to
Borrower pursuant to the Loan Documents, and in consideration thereof, and in
consideration of any loans or other financial accommodations heretofore or
hereafter extended by Foothill to Borrower, whether pursuant to the Loan
Documents or otherwise, Guarantor has agreed to guarantee the Guaranteed
Obligations (defined below).
NOW, THEREFORE, in consideration of the foregoing, Guarantor hereby
agrees, in favor of Foothill, as follows:
1. Definitions and Construction.
(a) Definitions. The following terms, as used in this Guaranty,
shall have the following meanings:
"Bankruptcy Code" means The Bankruptcy Reform Act of 1978 (11
U.S.C. Sections 101-1330), as amended or supplemented from time to time, and
any successor statute, and any and all rules issued or promulgated in
connection therewith.
"Guaranteed Obligations" means any and all obligations,
indebtedness, or liabilities of any kind or character owed by Borrower to
Foothill including all such obligations, indebtedness, or liabilities, whether
for principal, interest (including any interest which, but for the application
of the provisions of the Bankruptcy Code, would have accrued on such amounts),
premium, reimbursement obligations, fees, costs, expenses (including,
attorneys' fees), or indemnity obligations, whether heretofore, now, or
hereafter made, incurred, or created, whether voluntarily or involuntarily
made, incurred, or created, whether secured or unsecured (and if secured,
regardless of the nature or extent of the security), whether absolute or
contingent, liquidated or unliquidated, determined or indeterminate, whether
Borrower is liable individually or jointly with others, and whether recovery is
or hereafter becomes barred by any statute of limitations or otherwise becomes
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unenforceable for any reason whatsoever, including any act or failure to act by
Foothill.
"Loan Documents" shall mean that certain Security Agreement,
of even date herewith, between Foothill and Borrower, that certain Secured
Promissory Note in the principal amount of THREE MILLION DOLLARS ($3,000,000)
issued by Borrower in connection therewith, and those documents, instruments,
and agreements which either now or in the future exist among Borrower,
Guarantor, or any affiliate of Borrower, on the one hand, and Foothill, on the
other hand, and any amendments, modifications, or supplements to any of the
foregoing.
(b) Construction. Unless the context of this Guaranty clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, and the term "including" is not limiting.
The words "hereof," "herein," "hereby," "hereunder," and other similar terms
refer to this Guaranty as a whole and not to any particular provision of this
Guaranty. Any reference herein to any of the Loan Documents includes any and
all alterations, amendments, extensions, modifications, renewals, or
supplements thereto or thereof, as applicable. Neither this Guaranty nor any
uncertainty or ambiguity herein shall be construed or resolved against Foothill
or Guarantor, whether under any rule of construction or otherwise. On the
contrary, this Guaranty has been reviewed by Guarantor, Foothill, and their
respective counsel, and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of Foothill and Guarantor.
2. Guaranteed Obligations. Guarantor hereby irrevocably and
unconditionally guarantees to Foothill, as and for its own debt, until final
and indefeasible payment thereof has been made, (a) payment of the Guaranteed
Obligations, in each case when and as the same shall become due and payable,
whether at maturity, pursuant to a mandatory prepayment requirement, by
acceleration, or otherwise; it being the intent of Guarantor that the guaranty
set forth herein shall be a guaranty of payment and not a guaranty of
collection; and (b) the punctual and faithful performance, keeping, observance,
and fulfillment by Borrower of all of the agreements, conditions, covenants,
and obligations of Borrower contained in the Loan Documents. Notwithstanding
anything to the contrary contained herein, the liability of Guarantor under
this Guaranty shall not exceed One Million Dollars ($1,000,000) (exclusive of
liability under any other guaranties executed by Guarantor) (the "Guaranty
Ceiling"). Notwithstanding the Guaranty Ceiling, Foothill may permit the
indebtedness of Borrower to Foothill to exceed the Guaranty Ceiling. Any
payments by Guarantor of any indebtedness of Borrower to Foothill shall not
reduce Guarantor's maximum liability hereunder, unless written notice to that
effect is received by Lender at or prior to the time of payment. Any payments
by Borrower on the Guaranteed Obligations shall not reduce Guarantor's maximum
liability hereunder.
3. Continuing Guaranty. This Guaranty includes Guaranteed Obligations
arising under successive transactions continuing, compromising, extending,
increasing,
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modifying, releasing, or renewing the Guaranteed Obligations, changing the
interest rate, payment terms, or other terms and conditions thereof, or
creating new or additional Guaranteed Obligations after prior Guaranteed
Obligations have been satisfied in whole or in part. To the maximum extent
permitted by law, Guarantor hereby waives any right to revoke this Guaranty as
to future indebtedness. If such a revocation is effective notwithstanding the
foregoing waiver, Guarantor acknowledges and agrees that (a) no such revocation
shall be effective until written notice thereof has been received by Foothill,
(b) no such revocation shall apply to any Guaranteed Obligations in existence
on such date (including, any subsequent continuation, extension, or renewal
thereof, or change in the interest rate, payment terms, or other terms and
conditions thereof), (c) no such revocation shall apply to any Guaranteed
Obligations made or created after such date to the extent made or created
pursuant to a legally binding commitment of Foothill in existence on the date
of such revocation, (d) no payment by Guarantor, Borrower, or from any other
source, prior to the date of such revocation shall reduce the maximum
obligation of Guarantor hereunder, and (e) any payment by Borrower or from any
source other than Guarantor, subsequent to the date of such revocation, shall
first be applied to that portion of the Guaranteed Obligations as to which the
revocation is effective and which are not, therefore, guaranteed hereunder, and
to the extent so applied shall not reduce the maximum obligation of Guarantor
hereunder.
4. Performance Under This Guaranty. In the event that Borrower fails
to make any payment of any Guaranteed Obligations on or before the due date
thereof, or if Borrower shall fail to perform, keep, observe, or fulfill any
other obligation referred to in clause (b) of Section 2 hereof in the manner
provided in the Loan Documents, Guarantor immediately shall cause such payment
to be made or each of such obligations to be performed, kept, observed, or
fulfilled.
5. Primary Obligations. This Guaranty is a primary and original
obligation of Guarantor, is not merely the creation of a surety relationship,
and is an absolute, unconditional, and continuing guaranty of payment and
performance which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity or
irregularity with respect to the Loan Documents. Guarantor agrees that it is
directly, jointly and severally with any other guarantor of the Guaranteed
Obligations, liable to Foothill, that the obligations of Guarantor hereunder
are independent of the obligations of Borrower or any other guarantor, and that
a separate action may be brought against Guarantor whether such action is
brought against Borrower or any other guarantor or whether Borrower or any such
other guarantor is joined in such action. Guarantor agrees that its liability
hereunder shall be immediate and shall not be contingent upon the exercise or
enforcement by Foothill of whatever remedies it may have against Borrower or
any other guarantor, or the enforcement of any lien or realization upon any
security Foothill may at any time possess. Guarantor agrees that any release
which may be given by Foothill to Borrower or any other guarantor shall not
release Guarantor. Guarantor consents and agrees that Foothill shall be under
no obligation to marshal any assets of Borrower or any other guarantor in favor
of Guarantor, or against or in payment of any or all of the Guaranteed
Obligations.
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6. Waivers.
(a) To the maximum extent permitted by law, Guarantor hereby
waives: (1) notice of acceptance hereof; (2) notice of any loans or other
financial accommodations made or extended under the Loan Documents or the
creation or existence of any Guaranteed Obligations; (3) notice of the amount
of the Guaranteed Obligations, subject, however, to Guarantor's right to make
inquiry of Foothill to ascertain the amount of the Guaranteed Obligations at
any reasonable time; (4) notice of any adverse change in the financial
condition of Borrower or of any other fact that might increase Guarantor's risk
hereunder; (5) notice of presentment for payment, demand, protest, and notice
thereof as to any promissory notes or other instruments among the Loan
Documents; (6) notice of any event of default under the Loan Documents; and (7)
all other notices (except if such notice is specifically required to be given
to Guarantor hereunder or under any Loan Document to which Guarantor is a
party) and demands to which Guarantor might otherwise be entitled.
(b) To the maximum extent permitted by law, Guarantor hereby waives
the right by statute or otherwise to require Foothill to institute suit against
Borrower or to exhaust any rights and remedies which Foothill has or may have
against Borrower. In this regard, Guarantor agrees that it is bound to the
payment of all Guaranteed Obligations, whether now existing or hereafter
accruing, as fully as if such Guaranteed Obligations were directly owing to
Foothill by Guarantor. Guarantor further waives any defense arising by reason
of any disability or other defense (other than the defense that the Guaranteed
Obligations shall have been fully and finally performed and indefeasibly paid)
of Borrower or by reason of the cessation from any cause whatsoever of the
liability of Borrower in respect thereof.
(c) To the maximum extent permitted by law, Guarantor hereby
waives: (1) any rights to assert against Foothill any defense (legal or
equitable), set-off, counterclaim, or claim which Guarantor may now or at any
time hereafter have against Borrower or any other party liable to Foothill; (2)
any defense, set-off, counterclaim, or claim, of any kind or nature, arising
directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed Obligations or any
security therefor; (3) any defense based upon or arising out of an election of
remedies by Foothill including any defense based upon an election of remedies
by Foothill under the provisions of Sections 580d and 726 of the California
Code of Civil Procedure, or any similar law of California or any other
jurisdiction; (4) the benefit of any statute of limitations affecting
Guarantor's liability hereunder or the enforcement thereof, and any act which
shall defer or delay the operation of any statute of limitations applicable to
the Guaranteed Obligations shall similarly operate to defer or delay the
operation of such statute of limitations applicable to Guarantor's liability
hereunder; (5) all rights and defenses arising out of an election of remedies
by Foothill, even though that election of remedies, such as nonjudicial
foreclosure with respect to security for the Guaranteed Obligations, has
destroyed the Guarantors' rights of subrogation and reimbursement against
Borrower by the operation of Section 580d of the
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California Code of Civil Procedure or otherwise; and (6) all rights and
defenses that Guarantor may have because the Guaranteed Obligations are secured
by real property or an estate for years. As to clause "(6)" of this paragraph
6(c), this waiver means, among other things: (i) Foothill may collect from
Guarantor without first foreclosing on any real or personal property collateral
pledged by Borrower; and (ii) if Foothill forecloses on any real property (or
an estate for years) pledged by Borrower: (A) the amount of the Guaranteed
Obligations may be reduced only by the price for which that collateral is sold
at the foreclosure sale, even if the collateral is worth more than the sale
price, and (B) Foothill may collect from Guarantor even if Foothill, by
foreclosing on the real property collateral, has destroyed any right Guarantor
may have to collect from Borrower. The waiver in clause "(6)" of this paragraph
6(c) is an unconditional and irrevocable waiver of any rights and defenses that
Guarantor may have because Borrower's debt is secured by real property or an
estate for years. These rights and defenses include, but are not limited to,
any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the
California Code of Civil Procedure.
(d) To the maximum extent permitted by law, Guarantor hereby waives
any right of subrogation or reimbursement Guarantor has or may have as against
Borrower with respect to the Guaranteed Obligations. In addition, Guarantor
hereby waives any right to proceed against Borrower, now or hereafter, for
contribution, indemnity, reimbursement, and any other suretyship rights and
claims, whether direct or indirect, liquidated or contingent, whether arising
under express or implied contract or by operation of law, which Guarantor may
now have or hereafter have as against the Borrower with respect to the
Guaranteed Obligations. Guarantor also hereby waives any rights to recourse to
or with respect to any asset of Borrower. Guarantor agrees that in light of the
immediately foregoing waivers, the execution of this Guaranty shall not be
deemed to make Guarantor a "creditor" of Borrower, and that for purposes of
Sections 547 and 550 of the Bankruptcy Code Guarantor shall not be deemed a
"creditor" of Borrower.
(e) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY WAIVES, TO THE MAXIMUM
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHTS, BENEFITS, SANCTIONS, OR DEFENSES
ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE
SECTIONS 2787 TO 2855, INCLUSIVE, CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS
580a, 580b, 580c, 580d, AND 726, AND CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA
CIVIL CODE.
7. Releases. Guarantor consents and agrees that, without notice to or
by Guarantor and without affecting or impairing the obligations of Guarantor
hereunder, Foothill may, by action or inaction:
(a) compromise, settle, extend the duration or the time for the
payment of, or discharge the performance of, or may refuse to or otherwise not
enforce
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the Loan Documents;
(b) release all or any one or more parties to any one or more of
the Loan Documents or grant other indulgences to Borrower in respect thereof;
(c) amend or modify in any manner and at any time (or from time to
time) any of the Loan Documents;
(d) increase or decrease at any time (or from time to time) the
amount of the Guaranteed Obligations, the amount or rate of interest applicable
thereto, and/or the amount of fees or other charges imposed in connection
therewith; or
(e) release or substitute any other guarantor, if any, of the
Guaranteed Obligations, or enforce, exchange, release, or waive any security
for the Guaranteed Obligations or any other guaranty of the Guaranteed
Obligations, or any portion thereof.
8. No Election. Foothill shall have the right to seek recourse against
Guarantor to the fullest extent provided for herein, and no election by
Foothill to proceed in one form of action or proceeding, or against any party,
or on any obligation, shall constitute a waiver of Foothill's right to proceed
in any other form of action or proceeding or against other parties unless
Foothill has expressly waived such right in writing. Specifically, but without
limiting the generality of the foregoing, no action or proceeding by Foothill
under any document or instrument evidencing the Guaranteed Obligations shall
serve to diminish the liability of Guarantor under this Guaranty except to the
extent that Foothill finally and unconditionally shall have realized
indefeasible payment by such action or proceeding.
9. Indefeasible Payment. The Guaranteed Obligations shall not be
considered indefeasibly paid for purposes of this Guaranty unless and until all
payments to Foothill are no longer subject to any right on the part of any
person, including Borrower, Borrower as a debtor in possession, or any trustee
(whether appointed under the Bankruptcy Code or otherwise) of Borrower's assets
to invalidate or set aside such payments or to seek to recoup the amount of
such payments or any portion thereof, or to declare same to be fraudulent or
preferential. Until such full and final performance and indefeasible payment of
the Guaranteed Obligations whether by Guarantor or Borrower, Foothill shall
have no obligation whatsoever to transfer or assign its interest in the Loan
Documents to Guarantor. In the event that, for any reason, any portion of such
payments to Foothill is set aside or restored, whether voluntarily or
involuntarily, after the making thereof, then the obligation intended to be
satisfied thereby shall be revived and continued in full force and effect as if
said payment or payments had not been made, and Guarantor shall be liable for
the full amount Foothill is required to repay plus any and all costs and
expenses (including attorneys' fees) paid by Foothill in connection therewith.
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10. Financial Condition of Borrower. Guarantor represents and warrants
to Foothill that Guarantor is currently informed of the financial condition of
Borrower and of all other circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the Guaranteed Obligations.
Guarantor further represents and warrants to Foothill that Guarantor has read
and understands the terms and conditions of the Loan Documents. Guarantor
hereby covenants that Guarantor will continue to keep informed of Borrower's
financial condition, the financial condition of other guarantors, if any, and
of all other circumstances which bear upon the risk of nonpayment or
nonperformance of the Guaranteed Obligations.
11. Subordination. Guarantor hereby agrees that any and all present
and future indebtedness of Borrower owing to Guarantor is postponed in favor of
and subordinated to payment, in full, in cash, of the Guaranteed Obligations.
In this regard, no payment of any kind whatsoever shall be made with respect to
such indebtedness until the Guaranteed Obligations have been indefeasibly paid
in full.
12. Payments; Application. All payments to be made hereunder by
Guarantor shall be made in lawful money of the United States of America at the
time of payment, shall be made in immediately available funds, and shall be
made without deduction (whether for taxes or otherwise) or offset. All payments
made by Guarantor hereunder shall be applied as follows: first, to all costs
and expenses (including attorneys' fees) incurred by Foothill in enforcing this
Guaranty or in collecting the Guaranteed Obligations; second, to all accrued
and unpaid interest, premium, if any, and fees owing to Foothill constituting
Guaranteed Obligations; and third, to the balance of the Guaranteed
Obligations.
13. Attorneys' Fees and Costs. Guarantor agrees to pay, on demand, all
reasonable attorneys' fees and all other costs and expenses which may be
incurred by Foothill in the enforcement of this Guaranty or in any way arising
out of, or consequential to the protection, assertion, or enforcement of the
Guaranteed Obligations (or any security therefor), whether or not suit is
brought.
14. Indemnification. Guarantor agrees to indemnify Foothill and hold
Foothill harmless against all obligations, demands, or liabilities asserted by
any party and against all losses in any way suffered, incurred, or paid by
Foothill as a result of or in any way arising out of, following, or
consequential to Foothill's transactions with Borrower.
15. Notices. All notices or demands by Guarantor or Foothill to the
other relating to this Guaranty shall be in writing and either personally
served or sent by registered or certified mail, postage prepaid, return receipt
requested, or by prepaid telex, telefacsimile, or telegram, and shall be deemed
to be given for purposes of this Guaranty on the day that such writing is
received by the party to whom it is sent. Unless otherwise specified in a
notice sent or delivered in accordance with the provisions of this section,
such writing shall be sent, if to Guarantor, at Guarantor's address set forth
on the signature page hereof, and if to Foothill,
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then as follows:
Foothill Capital Corporation
11111 Santa Monica Boulevard, Suite 1500
Los Angeles, California 90025-3333
Attn: Small Business Lending Division
16. Cumulative Remedies. No remedy under this Guaranty or under any
Loan Document is intended to be exclusive of any other remedy, but each and
every remedy shall be cumulative and in addition to any and every other remedy
given hereunder or under any Loan Document, and those provided by law or in
equity. No delay or omission by Foothill to exercise any right under this
Guaranty shall impair any such right nor be construed to be a waiver thereof.
No failure on the part of Foothill 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.
17. Books and Records. Guarantor agrees that Foothill's books and
records showing the account between Foothill and Borrower shall be admissible
in any action or proceeding and shall be binding upon Guarantor for the purpose
of establishing the items therein set forth and shall constitute prima facie
proof thereof.
18. Severability of Provisions. Any provision of this Guaranty which
is prohibited or unenforceable under applicable law, shall be ineffective to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
19. Entire Agreement; Amendments. This Guaranty constitutes the entire
agreement between Guarantor and Foothill pertaining to the subject matter
contained herein. This Guaranty may not be altered, amended, or modified, nor
may any provision hereof be waived or noncompliance therewith consented to,
except by means of a writing executed by both Guarantor and Foothill. Any such
alteration, amendment, modification, waiver, or consent shall be effective only
to the extent specified therein and for the specific purpose for which given.
No course of dealing and no delay or waiver of any right or default under this
Guaranty shall be deemed a waiver of any other, similar or dissimilar right or
default or otherwise prejudice the rights and remedies hereunder.
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20. Successors and Assigns. The death of Guarantor shall not terminate
this Guaranty. This Guaranty shall be binding upon Guarantor's heirs,
executors, administrators, representatives, successors, and assigns and shall
inure to the benefit of the successors and assigns of Foothill; provided,
however, Guarantor shall not assign this Guaranty or delegate any of its duties
hereunder without Foothill's prior written consent. Any assignment without the
consent of Foothill shall be absolutely void. In the event of any assignment or
other transfer of rights by Foothill, the rights and benefits herein conferred
upon Foothill shall automatically extend to and be vested in such assignee or
other transferee.
21. Separate Property. Any married individual who signs this Guaranty
in his or her individual capacity hereby expressly agrees that recourse may be
had against his or her separate property for all Guaranteed Obligations
hereunder.
22. Choice of Law and Venue. THE VALIDITY OF THIS GUARANTY, ITS
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF GUARANTOR AND
FOOTHILL, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR HEREBY
AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS GUARANTY
SHALL BE TRIED AND DETERMINED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN
THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, OR, AT THE SOLE OPTION OF
FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR HEREBY
EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION.
23. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION,
CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS GUARANTY, OR IN ANY WAY CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
DEALINGS OF GUARANTOR AND FOOTHILL WITH RESPECT TO THIS GUARANTY, OR THE
TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO THE MAXIMUM
EXTENT PERMITTED BY LAW, GUARANTOR HEREBY AGREES THAT ANY SUCH ACTION, CAUSE OF
ACTION, CLAIM, DEMAND, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT
A JURY AND THAT FOOTHILL MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH
ANY COURT OR OTHER TRIBUNAL AS WRITTEN EVIDENCE OF
9
<PAGE> 10
THE CONSENT OF GUARANTOR TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
10
<PAGE> 11
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date set forth in the first paragraph hereof.
/s/ Alan N. Johnson
--------------------------------------
Alan N. Johnson, individually
Guarantor's
Address:
11
<PAGE> 1
EXHIBIT 10.30
PROMISSORY NOTE
December 17, 1998
FOR VALUE RECEIVED, LEISURE BELLE CRUISE L.L.C. ("Maker") promises to
pay to the order of General Electric Capital Corporation or any subsequent
holder hereof (each, a "Payee") at its office located at 44 Old Ridgebury Road,
Danbury, Connecticut 06810-5105, or at such other place as Payee may designate,
the principal sum of One Million Five Hundred Thousand and 00/100 Dollars
($1,500,000.00), with interest thereon, from the date hereof through and
including the dates of payment, at a fixed interest rate of 8.90% per annum,
payable in arrears, to be paid in lawful money of the United States and in
immediately available funds, in fifty-four (54) consecutive monthly
installments (each a "Periodic Installment") as hereinafter set forth. The
first Periodic Installment shall be due and payable on January 22, 1999, and
the following Periodic Installments shall be due and payable on the same day of
each succeeding month thereafter (each, a "Payment Date"). Such Periodic
Installments shall be calculated on the basis of a 360-day year, twelve 30-day
months. Each payment may, at the option of the Payee, be calculated and applied
on an assumption that such payment would be made on its due date. The first six
(6) Periodic Installments shall be in the amount of all accrued and unpaid
interest only. The next forty-eight (48) Periodic Installments shall each be in
an amount equal to the amount of $37,256.38 each.
Unless sooner paid, the entire unpaid principal sum, together with all
accrued interest thereon, shall be due and payable in full on June 22, 2003.
The acceptance by Payee of any payment which is less than payment in
full of all amounts due and owing at such time as set forth above shall not
constitute a waiver of Payee's right to receive payment in full at such time or
at any prior or subsequent time.
The Maker hereby expressly authorizes the Payee to insert the date
value is actually given in the blank space on the face hereof and on all
related documents pertaining hereto.
This Note is the promissory note referred to in and issued pursuant to
that certain Loan and Security Agreement dated of even date herewith (the "Loan
Agreement"), between Maker and Payee. The Loan Agreement and all documents
executed pursuant thereto are hereinafter collectively referred to as the "Loan
Documents".
This Note is secured by certain collateral described in the Loan
Documents.
Time is of the essence hereof. If any Periodic Installment or any
other sum due under this Note or the Loan Documents is not received within ten
(10) days after the applicable due date, the Maker agrees to pay, in addition
to the amount of each such installment or other sum, a late payment charge of
five percent (5%) of said installment or other sum, in no event to exceed the
maximum rate allowed by law. In the event that (i) Maker fails to make payment
of any amount as and when due hereunder; or (ii) Maker is in default under or
fails to perform under any term or condition contained in the Loan Documents,
then the entire principal sum remaining unpaid, together with all interest
thereon and any other sum payable under this Note or the Loan Documents, at the
election of Payee,
<PAGE> 2
shall immediately become due and payable, with interest thereon at the lesser
of 11.90% per annum or the highest rate not prohibited by New York law from the
date of such accelerated maturity until paid in full (both before and after any
judgment).
The Note shall be subject to mandatory prepayment in the event that
the Vessel which secures the Maker's obligations hereunder is sold or sustains
a Total Loss (as such terms are defined in the Loan Documents). In addition,
the Maker shall have the right to prepay the Note in whole but not in part upon
thirty (30) days' prior written notice to the Payee, by paying to the Payee the
remaining unpaid principal balance due hereunder, together with all accrued
interest thereon and a Prepayment Premium equal to two percent (2.0%) of the
principal amount being prepaid.
It is the intention of the parties hereto to comply with the
applicable usury laws; accordingly, it is agreed that, notwithstanding any
provisions contained herein or in the Loan Documents to the contrary, in no
event shall this Note or any of the Loan Documents require the payment or
permit the collection of interest in excess of the maximum rate allowed by
applicable law. If any such excess interest is contracted for, charged or
received under this Note or any of the other Loan Documents, or in the event
that all of the principal balance shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, charged or received under
this Note or any of the other Loan Documents on the principal balance shall
exceed the maximum rate of interest allowed by applicable law, then in such
event (a) the provisions of this paragraph shall govern and control, (b)
neither Maker nor any other person or entity now or hereafter liable for the
payment hereof shall be obligated to pay the rate of such interest to the
extent that it is in excess of the maximum rate of interest allowed by
applicable law, (c) any such excess which may have been collected shall be
either applied as a credit against the then unpaid principal balance or
refunded to Maker, at the option of the Payee, and (d) the effective rate of
interest shall be automatically reduced to the maximum rate allowed under the
applicable law as now or hereafter construed by the courts having jurisdiction
thereof. It is further agreed that without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or received under
this Note or any of the other Loan Documents which are made for the purpose of
determining whether such rate exceeds the maximum lawful contract rate, shall
be made, to the extent permitted by applicable law, by amortizing, prorating,
allocating and spreading in equal parts during the period of the full stated
term of the indebtedness evidenced hereby, all interest at any time contracted
for, charged or received from Maker or otherwise by Payee in connection with
such indebtedness; provided, however, that if any applicable state law is
amended or the law of the United States of America preempts any applicable
state law, so that it becomes lawful for the Payee to receive a greater
interest per annum rate than is presently allowed, the Maker agrees that, on
the effective date of such amendment or preemption, as the case may be, the
lawful maximum rate hereunder shall be increased to the maximum rate per annum
allowed by the amended state law or the law of the United States of America.
The Maker and all sureties, endorsers, guarantors or any others (each
such person, other than the Maker, an "Obligor") who may at any time become
liable for the payment hereof jointly and severally consent hereby to any and
all extensions of time, renewals, waivers or modifications of, and all
substitutions or releases of, security or of any party primarily or secondarily
liable on this Note or any of the other Loan Documents or any term and
provision of them, which may be made, granted or consented to by Payee, and
agree that suit may be brought and maintained against any one or more
2
<PAGE> 3
of them, at the election of Payee without joinder of any other as a party
thereto, and that Payee shall not be required first to foreclose, proceed
against, or exhaust any security hereof to enforce payment of this Note. The
Maker and each Obligor hereby waive presentment, demand for payment, notice of
nonpayment, protest, notice of protest, notice of dishonor, and all other
notices in connection herewith, as well as filing of suit and (if permitted by
law) diligence in collecting the Note or enforcing any of the security
therefor. The Maker hereby agrees to pay all expenses incurred by the Payee in
collection of all sums due hereunder, including the Payee's reasonable
attorneys' fees. Maker and each Obligor agree that attorneys' fees not in
excess of twenty percent (20%) of the amount then due shall be deemed
reasonable.
THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHT TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR
INDIRECTLY, THIS NOTE, ANY OF THE LOAN DOCUMENTS, ANY DEALINGS BETWEEN MAKER
AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED
TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER
AND PAYEE. The scope of this waiver is intended to be all encompassing of any
and all disputes that may be filed in any court (including, without limitation,
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims). THIS WAIVER IS IRREVOCABLE WITHOUT THE WRITTEN CONSENT
OF THE MAKER AND PAYEE, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE, ANY UNRELATED
DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION
OR ANY RELATED TRANSACTION. In the event of litigation, this Note may be filed
as a written consent to a trial by the court.
This Note together with the other Loan Documents constitute the entire
agreements of the Maker and Payee with respect to the subject matter hereof and
supersedes all prior understandings, agreements and representations, express or
implied.
No variation or modification of this Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an
authorized representative of Maker and Payee. Any such waiver, consent,
modification or change shall be effective only in the specific instance and for
the specific purpose given.
Any provision in this Note or any of the other Loan Documents which is
in conflict with any statute, law or applicable rule shall be deemed omitted,
modified or altered to conform thereto.
WITNESS: LEISURE BELLE CRUISE L.L.C.
By: LEISURE TIME CRUISE CORPORATION,
Its sole member
By: /s/
--------------------------------
3
<PAGE> 1
EXHIBIT 10.31
$1,500,000
LOAN AND SECURITY AGREEMENT
BETWEEN
GENERAL ELECTRIC CAPITAL CORPORATION,
the Lender,
AND
LEISURE BELLE CRUISE L.L.C.
the Borrower,
GUARANTEED BY
LEISURE TIME TECHNOLOGY, INC.,
LEISURE LADY CRUISE CORP.
AND
LEISURE TIME CASINOS & RESORTS, INC.
the Guarantors.
December 17, 1998
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C> <C>
Section 1.01. Certain Defined Terms .............................1
Section l.02. Computation of Time Periods .......................8
ARTICLE II
AGREEMENT TO MAKE THE LOAN;
DRAWDOWN AND REPAYMENT PROVISIONS
Section 2.01. Agreement to Make Loan ............................9
Section 2.02. Drawdown Procedures................................9
Section 2.03. Advance of Amount in Escrow Account ...............9
Section 2.04. The Note .........................................10
Section 2.05. Interest Rate.....................................10
Section 2.06. Prepayments.......................................10
Section 2.07. [Intentionally Omitted]
Section 2.08. Payments and Computations ........................10
Section 2.09. Interest on Overdue Amounts, etc. ...............11
ARTICLE III
GUARANTY
Section 3.01. Guaranty, etc.....................................11
ARTICLE IV
SECURITY
Section 4.01. Vessel............................................11
Section 4.02. Other Personal Property...........................12
ARTICLE V
CONDITIONS PRECEDENT
Section 5.01. Conditions Precedent ............................13
</TABLE>
i
<PAGE> 3
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C> <C>
Section 6.01. Representations and Warranties...................14
ARTICLE VII
GENERAL COVENANTS OF BORROWER
Section 7.01. Affirmative Covenants............................18
Section 7.02. Negative Covenants...............................25
ARTICLE VIII
EVENTS OF DEFAULT; REMEDES
Section 8.01. Events of Default, Remedies, etc. ...............27
ARTICLE IX
MISCELLANEOUS
Section 9.01. Amendments, etc..................................31
Section 9.02. Notices, etc. ..................................31
Section 9.03. GOVERNING LAW. .................................32
Section 9.04. Service of Process and Consent to Jurisdiction;
Waiver of Immunity............................32
Section 9.05. No Remedy Exclusive..............................33
Section 9.06. Payment of Costs.................................33
Section 9.07. Further Assurances...............................33
Section 9.08. Counterparts.....................................34
Section 9.09. Headings.........................................34
Section 9.10. Severability.....................................34
Section 9.11. Survival.........................................34
</TABLE>
EXHIBIT A - Form of Earnings Assignment
EXHIBIT B - Form of First Preferred Mortgage
ii
<PAGE> 4
EXHIBIT C - Form of Guaranty Agreement
EXHIBIT D - Form of Insurances Assignment
EXHIBIT E - Form of Promissory Note
EXHIBIT F - Form of Trademark Security Agreement
Appendix A - Form of Drawdown Notice
Schedule 1 - Description of Additional Collateral
ii
<PAGE> 5
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made this 4th
day of December, 1998, by and between GENERAL ELECTRIC CAPITAL CORPORATION, a
New York corporation ("GE Capital"), and LEISURE BELLE CRUISE L.L.C., a
Colorado limited liability company (the "Borrower").
RECITALS:
The Borrower has applied to GE Capital for a loan in the principal
amount of $1,500,000, the proceeds of which will be used (a) to finance a
portion of the cost to acquire and outfit the motor vessel named BILOX1 BELLE,
Official No. 985792 (the "Vessel") duly documented in the name of the Borrower,
and (b) to pay for certain additional renovations and improvements to the
Vessel, and for no other purposes.
As security for said loan, the Borrower proposes to grant to GE
Capital, among other things, a first preferred mortgage on the Vessel and a
first priority security interest in (a) all non-gaming equipment and other
personal property used in connection with the operation of the Vessel and (b)
all earnings, insurances and requisition compensation of the Vessel.
As inducement to GE Capital to make the loan to the Borrower, Leisure
Time Technology, Inc., Leisure Lady Cruise Corp., and Leisure Time Casinos &
Resorts, Inc., each have agreed unconditionally and irrevocably to guarantee
all obligations of the Borrower to GE Capital as set forth in this Agreement
and in each of the other documents now or hereafter executed, evidencing,
guaranteeing or securing the loan.
GE Capital is willing to make the requested loan to the Borrower, upon
the conditions and subject to the terms hereof.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. In this Agreement, unless the
context requires otherwise, the following terms shall have the following
meanings:
"Advances" means and collectively refers to any and all cash
dividends, loans, management fees, payments, advances or other distributions,
fees or compensation of any kind or character whatsoever, but shall not include
consideration paid for tangible and intangible assets in an arms length
exchange for fair market value, trade payments made and other payments for
liabilities incurred in the ordinary course of business or compensation to
officers, directors and employees of
<PAGE> 6
the Borrower in the ordinary course of business or compensation to consultants
and investment bankers paid in an arms length transaction for fair market value
for the purpose of pursuing or investigating prospective business opportunities
or business combinations.
"Agreement" means this Loan and Security Agreement.
"Auditors" means Ehrhardt Keefe Steiner & Hattman P.C. or other
comparable first class independent certified public accountants.
"Borrower" means LEISUREBELLE CRUISE L.L.C., a Colorado limited
liability company.
"Business Day" means any day other than a day on which banks are
closed for business in the State of New York or Georgia.
"Cash" means, when used in connection with any Person, all monetary
and non-monetary items owned by that Person that are treated as cash in
accordance with GAAP.
"Cash Equivalents" means, when used in connection with any Person,
that Person's Investments in:
(a) Government Securities maturing within one (1) year after
the date of the making of the Investment;
(b) readily marketable direct obligations of any State of the
United States of America given on the date of such Investment a credit rating of
at least AA by Moody's Investors Service, Inc. or AA by Standard & Poor's Rating
Group, a division of McGraw Hill, Inc., in each case maturing within one (1)
year from the making of the Investment;
(c) certificates of deposit issued by, bank deposits in,
eurodollar deposits through, bankers' acceptances of, and repurchase agreements
covering Government Securities executed by, any bank incorporated under the laws
of the United States of America or any State thereof and having on the date of
such Investment combined capital, surplus and undivided profits of at least Two
Hundred Fifty Million Dollars ($250,000,000), or total assets of at least Five
Billion Dollars ($5,000,000,000), in each case maturing within one (l) year
after the date of the making of the Investment;
(d) certificates of deposit issued by, bank deposits in,
eurodollar deposits through, bankers' acceptances of, and repurchase agreements
covering Government Securities executed by, any branch or office located in the
United States of America of a bank incorporated under the laws of any
jurisdiction outside the United States of America having on the date of such
Investment combined capital surplus and undivided profits of at least Five
Hundred Million Dollars ($500,000,000), or total assets of at least Fifteen
Billion Dollars ($15,000,000,000) in each case maturing within one (1) year
after the date of the making of the Investment;
2
<PAGE> 7
(e) repurchase agreements covering Government Securities
executed by a broker or dealer registered under Section l5(b) of the Securities
Exchange Act of 1934 having on the date of the Investment capital of at least
One Hundred Million Dollars ($ 100,000,000), maturing within thirty (30) days
after the date of the making of the Investment; provided that the maker of the
Investment receives written confirmation of the transfer to it of record
ownership of the Government Securities on the books of a "primary dealer" in
such Government Securities on the books of such registered broker or dealer, as
soon as practicable after the making of the Investment;
(f) readily marketable commercial paper of corporations doing
business in and incorporated under the laws of the United States of America or
any State thereof or of any corporation that is the holding company for a bank
described in clauses (c) or (d) above given on the date of such Investment a
credit rating of at least P-1 by Moody's Investors Service, Inc. or A- 1 by
Standard & Poor' s Ratings Group, in each case maturing within three hundred
sixty-five (365) days after the date of the making of the Investment;
(g) "money market preferred stock" issued by a corporation
incorporated under the laws of the United States of America or any State thereof
given on the date of such Investment a credit rating of at least AA by Moody's
Investors Service, Inc. or AA by Standard & Poor's Ratings Group, in each case
having an investment period not to exceed fifty (50) days; provided that (i) the
amount of all such Investments issued by the same issuer does not exceed Five
Million Dollars ($5,000,000) and (ii) the aggregate amount of all such
Investments does not exceed Fifteen Million Dollars ($ 15,000,000); and
(h) a readily redeemable "money market mutual fund" advised by
a bank described in clauses (c) or (d) hereof, or an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940, that has
and maintains an investment policy limiting its investments primarily to
instruments of the types described in clauses (a) through (g) hereof and having
on the date of such Investment total assets of at least One Billion Dollars
($1,000,000,000).
"Casino Gaming Operations" means the gaming operations conducted aboard
the Vessel as permitted under applicable law.
"Charter" means any demise charter, time charter, voyage charter,
contract of affreightment and other agreement for the use or hire of the Vessel
(including all extensions, modifications and renewals thereof).
"Collateral" has the meaning set forth in Section 4.02.
"Collateral Account" has-the meaning set forth in Section 7.01(k).
"Contingent Liabilities" shall mean, as to any Person, any obligation
of such Person guaranteeing or having the economic effect of guaranteeing any
indebtedness, leases or dividends ("primary obligations") of any other Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or not
contingent, (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such
3
<PAGE> 8
primary obligation or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation, (d) to make
payment in respect of any net liability arising in connection with any Interest
Rate Hedges, foreign currency exchange agreement, commodity hedging agreement or
any similar agreement or arrangement in any such case if the purpose or intent
of such agreement is to provide assurance that such primary obligation will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such primary obligation will be protected (in whole
or in part) against loss in respect thereof or (e) otherwise to assure or hold
harmless the holder of such primary obligation against loss in respect thereof;
provided. however. that the term Contingent Liability shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Liability shall be deemed to be an amount
equal to the stated or determinable amount of the primary obligation in respect
of which such Contingent Liability is made or, if not stated or determinable,
the reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Default" means any event that would constitute an Event of Default
but for the requirement that notice be given or time elapse, or both.
"Default Date" has the meaning set forth in Section 2.09.
"Default Rate" has the meaning set forth in Section 2.09.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Drawdown Date" means the date upon which the Borrower has requested
an advance of the Loan be advanced to it pursuant to Section 2.02 or (as the
context requires) the date on which such an advance of the Loan is actually
advanced to the Borrower hereunder.
"Drawdown Notice" means a Notice in the form set out in Appendix A (or
such other form as GE Capital may approve or require).
"Drawdown Period" means the period commencing on the date hereof, and
ending on May 4, 1999.
"Earnings Assignment" means the Earnings Assignment dated the date
hereof, given by the Borrower in favor of GE Capital, granting GE Capital a
security interest in all freights, hire and other earnings of the Vessel, in
the form attached hereto as Exhibit A.
"Escrow Agreement" means the Escrow Agreement dated the date hereof,
given by the Borrower in favor of GE Capital.
"Event of Default" and "Events of Default" means any one or more of
the events specified in Section 8.01.
4
<PAGE> 9
"First Preferred Mortgage" means the First Preferred Mortgage dated
the date hereof, given by the Borrower in favor of GE Capital over the Vessel,
in the form attached hereto as Exhibit B.
"Fiscal Quarter" means the consecutive three (3) month periods during
each Fiscal Year beginning on July 1, October 1, January 1 and April 1, and
ending on September 30, December 31, March 31 and June 30, respectively.
"Fiscal Year" means the fiscal year period beginning July 1 of each
calendar year and ending on the following June 30.
"GAAP" means generally accepted accounting principles, consistently
applied.
"Gaming Authorities" means, without limitation, the applicable
governmental or administrative federal, state or local agency involved in the
regulation of gaming and gaming activities conducted by the Borrower.
"Gaming Devices" means slot machines and other devices which
constitute gaming devices and related equipment.
"Gaming Permits" means collectively every license, permit or other
authorization, if any, required to own, operate and otherwise conduct gaming
operations on board the Vessel.
"Government Securities" means readily marketable (a) direct full faith
and credit obligations of the United States of America or obligations
guaranteed by the full faith and credit of the United States of America and (b)
obligations of an agency or instrumentality of, or corporation owned,
controlled or sponsored by, the United States of America that are generally
considered in the securities industry to be implicit obligations of the United
States of America
"Guarantors" means Leisure Time Technology, Inc., a Georgia
corporation, Leisure Lady Cruise Corp., a Colorado Corporation, and Leisure
Time Casinos & Resorts, Inc., a Colorado corporation, their successors and
permitted assigns.
"Guaranties" means the various Guaranty Agreements of even date
herewith, to be executed by the Guarantors in favor of GE Capital,
substantially in the form attached hereto as Exhibit C.
"Hazardous Materials" means and includes hazardous substances as
defined in CERCLA; oil of any kind, petroleum products and their by-products,
including, but not limited to, sludge or residue; asbestos containing
materials; polychlorinated biphenyls; any and all other hazardous or toxic
substances; hazardous waste, as defined in CERCLA, medical waste; infectious
waste; those substances listed in the United States Department of
Transportation Table (49 C.F.R ss.172.101); explosives; radioactive materials;
and all other pollutants, contaminants and other substances regulated or
controlled by the environmental laws and any other substance that requires
special handling in its collection, storage, treatment or disposal under the
environmental laws of any jurisdiction.
5
<PAGE> 10
"Insurances Assignment" means the Insurances Assignment dated the date
hereof, given by the Borrower in favor of GE Capital, granting GE Capital a
security interest in all insurances now or hereafter taken out with respect to
the Vessel, all premium rebates and all proceeds thereof and otherwise
substantially in the form attached hereto as Exhibit D.
"Interest Expense" means, with respect to any Person, as of the last
day of any fiscal period under review, the sum of (i) all interest, fees,
charges and related expenses paid or payable (without duplication but including
capitalized interest) for that fiscal period by such Person to a lender in
connection with borrowed money (including any obligations for fees, charges and
related expenses payable to the issuer of any letter of credit) or the deferred
purchase price of assets that are considered "interest expenses" under GAAP,
plus (ii) the portion of the up front costs and expenses for Interest Rate
Hedges (to the extent not included in (i) fairly allocated to such Interest
Rate Hedges as expenses for such period, plus (iii) the portions of Capital
Leases Liabilities that should be treated as interest in accordance with GAAP.
"Interest Rate Hedge" means, with respect to any Person, all
liabilities of such Person under interest rate swap agreements, interest rate
cap agreements, basis swap, forward rate agreement and interest collar or floor
agreements and all other agreements or arrangements designated to protect such
Person against fluctuations in interest rates or currency exchange rates.
"Investment" means when used in connection with any Person, any
investment by or of that Person, whether by means of purchase or other
acquisition of stock or other securities of any other Person or by means of a
loan, advance creating a debt, capital contribution, guaranty or other debt or
equity participation or interest in any other Person, including any partnership
and joint venture interests of such Person. The amount of any Investment shall
be the amount actually invested without adjustment for subsequent increases or
decreases in the value of such Investment.
"Loan" has the meaning given in Section 2.01.
"Loan Documents" mean collectively this Agreement, the Note, the
Guaranties, the First Preferred Mortgage, the Earnings Assignment, the
Insurances Assignment, and the UCC-1 Financing Statements.
"Note" means the Promissory Note dated the date hereof, issued by the
Borrower to the order of GE Capital, in the original principal amount of
$1,500,000, and otherwise in the form attached hereto as Exhibit E.
"Obligations" means collectively and includes all indebtedness,
liabilities and obligations of any kind and nature whatsoever of the Borrower
to GE Capital, both now existing and hereafter arising under, as a result of,
on account of, or in connection with, this Agreement, the Note, any of the
other Loan Documents or any amendments or modifications thereto, restrictions
thereof and supplements thereto made at any time and from time to time
hereafter, whether or not such obligation is reduced to judgment, liquidated or
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured, and whether or not such obligation is
discharged, stayed or otherwise affected by any proceeding referred to in
Section 8.01(j) or 8.01(k) hereof.
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"Permitted Liens" means (i) liens in favor of GE Capital, (ii) liens
for taxes not yet due or for taxes being contested in good faith and which do
not involve, in the reasonable judgment of Secured Party, any risk of the sale,
forfeiture or loss of any of the Collateral, (iii) inchoate materialmen's,
mechanic's, repairmen's and similar maritime liens arising by operation of law
in the normal course of business for amounts which are not delinquent, and (iv)
liens for crew's wages, general average and salvage.
"Person" means any individual, firm, corporation, trust, association,
partnership, joint venture, tribunal or other entity.
"Prepayment Premium" means an amount equal, at any time, to two
percent (2.0%) of the principal balance of the Loan being prepaid by the
Borrower.
"Total Loss" means the occurrence of: (i) the actual or constructive
total loss or compromised, agreed or arranged total loss of the Vessel; or (ii)
the loss, theft or destruction of the Vessel or damage thereto to such extent
as shall make repair thereof uneconomical or shall render the Vessel
permanently unfit for normal use for any reason whatsoever, or (iii) the
capture, seizure, arrest, detention, condemnation, confiscation or requisition
for more than thirty days, forfeiture or other taking of title to or use of the
Vessel by any government or by persons acting or purporting to act on behalf of
any government (as established to the reasonable satisfaction of GE Capital; or
(iv) the loss, suspension, material adverse modification or revocation by any
governmental authority of any the Borrower's authority to operate the Vessel;
or (v) the loss, suspension, revocation, or material adverse modification of
the Borrower's authority to operate its gaming operations on the Vessel, unless
the Borrower has the ability to move the Vessel to another jurisdiction where
such operations are permitted, and the Borrower moves the Vessel to such a
jurisdiction and takes all necessary steps to perfect GE Capital's first lien
upon the Vessel, within 10 days after such loss, suspension, revocation or
modification.
"Trademark Security Agreement" means the Trademark Security Agreement
in the form of Exhibit F hereof, to be executed and delivered by the Borrower
to GE Capital pursuant to Section 5.02 hereof.
"Vessel" means the 1983-built vessel known as the BILOXI BELLE,
Official No. 985792, duly documented in the name of the Borrower under the laws
and flag of the United States of America.
Section 1.02. Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and each of the words "to" and
"until" means "to but excluding."
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ARTICLE II
AGREEMENT TO MAKE THE LOAN;
DRAWDOWN AND REPAYMENT PROVISIONS
Section 2.01. Agreement to Make Loan. On and subject to the terms and
conditions of this Agreement, and in reliance upon each of the Borrower's
representations and warranties contained herein, GE Capital agrees to lend to
the Borrower up to ONE MILLION FTVE HUNDRED THOUSAND AND 00/100 DOLLARS
($1,500,000.00) (the "Loan") for the purposes set forth in the Recitals, and for
no other purpose. On the date hereof, GE Capital will advance the entire amount
of the Loan. A portion of the proceeds of the Loan in the amount of $125,000
will be deposited in an escrow account to be maintained in the name of GE
Capital at a financial institution (the "Escrow Account"), subject to the terms
and conditions hereinafter set forth, not more frequently than once per month
during the Drawdown Period, GE Capital shall, subject to the terms and
conditions hereinafter set forth make advances from the Escrow Account to
reimburse the Borrower for not more than 90% of the cost of non-gaming equipment
(acceptable to GE Capital in all respects) installed on the Vessel and
improvements to the Vessel satisfactory to GE Capital in all respects. Time is
of the essence.
Section 2.02. Drawdown Procedures. The Borrower may request GE Capital
to advance the proceeds of the Escrow Account by delivering to GE Capital a duly
completed Drawdown Notice (which shall be irrevocable) to be received by GE
Capital not later than 1 1:00 a.m. E.S.T. one (1) Business Day prior to the
applicable Drawdown Date. The Borrower's ability to request advances from the
Escrow Account hereunder shall expire upon the close of business, E.S.T. on May
22, 1999; provided, however, that such obligation shall terminate automatically
upon the occurrence of a Default or an Event of Default. With respect to any
advance of the Escrow Account, the Drawdown Notice shall be accompanied by (a)
an invoice for the item(s) of equipment covered by such draw request, (b) an
acceptance certificate signed by the Borrower, (c) where applicable, a bill of
sale, and (d) a receipt marked "paid.".
Section 2.03. Advance of Amount in Escrow Account. Subject to the terms
of this Agreement, GE Capital shall make advances to the Borrower from the
Escrow Account on each Drawdown Date by paying the proceeds thereof to the
Borrower to reimburse the Borrower for documented equipment costs previously
paid by the Borrower.
Section 2.04. The Note. The Loan shall be evidenced by a single
promissory note payable by the Borrower to the order of GE Capital, in the form
attached hereto as Exhibit A (the "Note"). The Note shall be dated as of the
date hereof and shall be in the original face amount of $1,500,000. GE Capital
shall maintain an escrow account with respect to all advances of the Escrow
Account and all payments on account thereof. Prior to any transfer of the Note,
GE Capital shall endorse on the schedules forming a part thereof appropriate
notations (or shall otherwise provide any transferee with appropriate written
notice) evidencing the date and the amount of each payment of principal made by
the Borrower with respect thereto. GE Capital is hereby irrevocably authorized
by the Borrower to so endorse the Note, and to attach and to make a part of the
Note, such schedules as and when required.
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Section 2.05. Interest Rate. The unpaid principal balance of the Note
shall bear interest from the date hereof until paid in full at the rate of 8.90%
per annum (in no event to exceed the maximum rate allowed by law).
Section 2.06. Prepayments.
(a) Optional Prepayment The Borrower shall have the right to
prepay the Note in whole but not in part at any time upon thirty (30) days'
prior written notice to GE Capital by paying to GE Capital the then unpaid
principal balance of the Note, together with all accrued interest thereon and
all other sums then due hereunder and under each of the other Loan Documents,
plus the Prepayment Premium.
(b) Mandatory Prepayments.
(i) In the event that the Vessel is sold, the
Borrower shall pay to GE Capital the then unpaid principal balance of the Note,
together with all accrued interest thereon and other sums then due hereunder and
under each any of the other Loan Documents.
(ii) In the event the Vessel sustains a Total Loss,
the Borrower shall pay to GE Capital the then unpaid principal balance of the
Note, together with all accrued interest thereon and all other sums then due
hereunder and under each of the other Loan Documents.
Section 2.07. [Intentionally Omitted]
Section 2.08. Payments and Computations.
(a) All payments to be made by the Borrower hereunder, under
the Loan Documents and/or under any instrument delivered in connection herewith
or therewith shall be made in lawful money of the United States of America, in
immediately available and freely transferable funds, to GE Capital at its
offices at 44 0ld Ridgebury Road, Danbury, Connecticut 06810-5105, free and
clear of and without deduction for any and all present and future taxes,
withholdings or other charges imposed on such payment. Should any such taxes,
withholdings or other charges be imposed on any such payment, the Borrower will
pay them and remit to GE Capital an amount equal to what should have been
received had such a tax, withholding or other charge not been imposed.
(b) All computations of interest shall be made by GE Capital
on the basis of a 360-day year, twelve 30-day months, for the actual number of
days (including the first day but excluding the last day) occurring in the
period for which such interest is payable.
(c) When ever any payment to be made hereunder or under any of
the other Loan Documents is 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 payment of interest
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Section 2.09. Interest on Overdue Amounts, etc. In the event that any
payment of principal, interest or other sum due hereunder or under any of the
other Loan Documents is not made when due (whether by acceleration, at maturity
or otherwise) (each, a "Default Date"), the Borrower shall pay to GE Capital,
upon demand, interest thereon until such past due amount, together with all
accrued interest thereon, is paid in full, at the rate equal to 11.90% per
annum (the "Default Rate").
ARTICLE III
GUARANTY
Section 3.01. Guaranty, etc. In order to induce GE Capital to make the
Loan to the Borrower, the Guarantors shall unconditionally and irrevocably
guarantee the full and punctual payment and performance of the Obligations,
and, in furtherance thereof, each shall execute and deliver to GE Capital in
form and substance satisfactory to GE Capital, a Guaranty.
ARTICLE IV
SECURITY
Section 4.01. Vessel. The Borrower shall execute and deliver, or cause
the Guarantors to execute and deliver, to GE Capital, in form and substance
satisfactory to GE Capital, the following documents:
(i) the First Preferred Mortgage;
(ii) the Earnings Assignment;
(iii) the Insurances Assignment;
(iv) the Trademark Security Agreement; and
(v) the Escrow Agreement.
In addition to the foregoing, the Borrower shall also promptly deliver,
or cause to be delivered, to GE Capital: (i) a certified copy of the Certificate
of Documentation for the Vessel; (ii) the Letter to the Master of the Vessel and
Master's acknowledgment of his compliance with the terms thereof duly executed
by the Master or other authorized individual; (iii) the form of Notice of
Mortgage; (iv) upon filing, a copy of the certified extract of preferred
mortgage index and certificate of ownership, evidencing the recording of the
First Preferred Mortgage and showing the Vessel to be free and clear of all
recorded liens, mortgages and other encumbrances other than the First Preferred
Mortgage in favor of GE Capital; (v) originals or copies of all cover notes,
letters of undertaking and certificates of entry evidencing the insurances
covering the Vessel; (vi) written advice from the Borrower's insurance brokers
of the insurances currently in place and an opinion (to the extent the brokers
are willing to provide the same) of such insurance brokers, satisfactory to GE
Capital, to the effect that such insurances comply with the applicable
provisions of this Agreement; (vii) the agreement by the Borrower's insurance
brokers (to the extent the brokers are willing
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provide the same) in form and substance satisfactory to GE Capital, whereunder
the insurances of the Vessel and all claims there under will not be affected by
non-payment of premiums on any other insurances maintained by the Borrower,
(viii) appropriate Uniform Commercial Code financing statements executed by the
Borrower with respect to the security interests created pursuant hereto; (ix)
the certificates of good standing for each of the Borrower and the Guarantors;
and (x) the opinions of legal counsel to the Borrower and the Guarantors'
satisfactory to GE Capital.
Section 4.02. Other Personal Property. As additional security for the
full and punctual payment and performance of its Obligations, the Borrower does
hereby give, grant, and assign to GE Capital a security interest in and lien on
all property identified on Schedule 1 hereto, and in and to any and all
additions, substitutions, replacements and exchanges therefor and any and all
insurance and/or other proceeds thereof (all of the foregoing, together with the
Vessel, being hereinafter referred to as the "Collateral").
ARTICLE V
CONDITIONS PRECEDENT
Section 5.01. Conditions Precedent. GE Capital's agreement to enter
into this Agreement and to make the Loan to the Borrower is subject to the
condition precedent that GE Capital shall have received on or before the date
hereof the following, each in form and substance satisfactory to GE Capital:
(a) certified copies of the Articles of Organization of the
Borrower, and the resolutions of the members of the Borrower approving this
Agreement, the Note and each of the other Loan Documents and evidence of other
necessary limited liability company actions and governmental approvals if any,
which are required with respect to this Agreement, the Note and the other Loan
Documents, along with a certificate of incumbency for each person signing any of
the Loan Documents on behalf of the Borrower and evidence of the Borrower's
organization and good standing;
(b) certified copies of the certificate of incorporation and
bylaws of each of the Guarantors and the resolutions of the Board of Directors
of each of the Guarantors authorizing the execution and delivery of its Guaranty
and the performance by it of its obligations thereunder, along with a
certificate of incumbency for each person signing the Guaranty on its behalf and
evidence of each Guarantor's incorporation and good standing in the state of its
incorporation;
(c) this Agreement;
(d) the Note;
(e) the Guaranties;
(f) the First Preferred Mortgage;
(g) the Earnings Assignment;
(h) the Insurance Assignment
(i) the Escrow Agreement
(j) the Form UCC-1 Financing Statements;
(k) the opinions of counsel for the Borrower and each of the
Guarantors;
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(l) copies of all governmental or other consents or approvals
necessary in connection with the execution, delivery and performance of the Loan
Documents; and
(m) copies of all documentation relating to the sale of the
Vessel to the Borrower.
All filings and recordings to the extent permitted or required by
applicable law shall have been duly made by the Borrower or, at the option of GE
Capital, provided for and all other action shall have been taken as may be
required by GE Capital to perfect the security interests and mortgage liens
granted by the First Preferred Mortgage and any of the other Loan Documents, all
proceedings taken in connection with the Loan Documents shall be reasonably
satisfactory to GE Capital, and GE Capital shall have received copies of such
documents as GE Capital reasonably may request in connection therewith, all in
form and substance reasonably satisfactory to GE Capital.
Section 5.02. Conditions Subsequent. In consideration of GE Capital's
agreement to make the Loan to the Borrower, the Borrower further agrees that
within thirty (30) days of the date hereof, the Borrower will file an
application to register the trade name BILOXI BELLE, or the new name to be given
to the Vessel, with the United States Patent and Trademark Office in Washington,
D.C. The Borrower will diligently pursue registration of said trade name and
advise GE Capital once the trade name has been so registered. Contemporaneously
with its filing of its application for registration of the trade name BILOXI
BELLE (or such new name), the Borrower will file, or cause to be filed, with the
U.S. Patent and Trademark Office an original copy of the Trademark Security
Agreement, with instructions that once said Trademark Security Agreement has
been recorded, notification thereof should be sent to GE Capital at its address
provided herein.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.01. Representations and Warranties. The Borrower hereby
represents and warrants as follows:
(a) Organization and Powers. It is, and will remain, a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Colorado and is, and will remain, duly qualified and
authorized to transact business as a foreign limited liability company in good
standing wherever failure to so qualify would have a material adverse affect on
the Borrower's business operations or financial condition.
(b) Power and Authority. It has the full power and authority
to enter into, and to perform its obligations, under this Agreement and each of
the other Loan Documents to which it is a party and to own and operate its
business as presently contemplated. Additionally, the Borrower has the full
power and authority to grant to GE Capital a security interest in and lien on
the Collateral described herein.
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(c) Authorization. It has duly authorized by all requisite
limited liability company action the execution, delivery and performance of
this Agreement and each of the other Loan Documents to which it is a party, and
the execution, delivery and performance by it of such Loan Documents will not
violate any provision of law, any order of any court or other agency of
government, its Articles of Organization or Operating Agreement, or any
indenture, agreement or other instrument to which it is a party, or by which it
or any of its property or assets is bound, or be in conflict with, result in a
breach of, or constitute (with due notice or lapse of time, or both) a default
under any such indenture, agreement or other instrument, or result in the
creation or imposition of any lies, charge or encumbrance of any nature
whatsoever upon any property or assets of it other than as otherwise permitted,
required or contemplated by the Loan Documents.
(d) Enforceability. This Agreement and each of the other Loan
Documents to which it is a part constitutes the legal, valid and binding
agreements of the Borrower, enforceable under all applicable laws in accordance
with the terms thereof, except to the extent limited under the applicable
bankruptcy and insolvency laws.
(e) Litigation. Except as set forth in Schedule 6.01 (e), there are no actions,
suits or proceedings pending or, to its knowledge, threatened against or
affecting it or its property at law, in equity or in admiralty, or before or by
any governmental authority, department, commission, bureau, board, agency or
instrumentality, domestic or foreign, (i) which either individually or in the
aggregate might materially adversely affect (A) its financial condition,
operations or affairs, or (B) its ability to perform its obligations hereunder,
under the Note or under any of the other Loan Documents, or (ii) if any such
actions, suits or proceedings exist, in the opinion of independent nationally
recognized counsel and/or auditors (including its present Auditors) for the
Borrower (a copy of which opinion has been provided to GE Capital) such actions,
suits or proceedings are not likely to adversely affect the same. It is not in
default with respect to any material order, writ, injunction, decree or demand
of any court or governmental authority, department, commission, board, bureau,
agency or instrumentality, domestic or foreign.
(f) Financial Condition. Except as previously disclosed to GE
Capital in writing, there has been no material adverse change in the Guarantors'
financial condition, operations or affairs as reflected in its 1998 year-end
audited financial statements, or in the Guarantors' unaudited financial
statements for the period ending September 30, 1998, copies of which were
delivered by the Borrower and/or the Guarantors to GE Capital. Such financial
statements fairly represent the balance sheet of the Guarantors on the
respective dates thereof and were prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP") and in the case of the 1997
year-end financial statements certified by the Auditors.
(g) No Sovereign Immunity. It is subject to private commercial
law and to suit in connection with matters relating to this Agreement, the Note
and the other Loan Documents, and neither it nor any of its property has any
right to immunity from suit or attachment on the grounds of sovereignty or on
any other grounds. The execution, delivery and performance of this Agreements
the Note and the other Loan Documents constitute commercial acts by it, in
connection with its commercial activities.
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(h) Tax Returns. It has filed or has caused to have been filed
all tax returns which, to its knowledge, are required to be filed, and has paid
or caused to have been paid all taxes as shown on such returns or on any
assessment received by it, to the extent that such taxes have become due, unless
and to the extent only that such taxes, assessments and governmental charges are
currently contested in good faith and by appropriate and diligent legal
proceedings and adequate reserves therefor have been established as required
under generally accepted accounting principles.
(i) Compliance with Law: Licenses and Permits. To the best of
its knowledge after due inquiry, it is not in violation of any material law,
ordinance, governmental rule or regulation to which it is subject, and it has
obtained all licenses, permits, franchises or other governmental authorizations
necessary for the ownership of its properties and the conduct of its business.
(j) Government Consents. Neither the execution and delivery by
it of this Agreement, the Note and any of the other Loan Documents, nor the
consummation by it of any of the transactions contemplated hereby or thereby,
requires the consent or approval of, the giving of notice to, the registration
with, or the taking of any other action in respect of, any governmental
authority or agency, domestic or foreign, other than the filing and recording of
the First Preferred Mortgage with the United States Coast Guard, Office of
Vessel Documentation, in Falling Waters, West Virginia and of the UCC-1
financing statements with the appropriate filing officers in the States of
Colorado, ________________, and __________________.
(k) Ownership of Collateral. The Borrower has good and
marketable title to the Collateral free and clear of all liens and other
encumbrances other than Permitted Liens. Upon the filing and recording of the
First Preferred Mortgage with the United States Coast Guard, Office of Vessel
Documentation in Falling Waters, West Virginia (the only place where such filing
and recording is required to perfect such interest), GE Capital will have a
first preferred mortgage lien on the Vessel and her freights, all as more fully
provided for in the First Preferred Mortgage. Upon the filing of the Form UCC-1
Financing Statements with the Secretary of State of the States of Colorado,
_______________, and ________________ and the Clerk of the Circuit Court of
______________ County, ________________ (the only place where such filings are
required to perfect GE Capital's interest in the collateral covered thereby), GE
Capital will have a first priority interest in the property identified on
Schedule 1 attached hereto.
(l) Principal Place of Business: Tradenames. The address
stated in Section 9.02 hereof is the principal place of business and chief
executive office of the Borrower, and the Borrower does not conduct business
under a trade, assumed or fictitious name.
(m) Margin Stock. None of the proceeds from the Loan will be
used, directly or indirectly, by the Borrower for the purpose of purchasing or
carrying, or for the purpose of reducing or retiring any indebtedness that was
originally incurred to purchase or carry, any "margin security" within the
meaning of Regulation G (12 C.F.R Part 207), or "margin stock" within the
meaning of Regulation U (12 C.F.R Part22 1), of the Board of Governors of the
Federal Reserve System (herein called "margin security" and "margin stock") or
for any other purpose that might make the transactions contemplated herein a
"purpose credit" within the meaning of said Regulation G or Regulation U, or
cause this Agreement to violate any other regulation of the Board of Governors
of the Federal Reserve System or the Securities Exchange Act of 1934, as
amended, or the Small
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Business Investment Act of 1958, as amended, or any rules or regulations
promulgated under any of such statutes.
(n) ERISA. With respect to any "pension plan" as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended,
("ERISA"), which plan, if any, is now or previously has been maintained or
contributed to by the Borrower and/or by any member ("Commonly Controlled
Entity") of a group of trades or businesses that includes the Borrower and that
is under common control within the meaning of Sections 41 4(b) and/or (c) of the
Code that: (a) no "accumulated funding deficiency" as defined in Code
ss.412OrERISA ss.302 has occurred, whether or not that accumulated funding
deficiency has been waived; (b) no "reportable event" as defined in ERISA
ss.4043 has occurred; (c) no termination of any plan subject to Title IV of
ERISA has occurred; (d) except as previously disclosed to GE Capital in writing,
neither the Borrower nor any Commonly Controlled Entity has incurred a "complete
withdrawal" within the meaning of ERISA ss.4203 from any multiemployer plan; (e)
except as previously disclosed to GE Capital in writing, neither the Borrower
nor any Commonly Controlled Entity has incurred a "partial withdrawal" within
the meaning of ERISA ss.4205 with respect to any multi employer plan; (f) no
multi employer plan to which the Borrower or any Commonly Controlled Entity has
an obligation to contribute is in "reorganization" within the meaning of ERISA
ss.4241 nor has notice been received by the Borrower or any Commonly Controlled
Entity that such a multi employer plan will be placed in "reorganization". The
Borrower represents and warrants to GE Capital with respect to any pension plan
which the Borrower and/or any Commonly Controlled Entity maintains or
contributes to, either now or in the future, that: (a) such bonding as is
required under ERISA ss.412 will be maintained; (b) as soon as practicable and
in any event within fifteen (15) days after the Borrower or any Commonly
Controlled Entity knows or has reason to know that a "reportable event" has
occurred or is likely to occur, the Borrower will deliver to GE Capital a
certificate signed by its chief financial officer setting forth the details of
such "reportable event"; (c) neither the Borrower nor any Commonly Controlled
Entity will: (i) engage in or permit any "prohibited transaction" (as defined in
ERISA ss.406 or Code ss.4975) to occur, (ii) cause any "accumulated funding
deficiency" as defined in ERISA ss.302 and/or Code ss.412, (iii) terminate any
pension plan in a manner that could result in the imposition of a lien on the
property of the Borrower or any Subsidiary pursuant to ERISA ss.4068, (iv)
terminate or consent to the termination of any multi employer plan, (v) incur a
complete or partial withdrawal with respect to any multi employer plan within
the meaning of ELSA ss.ss.4203 and 4205, and (d) within fifteen (15) days after
notice is received by the Borrower or any Commonly Controlled Entity that any
multi employer plan has been or will be placed in "reorganization" within the
meaning of ERISA ss.4241, the Borrower will notify GE Capital to that effect
Upon GE Capital's request, the Borrower will deliver to GE Capital a copy of the
most recent actuarial report, financial statements and annual report completed
with respect to any "'defined benefit plan", as defined in ERISA ss.3(35).
(o) Condition of Collateral. The Collateral is in good
condition and repair.
(p) Recitals. The Recitals to this Agreement are true and
accurate in each and every respect and are all incorporated by reference herein.
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ARTICLE VII
GENERAL COVENANTS OF BORROWER
Section 7.01. Affirmative Covenants. So long as this Agreement remains
in effect and until all the Borrower's Obligations have been satisfied in full,
the Borrower hereby covenants with GE Capital as follows:
(a) Financial Statements. It shall furnish, or cause to be
furnished, to GE Capital (i) as soon as possible and in no event more than one
hundred twenty (120) days after the end of each Fiscal Year of Leisure Time
Casinos & Resorts, Inc., a copy of Leisure Time Casinos & Resorts, Inc.'s and
its subsidiaries' consolidated and consolidating financial statements, prepared
in accordance with GAAP and certified by the Auditors as of the end of such
period, including a balance sheet and related profit and loss and surplus
statements, and reflecting any changes in working capital; (ii) as soon as
possible and in no event more than sixty (60) days after the close of each
Fiscal Quarter of Leisure Time Casinos & Resorts, Inc., similar financial
statements to those referred to in (i) above, unaudited but certified by Leisure
Time Casinos & Resorts, Inc.'s, chief financial officer, and (iii) as soon as
available, copies of all statements filed with the Securities and Exchange
Commission or any successor agency; and (iv) such other financial or other
information as GE Capital may from time to time reasonably request. Such
financial statements shall be prepared in accordance with generally accepted
accounting principles applied on a consistent basis.
(b) Limited Liability Company Existence. The Borrower shall at
all times maintain its limited liability company existence and shall not,
without GE Capital's prior written consent, dissolve or otherwise dispose of all
or substantially all of its assets, in one transaction or a series of
transactions, or consolidate with or merge into another entity.
(c) Capital Stock. Leisure Time Casinos & Resorts, Inc. shall
continue to own all of the Borrower's issued and outstanding capital stock.
(d) Reports. The Borrower shall promptly notify GE Capital in
writing of (i) any change in its name, (ii) the relocation of its chief
executive offices, (iii) any notices received by it and/or the Guarantors from
any other lender notifying it (them) of its (their) failure to comply with,
honor, abide by, or carry out any of the terms of any documentation executed and
delivered in connection with any indebtedness in excess of $250,000.
(e) Mortgage Supplements. The Borrower shall at any time, upon
request of GE Capital execute and deliver to GE Capital one or more amendments
or supplements to the First Preferred Mortgage, in form and substance
satisfactory to GE Capital, for the purpose of insuring that the amount and
other terms of the First Preferred Mortgage are adequate to provide GE Capital
with security for the Loan
(f) Use of Proceeds. The proceeds from the Loan will be used
solely for the purposes specified in the Recitals and for no other purpose.
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(g) Valuation of Vessel. At least once each year and at any
time following the occurrence of a Default hereunder, the Borrower shall provide
to GE Capital, upon request by GE Capital but at the sole cost and expense of
the Borrower, its certified written opinion of the Fair Market Sale Value of the
Vessel based upon Borrower' s consultation with one or more independent ship
brokers. "Fair Market Sale Value" shall mean the amount for which the Vessel
could be sold on a charter-free basis in an arm's length transaction.
(h) Notice of Mortgage. The Borrower shall cause a certified
copy of the First Preferred Mortgage, together with notice thereof, to be placed
on board the Vessel, and shall furnish GE Capital with copies of the Masters'
signed receipt therefor in form and substance satisfactory to GE Capital.
(i) Payment of Taxes. The Borrower shall pay and discharge all
taxes, assessments and governmental charges or levies imposed on it or on its
income or profits or on any of its property prior to the date on which penalties
attach thereto, except that the Borrower will not be required hereby to pay any
such tax, assessment, charge or levy, the payment of which is being contested in
good faith and by proper and diligent legal proceedings, so long as none of the
assets of the Borrower (including the Collateral) have been attached or arrested
or if attached or arrested, such attachment or arrest has been fully bonded and
fully lifted.
(j) Compliance with Laws Generally. The Borrower shall comply
with the requirements of all applicable laws, including, without limitation, 15
U.S.C. 1175 and all similar state laws regulating the possession, use and
operation of gaming devices on board the Vessel rules, regulations and orders of
any court; governmental body or regulatory agency having jurisdiction, a breach
of which could have a material adverse effect on its financial condition or its
business, except where contested in good faith and by proper and diligent legal
proceedings. At no time shall the Vessel operate out of jurisdictions under
which the gaming operations of the type engaged in by the Borrower have been
either prohibited or judicially challenged. At all times the Vessel shall carry
on board all Gaming Permits, if any, required by applicable law.
(k) Collateral Account. The Borrower shall maintain a separate
account (the "Collateral Account") with GE Capital or other financial
institution acceptable to GE Capital for the purpose of payment of all amounts
due under the Earnings Assignment and Insurances Assignment All funds on deposit
in the Collateral Account shall be available to the Borrower until a Default or
Event of Default shall have occurred and be continuing, in which case such funds
may, at the option of GE Capital, be applied in prepayment of the Borrower's
Obligations. If the Collateral Account is attached or levied upon by a third
party, all payments to be made to the Collateral Account shall be made directly
to GE Capital and not to the Collateral Account.
(l) Management Agreements. The commercial and technical
management of the Vessel shall be performed by either the Borrower, the
Guarantors, one or more of their subsidiaries or other companies acceptable to
GE Capital. Upon the occurrence of an Event of Default, GE Capital shall have
the right: (1) to require the Borrower to terminate any management agreement,
(2) to approve the terms of any subsequent management arrangement, (3) to
require the Borrower to withhold for a period not in excess of three (3) months
all management fees in respect of the Vessel (in which case such amounts so
withheld shall comprise a debt subordinate in all respects to the
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Borrower's obligations to GE Capital), and (4) to require each of the managers
of the Vessel to agree to the foregoing.
(n) Collateral Generally. The Borrower at all times and
without expenses to GE Capital shall (i) maintain and preserve, or cause to be
maintained and preserved, the Collateral in good condition and working order,
(ii) use and maintain the Collateral only in compliance with all applicable laws
and (iii) keep the Collateral free and clear of liens, claims and encumbrances
(except for Permitted Liens).
(o) Vessel. At all times and without cost or expense to GE
Capital, the Borrower shall maintain and preserve, or cause to be maintained and
preserved, the Vessel in good running order and repair, so that the Vessel shall
be, in so far as due diligence can make them so, tight, staunch, strong and
sufficiently well tackled, appareled, furnished, equipped and in every respect
seaworthy and in good operating condition. The Vessel shall, and the Borrower
covenants that it will, at all times comply with all applicable laws, treaties
and conventions of the United States of America and rules and regulations issued
thereunder, and shall have on board as and when required thereby valid
certificates showing compliance therewith. The Borrower will cause the Vessel to
be drydocked as per U.S. Coast Guard requirements, if and to the extent
applicable. The Borrower shall give GE Capital five (5) Business Days' prior
written notice of drydocking of the Vessel so as to afford GE Capital the
opportunity to be present and inspect the Vessel. The Borrower will not make, or
permit to be made, any substantial change in the structure, type and speed of
the Vessel, which might result in a decrease or reduction in the value or
utility of the Vessel.
(p) Inspections: Vessel's Logs and Records. The Borrower at
all times shall afford GE Capital or its authorized representatives full and
complete access to the Collateral for the purpose of inspecting the same and, at
the request of GE Capital, the Borrower will deliver for inspection copies of
any and all documents relating to the Collateral including copies of the
Vessel's logs and records. If GE Capital shall discover upon its inspection of
the Vessel that the Vessel is in a condition of disrepair that materially
affects its values, GE Capital shall have the immediate right to call for the
drydocking and repair of the Vessel within thirty (30) days thereafter, upon
notice to the Borrower and at the Borrower's sole cost and expense.
(q) Litigation. The Borrower shall promptly inform GE Capital
of any pending or threatened litigation involving the Borrower or the
Guarantors, where the amount claimed exceeds $250,000 (regardless of whether
covered by insurance), and of any other event, condition or occurrence which
might adversely affect or prejudice the timely repayment of all sums due under
the Note or hereunder.
(r) Insurance Generally. At all times during the term hereof,
the Borrower shall kept the Collateral insured against loss or damage by fire or
extended coverage perils, theft, burglary and where requested by GE Capital
against other risks as required thereby, for the full replacement value thereof,
with companies, in amounts and under policies reasonably acceptable to GE
Capital. The Borrower shall, if GE Capital so requires, deliver to GE Capital
policies or certificates of insurance evidencing such coverage. Each policy
shall name GE Capital as loss payee thereunder, shall not be subject to
co-insurance, and shall provide for fourteen (14) days' prior written notice to
GE Capital of the cancellation, non-renewal or material modification thereof.
The Borrower hereby
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appoints GE Capital as its attorney-in-fact to make proof of loss, claim for
insurance and adjustment with insurers, and to execute or endorse all documents,
checks or drafts in connection with any payment made as a result of such
insurance policies. Except as otherwise specifically provided for in
subparagraph (s) below with respect to the Vessel, all insurance proceeds shall
be made payable to the Borrower and GE Capital as their interests may appear and
all insurance proceeds received as a result of any loss or damage to the
Collateral (other than the Vessel) shall be applied, at GE Capital's option, to
repair or replace the Collateral or to reduce the Obligations secured hereby.
(s) Insurance on Vessel. At all times during the term hereof,
the Borrower shall obtain and keep the Vessel insured against the risks
indicated below:
(1) marine hull insurance insuring the Vessel against
the usual risks, including collision, with a limit of not less than 100% of the
Loan;
(2) protection and indemnity insurance (including
longshoreman and harbor worker's compensation insurance in form and amount
required by applicable law), in the broadest form available (or under such form
of policy as GE Capital may approve in writing) in an amount not less than
$3,000,000;
(3 ) insurance against liability arising out of
pollution, spillage or leakage in connection with the conduct of the Vessel, in
an amount not less than $3,000,000 per accident/occurrence; and
(4) mortgagee's interest insurance covering the risks
and in the amounts stated above.
The Vessel shall not carry any cargoes nor proceed into any area then
excluded by trading warranties under the above-referenced policies without first
obtaining any necessary additional coverage, satisfactory in form and substance,
and evidence of which shall be furnished, to GE Capital. All insurances shall be
in form and with companies reasonably satisfactory to GE Capital. All insurance
for loss or damage shall provide that losses, if any, shall be payable to GE
Capital for distribution by it to itself and the Borrower, as their respective
interests may appear. Notwithstanding the foregoing, unless otherwise required
by GE Capital by notice to the underwriters, (i) any loss under any insurance on
the Vessel with respect to protection and indemnity risks may be paid directly
to the Borrower to reimburse it for any loss, damage or expense incurred by it
and covered by such insurance or to the person to whom any liability covered by
such insurance has been incurred, and (ii) in the case of any loss (other than a
Total Loss as hereinafter defined) under any insurance with respect to the
Vessel involving any damage to the Vessel, the underwriters may, so long as no
Default or Event of Default, has occurred and upon receipt of evidence
satisfactory to them of the completion of such repairs or other charges, pay
directly for the repair, salvage or other charges involved or, if the Borrower
shall have first fully repaired the damage or paid all of the salvage or other
charges, may pay the Borrower as reimbursement therefor, provided, however, that
if such damage involves a loss in excess of $250,000, the underwriters shall not
make such payment without first obtaining the written consent thereto of GE
Capital. Any loss covered by this paragraph which is paid to GE Capital but
which might have been paid, in accordance with the provisions of this paragraph,
directly to the Borrower
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or others, shall be paid by GE Capital to, or as directed by, the Borrower and
all other payments to GE Capital of losses covered by this paragraph shall be
applied by GE Capital as it, in its sole discretion, sees fit. The Borrower
shall pay the premiums and calls, if any, therefor and deliver to GE Capital the
policies of insurance or duplicates thereof, or other evidence satisfactory to
GE Capital of such insurance coverages and of each rider and endorsement thereto
or renewal thereof. In addition, the Borrower shall use its best efforts to
furnish, or cause to be furnished, to GE Capital annually a detailed report
signed by a firm of marine insurance brokers reasonably satisfactory to GE
Capital as to the insurance maintained in respect of the Vessel, as to their
opinion as to the adequacy thereof and as to the Borrower's compliance with the
terms hereof. Each insurer shall agree, by endorsement upon the policy or
policies issued by it, or by independent instrument furnished to GE Capital,
that it will give GE Capital fourteen (14) days' prior written notice of the
effective date of any material alteration, cancellation or nonrenewal of such
policy or policies.
Upon the occurrence of Total Loss and provided any amount due
hereunder is still outstanding, the Borrower shall give prompt notice thereof
to GE Capital. After such notice that such a Total Loss has occurred, GE
Capital shall apply all insurance proceeds received by it as a result of such
Total Loss towards prepayment of the Note in accordance with Section 2.06
hereof, with the Borrower being liable for any deficiency.
(t) Financial Responsibility. The Borrower will comply with
and satisfy all of the provisions of any applicable law, regulation,
proclamation or order concerning financial responsibility for liabilities
imposed on the Borrower or the Vessel with respect to pollution including, to
the extent applicable, the International Convention of Maritime Pollution of
1973, the International Convention for the Safety of Life at Sea of 1974, the
U.S. Water Pollution Act as amended by the Water Pollution Control Act
Amendment of 1972, the U.S. Oil Pollution Act of 1990, as the same may be
amended from time to time, and will maintain all certificates or other evidence
of financial responsibility as may be required by any such law, regulation,
proclamation or order with respect to the trade which the Vessel from time to
time is engaged in.
(u) Insolvency. The Borrower shall provide GE Capital with
written notice of the commencement of proceedings by or against it or the
Guarantors under the applicable bankruptcy laws or other insolvency laws (as
now or hereafter in effect), involving it or the Guarantors, as a debtor.
(v) Request for Information. The Borrower shall (i) keep and
maintain accurate books and records, (ii) make entries on such books and
records in form reasonably satisfactory to GE Capital disclosing GE Capital 7
assignment of, and security interest in and lien on, the Collateral and all
proceeds thereof, (iii) furnish to GE Capital promptly upon request such other
information, reports, contracts, invoices as GE Capital may from time to time
request
(w) Bonding and Compliance with ERISA. To the extent
applicable, the Borrower shall maintain at all times such bonding as is
required by ERISA. As soon as practicable and in any event within fifteen (15)
days after it knows or has reason to know that, with respect to any plan, a
"reportable event" has occurred, the Borrower will deliver to GE Capital a
certificate signed by its chief financial officer setting forth the details of
such "reportable event".
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(x) Notice of Hazardous Materials. Within ten (10) days after
the Borrower obtains actual knowledge thereof, the Borrower shall immediately
advise GE Capital in writing and deliver a copy of(a) any and all enforcement,
clean-up, removal or other governmental or regulatory actions expected to cost
in excess of Two Hundred Fifty Thousand United States Dollars ($250,000)
instituted, completed or threatened pursuant to any applicable federal state or
local laws, ordinances or regulations relating to any Hazardous Materials
affecting the Collateral ("Hazardous Materials Laws"); and (b) all claims made
or threatened by any third party against the Borrower in excess of Two Hundred
Fifty Thousand United States Dollars ($250,000) relating to damage,
contribution, cost recovery compensation, loss or injury resulting from any
Hazardous Materials (the matters set forth in clauses (a) and (b) above are
hereinafter referred to an "Hazardous Materials Claims").
(y) Possession. The Borrower shall continue to use the
Collateral solely in its trade or business and except as otherwise permitted
herein shall not part with possession thereof (except for maintenance and
repair).
(z) Place of Business. The Borrower shall give GE Capital at
least fifteen (15) Business Days' prior written notice of the change of its
principal place of business, giving the complete address of such new place of
business and execute and file Uniform Commercial Code financing statements,
amendments or continuation statements in form and substance satisfactory to GE
Capital, in such jurisdiction or jurisdictions as GE Capital shall request upon
demand by GE Capital.
Section 7.02. Negative Covenants. Until the Borrower's Obligations have
been satisfied in full, the Borrower shall not:
(a) Change of Business. Make or permit any material change in
the nature of its business.
(b) Liens. Create, incur, assume or suffer to exist any
mortgage, security interest, pledge, lien or other charge or encumbrance on the
Collateral (except for Permitted Liens).
(c) Assignments. Allow any insurances, charters, freights and
subfreights (if applicable), hire or other earnings in respect of the Vessel to
be assigned to any Person other than GE Capital.
(d) Flag; Etc. . Change the flag of the Vessel. In addition,
without the prior written consent of GE Capital (which consent shall not be
unreasonably withheld), the Borrower shall not change the name of the Vessel
without first registering such name with the United States Trademark and Patent
Office and granting GE Capital of a security interest therein, and any such
written consent to any one change of the name of the Vessel or the hailing port
or port of documentation shall not be construed to be a waiver of this
provision with respect to any subsequent proposed change of the name of the
Vessel or the hailing port or port of documentation.
(e) Sale or Transfer of Collateral. Except as otherwise
expressly permitted herein, sell or transfer the Collateral to any Person.
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(f) Investments and Advances. Other than Investments, Advances
and Contingent Liabilities made or incurred as of the date hereof, make any
further Investments or Advances or incur any further Contingent Liabilities
other than for:
(i) Investments in Cash Equivalents.
(ii) Investments received in settlement of
arms-length disputes with non-affiliates of the Borrower.
(iii) Investments received as consideration for
asset sales made in arms-length transactions for fair market consideration.
(g) Additional Indebtedness. Provide or incur any additional
indebtedness.
(h) Contingent Liabilities. Incur any Contingent Liabilities.
(i) Dividends. Pay or declare dividends or distributions on
capital stock if a Default or Event of Default has occurred and remains
continuing or if a Default or Event of Default would result from the
declaration and/or payment of such dividend or distribution on capital stock.
(j) Consolidation, Merger, Sale of Assets, etc.. Wind up its
affairs, liquidate its assets or dissolve or enter into any transaction of
merger or consolidation, or convey, sell, lease or Otherwise dispose of (or
agree to do any of the forgoing) all or any substantial part of its property or
assets.
(k) ERISA.
(i) At any time, permit any Pension Plan which is
maintained by it or to which it is obligated to contribute on behalf of its
respective employees, to:
(x) engage in any nonexempt "prohibited
transaction", as such term is defined in Section 4975 of the Code;
(y) incur any material "accumulated funding
deficiency", as that term is defined in Section 3 02 of ERISA, or
(z) suffer a termination event to occur
which may reasonably be expected to result in liability of such Borrower to the
Pension Plan or to the Pension Benefit Guaranty Corporation or the imposition of
a lien on the Collateral pursuant to Section 4068 of ERISA.
(ii) Fail, upon the Borrower becoming aware thereof, promptly
to notify GE Capital of the occurrence of any "reportable event" where
reporting requirements as to the same have not been waived by the Pension
Benefit Guaranty Corporation (as defined in Section 4043 of ERISA) or of any
non-exempt "prohibited transaction" (as defined in Section 4975 of the Code)
with respect
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to any Pension Plan which is maintained by such Borrower or to which such
Borrower is obligated to contribute on behalf of its employees or any trust
created thereunder.
(iii) At any time, permit any Pension Plan which is
maintained by it or to which it is obligated to contribute on behalf of its
employees to fail to comply with ERISA or other applicable laws in any respect
that would result in a Material Adverse Effect.
ARTICLE VIII
EVENTS OF DEFAULT: REMEDIES
Section 8.01. Events of Default Remedies, etc. If any of the following
events (each an "Event of Default" and collectively "Events of Default") shall
occur and be continuing:
(a) the Borrower shall fail to pay, within five days after
the date when the same becomes due, any installment of principal and/or
interest due on the Note or to pay when due any other sum payable hereunder or
under any of the other Loan Documents; or
(b) the Borrower shall sell, demise charter, mortgage, grant
a security interest in, otherwise transfer or encumber (except for Permitted
Liens) any of the Collateral, in each instance without the prior written
consent of GE Capital; or
(c) the Borrower shall fail to procure, maintain in effect at
all times, all required insurances on the Collateral; or
(d) the anticipatory repudiation by the Guarantors of their
obligations under the Guaranty; or
(e) the Guarantors shall fail to perform or observe any of
their obligations under the Guaranty (within any applicable grace or cure
periods); or
(f) the Borrower or the Guarantors shall fail to perform or
observe, or cause to be performed or observed, any other term, covenant or
agreement contained herein or in any of the other Loan Documents or any
certificate delivered pursuant thereto and such failure shall continue
unremedied for a period of thirty (30) days after the giving of notice thereof;
provided, however, that if such default is capable of being remedied but cannot
be remedied within said thirty (30) day period, so long as the Borrower and/or
Guarantors undertake to remedy such default within said thirty (30) day period
and diligently pursues such cure, the Borrower and/or Guarantors shall have up
to a total of sixty (60) days to effectuate such cure; or
(g) any representation or warranty made or deemed to be made
by the Borrower hereunder or by the Borrower or the Guarantors in any of the
other Loan Documents shall prove to be false or misleading in any material
respect; or
(h) the Borrower or the Guarantors shall (i) fail to pay when
due any indebtedness for borrowed money or any interest or premium thereon when
due (whether by scheduled maturity,
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required prepayment, acceleration, demand or otherwise), and such failure shall
continue unremedied after the applicable grace period, if any, or (ii) fail to
timely perform or observe any term, covenant or condition to be performed or
observed by it under any agreement or instrument relating to any such
indebtedness for borrowed money and such failure shall continue unremedied after
the applicable grace period, if any, specified in such agreement or instrument;
or
(i) a final judgment or order in excess of $250,000 (not
otherwise covered by insurance) shall be rendered against the Borrower and/or
the Guarantors and such judgment or order shall continue unsatisfied, in effect
and unstayed or unbonded for a period of thirty (30) consecutive days; or
(j) the Borrower or the Guarantors shall (i) apply for or
consent to the appointment of or the taking possession by a receiver, trustee,
liquidator, assignee, custodian, sequestrator or the like of itself or of its
property, (ii) fail generally or admit its inability to pay its debts as they
mature, (iii) become insolvent, (iv) make a general assignment for the benefit
of creditors, (v) commence a voluntary case under the bankruptcy laws of any
jurisdiction, (vi) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any insolvency law or an
answer admitting the material allegations of a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding or (vii) take limited
liability company action or other action for the purpose of effecting any of
the foregoing; or
(k) an order, judgment, or decree shall be entered in any
voluntary or involuntary case with or without the application, approval or
consent of the Borrower or the Guarantors, by a court or governmental agency of
competent jurisdiction, granting relief under or approving a petition seeking
reorganization, or appointing a receiver, trustee, liquidator, assignee,
custodian, sequestrator or the like of the Borrower or the Guarantors or of the
property of either of them, and such order, judgment or decree shall continue
unstayed and in effect for a period of thirty (30) consecutive days; or
(l) any notice shall have been issued by the United States
Coast Guard to the effect that the Vessel is subject to deletion from registry
or the certificate of documentation of the Vessel is subject to revocation or
cancellation, for any reason whatsoever; or
(m) GE Capital fails to hold duly recorded first preferred
mortgage or security interest on the Vessel or a first priority security
interest in all other Collateral;
(n) the Borrower shall be in default under any other
obligation to GE Capital, or under any obligation to-any other person for the
payment of borrowed money, for the deferred purchase price of property, or for
the payment of any rent under any lease agreement covering real or personal
property, and the applicable grace period with respect thereto shall have
expired;
(o) a material adverse change in the financial condition of
either the Borrower or the Guarantors, which in the opinion of GE Capital may
adversely affect the ability of the Borrower or the Guarantors (as the case may
be) to perform their obligations hereunder, under the Note or under any of the
other Loan Documents, and such change is not cured to the satisfaction of GE
Capital within thirty days after written notice to the Borrower; or
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(p) a default or an event of default shall occur under any of
the other Loan Documents (after giving effect to any applicable grace or cure
period); or
(q) legislation is passed which (or any Gaming Authorities
act to) suspends, revokes or otherwise materially restricts the Borrower's
authority to engage in Casino Gaming Operations aboard the Vessel; or
(r) a change of ownership or dissolution, merger,
consolidation, liquidation or reorganization of the Borrower or Leisure Time
Technology, Inc., then, and in any such event, (A) GE Capital at its option,
may declare the Note to be in default and accelerate payment of all sums due
hereunder, whereupon all such amounts shall become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
the Borrower hereby waives, (B) GE Capital may terminate any charter or
management agreement (if any) relating to the Vessel, (C) may withhold for a
period of up to three (3) months all management fees due the managers of the
Vessel, (D) set-off against and debit any account maintained by Borrower with
GE Capital or its agent directly for any sums due GE Capital hereunder and
under the Note; (E) immediately proceed against the Guarantors under the
Guaranties; (F) immediately proceed against the Vessel under the First
Preferred Mortgage; (G) GE Capital may exercise any or all other remedies
available to it under any of the Loan Documents or any applicable law,
provided, however, if a default occurs under subparts (j) and (k) of this
Section 8.01, no such declaration shall be necessary and subpart (A), ( B),
(C), (D), (E), (F) and (G) hereof shall operate as if such declaration had been
made. The rights and remedies of GE Capital hereunder and under any documents
or instruments executed pursuant hereto are cumulative, and recourse to one or
more rights or remedies shall not constitute a waiver of the others or an
election of remedies. It is mutually agreed that commercial reasonableness and
good faith require the giving of no more than ten (10) days ' prior written
notice of the time and place of any public sale of any Collateral or of the
time after which any private sale or any other intended disposition thereof is
to be made, and at any such public or private sale, subject to limitations of
law, GE Capital, its agents and/or nominees, may purchase any or all of the
Collateral. If the net proceeds of any disposition of Collateral exceed the
amount then due and owing, whether by acceleration, normal maturity or
otherwise, such excess will be remitted to Borrower or whomsoever shall be
entitled thereto. Borrower shall remain liable for any deficiency remaining
after disposition of the Collateral.
If Borrower fails to perform or comply with any of its obligations
contained herein, GE Capital shall have the right, but shall not be obligated,
to effect such performance or compliance and Borrower shall, within ten (10)
days from the date of demand, immediately reimburse GE Capital for such sums so
expended, together with interest thereon at the late charge rate specified in
the Note for the actual number of days elapsed from date of payment by GE
Capital to the date on which Lender receives payment thereof from Borrower.
Failure of Borrower to pay and promptly discharge the aforesaid debts and
obligations shall constitute an Event of Default under this Agreement, but the
payment of the same by GE Capital pursuant to this Section shall not cure or
constitute a waiver of such Event of Default. Upon an Event of Default, all
payments received by GE Capital from or on behalf of Borrower may be applied by
GE Capital to any installment(s) due and payable under the Note as GE Capital
may determine in its sole discretion, without notice to or consent of Borrower,
Borrower hereby expressly waiving (to the extent permitted by law) all rights
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to make or manifest any binding instruction upon GE Capital as to application of
such payments other than as herein provided. Acceptance by GE Capital of partial
payment(s) or performance by the Borrower or the Guarantors or by any other
third party shall not be construed as a waiver of any Event of Default, nor
shall the same affect or in any way impair the rights and remedies of GE Capital
hereunder.
In the event this Agreement, the Note or any other Loan Documents are
placed in the hands of an attorney for collection of money due or to become due
or to obtain performance of any provision hereof, the Borrower agrees to pay all
reasonable attorneys' fees incurred by GE Capital, and further agrees that
payment of such fees is secured hereunder. The Borrower and GE Capital agree
that such fees to the extent not in excess of twenty percent (20%) of subject
amount owing after default (if permitted by law, or such lesser sum as may
otherwise be permitted by law) shall be deemed reasonable.
GE Capital's rights and remedies hereunder or otherwise arising are
cumulative and may be exercised singularly or concurrently. Neither the failure
nor any delay on the part of GE Capital to exercise any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. GE
Capital shall not be deemed to have waived any of its rights hereunder or under
any other agreement, instrument or paper signed by the Borrower unless such
waiver be in writing and signed by GE Capital. A waiver on any one occasion
shall not be construed as a bar to or waiver of any right or remedy on any
future occasion.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Amendments, etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by the Borrower therefrom shall
in any event be effective unless the same shall be in writing and signed by GE
Capital and then such waiver or consent shall be effective only in the
specific-instance and for the specific purpose for which given.
Section 9.02. Notices, etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic
communications) and mailed telexed, telecopied, telegraphed or delivered as
follows:
To the Borrower:
Leisure Belle Cruise L.L.C.
5825-B Peachtree Corners East
Norcross, Georgia 30092
Attn: Eldon Rance
Facsimile No.: (770) 446-2211
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with copies to:
Leisure Time Technology, Inc.
5825-B Peachtree Corners East
Norcross, Georgia 30092
Attn: Eldon Rance
Facsimile No.: (770) 446-2211
Leisure Time Casinos & Resorts, Inc.
1248 Miller Road
Avon, Ohio 44052
Attn: Mr. A. N. Johnson
Facsimile No.: (216) 934-1027
Smith McCullough, P.C.
4643 S. Ulster Street
Suite 900
Denver, Colorado 80237
Attn: Thomas S. Smith, Esq.
Facsimile No.: (303)221-6001
To GE Capital:
General Electric Capital Corporation
Commercial Equipment Financing
44 Old Ridgebury Road
Danbury, Connecticut 06810-5105
Facsimile No.: (203) 796-1315
With a copy to:
Region Counsel
General Electric Capital Corporation
777 Long Ridge Road, Building B, First Floor
Stamford, Connecticut 06927
Telecopy: (203) 703-1777
or to such other address as shall be designated by such part in a written
notice to the other party . All such notices and communications shall, when
mailed be sent by first class registered mail postage prepaid and be effective
5 days after being deposited in the US mails addressed as aforesaid. All
notices sent by telex shall be effective when sent, provided that (i) an
appropriate answer back has been received by the sending party and (ii) such
telex transmission is confirmed by mailing to the receiving party at its
address given above, a copy of such telex postage prepaid by first class mail
(air mail if international). All other forms of written notice or other
communication shall be effective upon receipt.
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Section 9.03. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 9.04. Service of Process and Consent to Jurisdiction: Waiver of
Immunity. The Borrower hereby irrevocably submit itself to the non-exclusive
jurisdiction of the Federal and State courts located in the State of New York,
in any action brought against the Borrower under this Agreement, the Note or any
other Loan Document and agrees that a summons and complaint commencing any
action or proceeding in such court shall be properly served if delivered
personally or by certified mail, postage prepaid, return receipt requested to
the Borrower at its address set forth in Section 9.02 above, or otherwise served
under the laws of the State of New York, and the Borrower hereby waives any
objection to venue and jurisdiction which the Borrower may now or hereafter
have. The Borrower shall promptly notify GE Capital of any change in such
address. Nothing herein shall affect the right of GE Capital to serve process in
any other matter prescribed by law or the right of GE Capital to bring legal
proceedings in any other competent jurisdiction.
Section 9.05. No Remedy Exclusive. Each and every right, power and
remedy given to GE Capital in this Agreement, the Note and the Loan Documents
shall be cumulative and shall be in addition to every other right, power and
remedy herein or therein given now or hereafter existing at law, in equity, in
admiralty, by statute or otherwise. Each and every right, power and remedy
whether given therein or otherwise existing may be exercised from time to time
as often and in such order as may be determined by GE Capital, and neither the
failure or delay in exercising any power or right nor the exercise or partial
exercise of any right, power or remedy shall be construed to be a waiver of or
acquiescence in any default therein; nor shall the acceptance of any security or
of any payment of or on account of any loan, any promissory note, Advances,
obligations, expenses, interest or fees maturing after a default or of any
payment on account of any past default be construed to be a waiver of any right
to take advantage of any future default or of any past default not completely
cured thereby.
Section 9.06. Payment of Costs. Whether or not the transactions
contemplated herein shall be consummated, the Borrower hereby agrees to pay (a)
all costs and expenses incurred by GE Capital (including the fees and expenses
of its counsel) in connection with the preparation, execution and delivery of
this Agreement and any other Loan Document or any amendment to any Loan
Document, and (b) all losses, costs and expenses (including, but not limited to,
attorneys' fees and expenses) in connection with (i) the preservation of any
rights of GE Capital under, or legal advice in respect of, the rights or
responsibilities of GE Capital under this Agreement and the other Loan Documents
or (ii) the enforcement of any of the Loan Documents. The Borrower further
agrees to indemnify and hold GE Capital harmless from and against any
documentary taxes, assessments or charges made by any governmental authority by
reason of the execution, delivery, filing or recordation of this Agreement or
any of the other Loan Documents.
Section 9.07. Further Assurances. The Borrower agrees to execute such
other and further assurances and documents as in the opinion of GE Capital
reasonably may be required more effectively to carry out the terms of this
Agreement or of any of the other Loan Documents.
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Section 9.08. Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall be deemed an original but all
such counterparts shall together constitute but one and the same instrument.
Section 9.09. Headings. The titles of the Articles and the Section
headings of this Agreement are for convenience only and shall not affect the
construction of this Agreement
Section 9.10. Severability. If any term or provision of this Agreement
or any of the other Loan Documents shall be determined to be invalid or
Unenforceable for any reason, such determination shall not adversely affect any
other term or provision of this Agreement or such other Loan Document which
shall remain in full force and effect and the effect of such determination shall
be limited to the territory or the jurisdiction in which made.
Section 9.11. Survival. The Borrower's agreements, representations,
warranties and conditions contained in this Agreement and made pursuant to the
provisions hereof shall survive the execution and delivery of this Agreement
until the Note and the interest thereon shall have been paid in full in
accordance with the terms of this Agreement and the Note and any and all other
moneys, payments, obligations and liabilities which the Borrower shall have
made, incurred or become liable for pursuant to the terms of this Agreement or
any of the other Loan Documents shall have been paid in full. All statements
contained in any certificate or other instrument delivered pursuant to the
provisions of this Agreement shall constitute representations and warranties by
the Borrower under this Agreement.
Section 9.12 WAIVER OF TRIAL BY JURY. THE BORROWER HEREBY
UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION, BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT,
ANY AMOUNTS SECURED HEREBY, ANY DEALINGS BETWEEN THE BORROWER AND GE CAPITAL
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR ANY RELATED TRANSACTIONS.
The scope of this waiver is intended to be all encompassing of any and all
disputes that may be filed in any court (including, without limitation, contract
claims, tort claims, breach of duty claims, and all other common law and
statutory claims). THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMISNTS OR MODIFICATIONS TO THIS AGREEMENT, OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY. In the event of litigation, this Agreement may
be filed as a written consent to a trial by the court.
Section 9.13. Assignment. GE Capital may assign any or all of its
rights and obligations hereunder or under any of the other Loan Documents upon
notice to but without the consent of the Borrower and the Borrower hereby waives
any defense, counterclaim or cross-complaint by the Borrower against the
assignee, agreeing that GE Capital shall be solely responsible therefor.
Additionally, GE Capital may upon notice to but without the consent of the
Borrower sell to any other Person participations in the Loan. Upon its receipt
of notice thereof, the Borrower shall acknowledge the same in writing and, in
the case of any such assignment, shall agree to comply with all instructions
given to it by such assignee as to the interests thereby assigned. Without the
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prior written consent of GE Capital, the Borrower may not assign any of its
rights or obligations hereunder to any Person.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, under seal, as of the day and year first above written.
W1TNESS: GENERAL ELECTRIC CAPITAL CORPORATION
/s/ By: /s/ SEAL)
- ------------------------------ ----------------------------------------
WITNESS: LEISURE BELLE CRUISE L.L.C.
By: LEISURE TIME CRUISE CORPORATION,
Its sole member
/s/ By: /s/ SEAL)
- ------------------------------ ----------------------------------------
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Schedule 1
DESCRIPTION OF ADDITIONAL COLLATERAL
All non-gaming equipment and other personal property used in connection
with the operation of the Vessel and in all earnings, insurance and requisition
compensation of the Vessel.
31
<PAGE> 1
EXHIBIT 10.32
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (the "Guaranty") is given by LEISURE TIME
CASINOS & RESORTS, INC., a Colorado corporation (the "Guarantor"), for the
benefit of GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("GE
Capital"), with respect to the obligations of LEISURE BELLE CRUISE L.L.C.
("Borrower") to GE Capital. The Borrower has applied to GE Capital for a loan in
the original principal amount of $1,500,000 ("Loan"). The Guarantor has
requested GE Capital to make the Loan to the Borrower and, in consideration
therefor and of the substantial direct and indirect benefits which it will
derive therefrom, gives the following guaranty and indemnification to GE
Capital.
Section 1. The Guaranty. The Guarantor hereby UNCONDITIONALLY AND
IRREVOCABLY GUARANTEES: (a) the full and punctual payment when due of any and
all sums now or hereafter owing by the Borrower to GE Capital as a result of or
in connection with the Loan and all renewals, refinancings, extensions,
substitutions, amendments, and modifications thereof, including, but not
limited to, all amounts of principal, interest, penalties, reimbursements,
advancements, escrows, and fees; (b) the timely, complete, continuous, and
strict performance and observance by the Borrower of any and all of the terms,
covenants, agreements and conditions contained in any and all existing or
future documents, instruments, agreements, and writings of every kind, nature,
type, and variety which evidence, reflect, embody, give rise to or secure any
and all existing and future indebtedness, liabilities, and obligations of any
kind of the Borrower to GE Capital as a result of or in connection with the
Loan and (c) the payment upon demand of all costs and expenses incurred by GE
Capital in connection with its enforcement of this Guaranty. As used in this
Guaranty, the term "Obligations" shall refer to the obligations of payment,
performance, and indemnification which the Guarantor has undertaken and assumed
pursuant to this Guaranty, both as described in this Section and in other
Sections of this Guaranty and the term "Loan Documents" shall refer to the Loan
and Security Agreement dated the date hereof between GE Capital and the
Borrower and all other documents executed and/or delivered in connection
therewith evidencing, securing or guaranteeing the Loan.
Section 2. Nature of the Guaranty. This Guaranty: (a) is (i)
irrevocable; (ii) absolute and unconditional; (iii) direct, immediate and
primary; and (iv) one of payment and not just collection; and (b) makes the
Guarantor a surety to GE Capital and primarily liable with the Borrower.
Section 3. Accuracy of Representations. The Guarantor hereby
guaranties that each and every representation and warranty made by the Borrower
or by the Guarantor to GE Capital, both before and after the date of this
Guaranty, are and will continue to be true,
<PAGE> 2
correct, accurate, and complete, in all respects, and not knowingly misleading,
and the Guarantor shall indemnify and hold GE Capital, its agents and
employees, harmless from any and all losses, costs, or expenses which GE
Capital may suffer, sustain or incur as a result of any representation or
statement of the Borrower or of the Guarantor being false, incorrect,
inaccurate, incomplete, or knowingly misleading.
Section 4. Foreclosure Indemnification. In the event that any real or
personal property secures either the Loan or the Obligations, and GE Capital or
any affiliate of GE Capital acquires the same after a default by the Borrower
or the Guarantor in full or partial satisfaction of the obligations of the
Borrower to GE Capital or the Obligations, the Guarantor shall indemnify and
hold GE Capital, its agents and employees, harmless from any and all losses,
costs, or expenses which GE Capital, may sustain as a result of: (a) selling
the real or personal property so acquired for less than the total sums owed
with respect to the obligations of the Borrower to GE Capital or the
Obligations, as the case may be; provided, however, that any such sale by GE
Capital is done in a commercially reasonable manner, or (b) any action brought
against GE Capital under ss. 548 or ss. 544(b) of the United States Bankruptcy
Code, as amended, or other similar statutory provision, on the ground that the
consideration paid by GE Capital for the real or personal property was not
"reasonably equivalent value," within the contemplation of ss. 548 or ss.
544(b) of the United States Bankruptcy Code, as amended, or other similar
statutory provision or "fair consideration," within the contemplation of any
applicable state fraudulent conveyance or transfer law or was otherwise
inadequate.
Section 5. Reporting Requirements. The Guarantor shall deliver, or
cause the Borrower to deliver, to GE Capital (a) as soon as available but in no
event more than one hundred twenty (120) days after the end of each fiscal year
of the Guarantor, the consolidated and consolidating financial statements of
the Guarantor and its subsidiaries, prepared in accordance with generally
accepted accounting principles ("GAAP"), all in reasonable detail and certified
by independent certified public accountants of recognized standing selected by
the Guarantor and acceptable to GE Capital; (b) as soon as available but in no
event more than sixty (60) days after the end of each quarter of the
Guarantor's fiscal year, the consolidated financial statements of the Guarantor
and its subsidiaries for such quarter, prepared in accordance with GAAP and
certified by the chief financial officer of the Guarantor; (c) as soon as
available, all other statements filed with the Securities and Exchange
Commission or any successor agency thereof; and (d) such other financial
information as GE Capital may reasonably request from time to time.
Section 6. GE Capital Need Not Pursue Other Rights Before Enforcing
Guaranty. GE Capital shall be under no obligation to pursue its rights against
the Borrower or any of the collateral of
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the Borrower securing the Loan or against any other guarantor or any other
person that is now or hereafter liable upon or in connection with any of the
obligations of the Guarantor or the Borrower to GE Capital or that has granted
any lien or security interest to or for the benefit of GE Capital to secure any
of the obligations of the Guarantor or the Borrower to GE Capital ("Other
Obligor") or any collateral of any Other Obligor before pursuing its rights
against the Guarantor.
Section 7. Right of GE Capital to Act With Respect to the Borrower,
Other Obligors, and Collateral. The Guarantor hereby assents to any and all
terms and agreements between GE Capital and the Borrower or between GE Capital
and any Other Obligor, and all amendments and modifications thereof, whether
presently existing or hereafter made and whether oral or in writing. GE Capital
may, without compromising, impairing, diminishing, or in any way releasing the
Guarantor from the Obligations and without notifying or obtaining the prior
approval of the Guarantor, at any time or from time to time: (a) waive or
excuse any default by the Borrower or any Other Obligor, or delay in the
exercise by GE Capital of any or all of GE Capital's rights or remedies with
respect to such default; (b) grant extensions of time for payment or
performance by the Borrower or any Other Obligor; (c) release, substitute,
exchange, surrender, or add collateral of the Borrower or of any Other Obligor,
or waive, release, or subordinate, in whole or in part, any lien or security
interest held by GE Capital on any real or personal property securing payment
or performance, in whole or in part, of the obligations of the Borrower or of
any Other Obligor to GE Capital; (d) release the Borrower or any Other Obligor;
(e) apply payments made by the Borrower, or by any Other Obligor, to any sums
owed by the Borrower or any Other Obligor to GE Capital, in any order or
manner, or to any specific account or accounts, as GE Capital may elect; and
(f) modify, change, renew, extend, or amend, in any respect GE Capital's
agreement with the Borrower or any Other Obligor, or any document, instrument,
or writing embodying or reflecting the same.
Section 8. Waivers by the Guarantor. The Guarantor hereby waives: (a)
any and all notices whatsoever with respect to this Guaranty or with respect to
any of the obligations of the Borrower to GE Capital, including, but not
limited to, notice of: (i) GE Capital's acceptance hereof or GE Capital's
intention to act, or GE Capital's action, in reliance hereon; (ii) the present
existence or future incurring of any of the obligations of the Borrower to GE
Capital or any terms or amounts thereof or any change therein; (iii) any
default by the Borrower or any Other Obligor; and (iv) the obtaining or release
of any guaranty or surety agreement, pledge, assignment, or other security for
any of the obligations of the Borrower to GE Capital; (b) presentment and
demand for payment of any sum due from the Borrower or any Other Obligor and
protest of nonpayments; and (c) demand for performance by the Borrower or any
Other Obligor.
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Section 9. Unenforceability of Obligations of the Borrower. This
Guaranty shall be valid, binding, and enforceable even if the obligations of
the Borrower to GE Capital which are guaranteed hereby are now or hereafter
become invalid or unenforceable for any reason.
Section 10. No Conditions Precedent. This Guaranty shall be effective
and enforceable immediately upon its execution. The Guarantor acknowledges that
no unsatisfied conditions precedent to the effectiveness and enforceability of
this Guaranty exist as of the date of its execution and that the effectiveness
and enforceability of this Guaranty are not in any way conditioned or
contingent upon any event, occurrence, or happening, or upon any condition
existing or coming into existence either before or after the execution of this
Guaranty.
Section 11. Information Concerning the Borrower, Collateral, or Other
Obligors. GE Capital shall have no present or future duty or obligation to
discover or to disclose to the Guarantor any information, financial or
otherwise, concerning the Borrower, any Other Obligor, or any collateral
securing the obligations of the Borrower to GE Capital or of any Other Obligor
to GE Capital. The Guarantor waives any right to claim or assert any such duty
or obligation on the part of GE Capital. The Guarantor agrees to obtain all
information which the Guarantor considers either appropriate or relevant to
this Guaranty from sources other than GE Capital to the extent they exist and
to become and remain at all times current and continuously apprised of all
information concerning the Borrower, Other Obligors, and any collateral which
is material and relevant to the Obligations of the Guarantor under this
Guaranty.
Section 12. Cumulative Liability. The liability of the Guarantor under
this Guaranty shall be cumulative to, and not in lieu of, the Guarantor's
liability under any other Loan document or in any capacity other than as the
Guarantor hereunder.
Section 13. Obligations Unconditional. The payment and performance of
the Obligations shall be the absolute and unconditional duty and obligation of
the Guarantor, and shall be independent of any defense or any rights of
set-off, recoupment or counterclaim which the Guarantor might otherwise have
against GE Capital, and the Guarantor shall pay and perform the Obligations,
free of any deductions and without abatement, diminution or set-off; and until
such time as the Obligations have been fully paid and performed, the Guarantor:
(a) shall not suspend or discontinue any payments provided for therein; (b)
shall perform and observe all of the covenants and agreements contained in this
Guaranty; and (c) shall not terminate or attempt to terminate this Guaranty for
any reason. No delay by GE Capital in making demand on the Guarantor for
satisfaction of the Obligations shall prejudice or in any way impair GE
Capital's ability to enforce this Guaranty.
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Section 14. Defenses Against Debtor. The Guarantor waives any right to
assert against GE Capital any defense (whether legal or equitable), claim,
counterclaim, or right of set-off or recoupment which the Guarantor may now or
hereafter have against the Borrower or any Other Obligor.
Section 15. Covenants of Guarantor. Until all sums due by the Borrower
and the Guarantor have indefeasibly been paid in full, the Guarantor hereby
covenants that it will at all times maintain a ratio of Debt to Net Worth of
not more than 5.5 to 1. For purposes hereof, "Debt" means total debt and other
liabilities and "Net Worth" means shareholder equity, in each case as defined
by general acceptable accounting principles applied on a consistent basis.
Section 16. Events Authorizing Acceleration of the Obligations. If any
of the following shall happen or occur, GE Capital, without notice or demand,
may accelerate and call due the Obligations, even if GE Capital has not
accelerated and called due the sums owed to GE Capital by the Borrower: (a) a
default by the Borrower or any Other Obligor of any existing or future
obligation owed by the Borrower or Other Obligor to GE Capital; (b) the failure
of the Guarantor to perform any covenant or agreement contained in this
Guaranty; (c) a default in any other agreement, instrument or document between
the Guarantor, the Borrower or Other Obligor and GE Capital, or any corporate
affiliate of GE Capital, whether previously, simultaneously, or hereafter
entered into; (d) a material adverse change in the financial condition of the
Guarantor, the Borrower or Other Obligor from that expressed in the financial
statement most recently submitted to GE Capital prior to the date of this
Guaranty, as determined in good faith by GE Capital in its sole discretion; (e)
institution of bankruptcy, insolvency, reorganization or receivership
proceedings by or against the Guarantor, the Borrower or Other Obligor in any
state or federal court; (f) the appointment of a receiver, assignee, custodian,
trustee or similar official under any federal or state insolvency or creditors'
rights law for any property of the Guarantor, the Borrower or Other Obligor;
(g) any warranty, representation, or statement to GE Capital by or on behalf of
the Guarantor, the Borrower or Other Obligor proving to have been incorrect in
any material respect when made or furnished; (h) the occurrence of any event
which is, or would be in the passage of time or the giving of notice or both, a
default under any indebtedness of the Guarantor, the Borrower or Other Obligor
to any person other than GE Capital; (i) any material loss, theft or
substantial damage, not fully insured for the benefit of GE Capital, to any of
the assets of the Guarantor, the Borrower or Other obligor, or the transfer or
encumbrance of any material part of the assets of the Guarantor, the Borrower
or Other Obligor other than in the ordinary course of business; (j) the entry
of any final judgment against the Guarantor, the Borrower or Other Obligor for
the payment of money in excess of $250,000 (to the extent not covered by
insurance) and such judgment is not satisfied or, if
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appealed, bonded off within thirty (30) days thereafter; (k) the levy upon or
attachment of any assets of the Guarantor, the Borrower or Other Obligor and
such levy or attachment is not released or bonded off within thirty (30) days
of the date thereof; (l) the recordation of any federal, state or local tax
lien against the Guarantor, the Borrower or Other Obligor that is not satisfied
or bonded over within thirty (30) days thereafter; (m) a change of ownership,
merger or consolidation of the Borrower or Other Obligor or the dissolution,
liquidation or reorganization of the Guarantor, the Borrower or any Other
Obligor; or (n) the failure of the Guarantor, the Borrower or Other Obligor to
furnish to GE Capital such financial information as GE Capital may reasonably
request from time to time and such failure shall continue unremedied for a
period of ten (10) days thereafter.
Section 17. Expenses of Collection and Attorney's Fees. The Guarantor
shall pay all reasonable costs and expenses incurred by GE Capital in
collecting sums due under this Guaranty, including, without limitation, the
costs of any lien, judgment or other record searches, appraisals, travel
expenses and the like. In addition, if this Guaranty is referred to an attorney
for collection, whether or not judgment has been confessed or suit has been
filed, the Guarantor shall pay all of GE Capital's costs, fees (including, but
not limited to, GE Capital's reasonable attorneys' fees, charges and expenses)
and all other expenses resulting from such referral (to the extent not
prohibited by law).
Section 18. Interest Rate After Judgment. If judgment is entered
against the Guarantor on this Guaranty, the amount of such judgment (which may
include principal, interest, charges, fees and costs) shall bear interest to
the extent permitted by applicable law at the higher of the default interest
rate set forth in the Loan Documents, as determined on the date of the entry of
the judgment, or the legal rate of interest then applicable to judgments in the
jurisdiction in which judgment was entered.
Section 19. Enforcement During Bankruptcy. Enforcement of this
Guaranty shall not be stayed or in any way delayed, as a result of the filing
of a petition under the United States Bankruptcy Code, as amended, or other
similar statutory scheme, by or against the Borrower. Should GE Capital be
required to obtain an order of the United States Bankruptcy Court or other
court of competent jurisdiction to begin enforcement of this Guaranty after the
filing of a petition under the United States Bankruptcy Code, as amended, or
other similar statutory scheme, by or against the Borrower, the Guarantor
hereby consents to this relief and agrees to file or cause to be filed all
appropriate pleadings to evidence and effectuate such consent and to enable GE
Capital to obtain the relief requested.
Section 20. Remedies Cumulative. All of GE Capital's rights and
remedies shall be cumulative and any failure of GE Capital to exercise any
right hereunder shall not be construed as a waiver of
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the right to exercise the same or any other right at any time, and from time to
time, thereafter.
Section 21. Discharge of Guaranty. This Guaranty shall not be
discharged and the Guarantor shall not be released from liability until all
Obligations have been satisfied in full and the satisfaction of the Obligations
is not subject to challenge or contest. If all or any portion of the
Obligations are satisfied and GE Capital is required for any reason to pay to
any person the sums used to satisfy the Obligations, the Obligations shall
remain in effect and enforceable to the extent thereof.
Section 22. Termination. This Guaranty may be terminated only in
writing by GE Capital and upon such terms and conditions as GE Capital may
impose.
Section 23. Rights of Subrogation, Etc. In the event the Guarantor
pays any sum to or for the benefit of GE Capital pursuant to this Guaranty, the
Guarantor shall have no right of contribution, indemnification, exoneration,
reimbursement, subrogation or other right or remedy against or with respect to
the Borrower, any Other Obligor, or any collateral, whether real, personal, or
mixed, securing the obligations of the Borrower to GE Capital or the
obligations of any Other Obligor until such time as the Borrower and/or the
Guarantor have indefeasibly paid in full all sums due GE Capital.
Section 24. Subordination of Certain Indebtedness. If the Guarantor
has advanced or hereafter advances any sums to the Borrower or its successors
or assigns or if the Borrower or its successors or assigns is now or shall
hereafter become indebted to the Guarantor, such sums and indebtedness shall be
subordinate in all respects to the amounts now and hereafter due and owing to
GE Capital by the Borrower.
Section 25. Setoff. GE Capital shall have the right to setoff and
apply against the Obligations any sums of the Guarantor at any time on deposit
with GE Capital whether such deposits are general or special, time or demand,
provisional or final, and the Guarantor hereby pledges and grants to GE Capital
a security interest in all such deposits.
Section 26. Choice of Law. The laws of the State of New York
(excluding, however, conflict of law principles) shall govern and be applied to
determine all issues relating to this Guaranty and the rights and obligations
of the parties hereto, including the validity, construction, interpretation,
and enforceability of this Guaranty and its various provisions and the
consequences and legal effect of all transactions and events which resulted in
the issuance of this Guaranty or which occurred or were to occur as a direct or
indirect result of this Guaranty having been executed.
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Section 27. Consent to Jurisdiction; Agreement as to Venue. The
Guarantor irrevocably consents to the non-exclusive jurisdiction of the federal
and state courts located in the State of New York. The Guarantor agrees that
venue shall be proper in any such courts. The Guarantor hereby consents to
process being served in any suit, action, or proceeding instituted in
connection with this Guaranty by the mailing of a copy thereof by certified
mail, postage prepaid, return receipt requested, to the Guarantor. The
Guarantor irrevocably agrees that such service shall be deemed to be service of
process upon the Guarantor in any such suit, action, or proceeding. Nothing in
this Section shall affect the right of GE Capital to serve process in any
manner otherwise permitted by law and nothing in this Section will limit the
right of GE Capital otherwise to bring proceedings against the Guarantor in the
courts of any jurisdiction or jurisdictions.
Section 28. Actions Against GE Capital. Any action brought by the
Guarantor against GE Capital which is based, directly or indirectly, on this
Guaranty or any matter in or related to this Guaranty, including, but not
limited to, the obligations of the Borrower to GE Capital, or the
administration, collection, or enforcement thereof, shall be brought only in
the federal or state courts of the State of New York. The Guarantor shall not
file a counterclaim against GE Capital in a suit brought by GE Capital against
the Guarantor in a state other than the State of New York unless under the
rules of procedure of the court in which GE Capital brought the action the
counterclaim is mandatory, and not merely permissive, and will be considered
waived unless filed as a counterclaim in the action instituted by GE Capital.
The Guarantor agrees that any forum other than the State of New York is an
inconvenient forum and that a suit brought by the Guarantor against GE Capital
in a court of any state other than the State of New York should be forthwith
dismissed or transferred to a court located in the State of New York by that
court.
Section 29. Invalidity of any Part. If any provision or part of any
provision of this Guaranty shall for any reason be held invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions or the remaining part of any effective
provisions of this Guaranty, and this Guaranty shall be construed as if such
invalid, illegal, or unenforceable provision or part thereof had never been
contained herein, but only to the extent of its invalidity, illegality, or
unenforceability.
Section 30. Amendment or Waiver. This Guaranty may be amended only be
a writing duly executed by the Guarantor and GE Capital. No waiver by GE
Capital of any of the provisions of this Guaranty or any of the rights or
remedies of GE Capital with respect hereto shall be effective or enforceable
unless in writing.
Section 31. Binding Nature. This Guaranty shall inure to the benefit
of and be enforceable by GE Capital and GE Capital's successors and assigns and
any other person to whom GE Capital may
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grant an interest in the obligations of the Borrower to GE Capital, and shall
be binding upon and enforceable against the Guarantor and the Guarantor's
successors and permitted assigns.
Section 32. Assignability. This Guaranty or any interest herein may be
assigned by GE Capital, at any time or from time to time and upon the
Guarantor's receipt of notice thereof, the Guarantor shall acknowledge and
consent to the same in writing.
Section 33. Notices. Any notice or demand required or permitted by or
in connection with this Guaranty, without implying the obligation to provide
any notice or demand, shall be in writing at the address set forth below or to
such other address as may be hereafter specified by written notice to GE
Capital by the Guarantor. Any such notice or demand shall be deemed to be
effective as of the date of hand delivery or facsimile transmission, one (1)
day dispatch if sent by telegram, mailgram, overnight delivery, express mail or
federal express, or five (5) days after mailing if sent by first class mail
with postage prepaid.
Section 34. Final Agreement. This Guaranty contains the final and
entire agreement between GE Capital and the Guarantor with respect to the
guaranty by the Guarantor of the Borrower's obligations to GE Capital. There
are no separate oral or written understandings between GE Capital and the
Guarantor with respect thereto.
Section 35. Tense, Gender, Defined Terms, Captions. As used herein,
the plural shall refer to and include the singular, and the singular, the
plural, and the use of any gender shall include and refer to any other gender.
If more than one person has executed this Guaranty, the term "Guarantor" shall
mean all such persons collectively or any one or more of such persons
individually or collectively, as the case may be and as the context may
require. All captions are for the purpose of convenience only.
Section 36. Seal and Effective Date. This Guaranty is an instrument
executed under seal and is effective and enforceable as of the date set forth
below, independent of the date of actual execution.
SECTION 37. WAIVER OF TRIAL BY JURY. THE GUARANTOR HEREBY
UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS GUARANTY, ANY
AMOUNTS SECURED HEREBY, ANY DEALINGS BETWEEN THE GUARANTOR AND GE CAPITAL
RELATING TO THE SUBJECT MATTER OF THIS GUARANTY OR ANY RELATED TRANSACTIONS.
The scope of this waiver is intended to be all encompassing of any and all
disputes that may be filed in any court (including, without limitation,
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims). THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING,
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AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS GUARANTY, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THIS GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY. In
the event of litigation, this Guaranty may be filed as a written consent to a
trial by the court.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed, under seal, by one of its duly authorized officers as of the 17 day
of December, 1998.
WITNESS: LEISURE TIME CASIONS & RESORTS, INC.
By: /s/ (SEAL)
--------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
Attn:
---------------------------
Facsimile No.:
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EXHIBIT 10.33
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (the "Guaranty") is given by LEISURE TIME
TECHNOLOGY, INC., a Colorado corporation (the "Guarantor"), for the benefit of
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("GE Capital"),
with respect to the obligations of LEISURE BELLE CRUISE L.L.C. ("Borrower") to
GE Capital. The Borrower has applied to GE Capital for a loan in the original
principal amount of $1,500,000 ("Loan"). The Guarantor has requested GE Capital
to make the Loan to the Borrower and, in consideration therefor and of the
substantial direct and indirect benefits which it will derive therefrom, gives
the following guaranty and indemnification to GE Capital.
Section 1. The Guaranty. The Guarantor hereby UNCONDITIONALLY AND
IRREVOCABLY GUARANTEES: (a) the full and punctual payment when due of any and
all sums now or hereafter owing by the Borrower to GE Capital as a result of or
in connection with the Loan and all renewals, refinancings, extensions,
substitutions, amendments, and modifications thereof, including, but not
limited to, all amounts of principal, interest, penalties, reimbursements,
advancements, escrows, and fees; (b) the timely, complete, continuous, and
strict performance and observance by the Borrower of any and all of the terms,
covenants, agreements and conditions contained in any and all existing or
future documents, instruments, agreements, and writings of every kind, nature,
type, and variety which evidence, reflect, embody, give rise to or secure any
and all existing and future indebtedness, liabilities, and obligations of any
kind of the Borrower to GE Capital as a result of or in connection with the
Loan and (c) the payment upon demand of all costs and expenses incurred by GE
Capital in connection with its enforcement of this Guaranty. As used in this
Guaranty, the term "Obligations" shall refer to the obligations of payment,
performance, and indemnification which the Guarantor has undertaken and assumed
pursuant to this Guaranty, both as described in this Section and in other
Sections of this Guaranty and the term "Loan Documents" shall refer to the Loan
and Security Agreement dated the date hereof between GE Capital and the
Borrower and all other documents executed and/or delivered in connection
therewith evidencing, securing or guaranteeing the Loan.
Section 2. Nature of the Guaranty. This Guaranty: (a) is (i)
irrevocable; (ii) absolute and unconditional; (iii) direct, immediate and
primary; and (iv) one of payment and not just collection; and (b) makes the
Guarantor a surety to GE Capital and primarily liable with the Borrower.
Section 3. Accuracy of Representations. The Guarantor hereby
guaranties that each and every representation and warranty made by the Borrower
or by the Guarantor to GE Capital, both before and after the date of this
Guaranty, are and will continue to be true,
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correct, accurate, and complete, in all respects, and not knowingly misleading,
and the Guarantor shall indemnify and hold GE Capital, its agents and
employees, harmless from any and all losses, costs, or expenses which GE
Capital may suffer, sustain or incur as a result of any representation or
statement of the Borrower or of the Guarantor being false, incorrect,
inaccurate, incomplete, or knowingly misleading.
Section 4. Foreclosure Indemnification. In the event that any real or
personal property secures either the Loan or the Obligations, and GE Capital or
any affiliate of GE Capital acquires the same after a default by the Borrower
or the Guarantor in full or partial satisfaction of the obligations of the
Borrower to GE Capital or the Obligations, the Guarantor shall indemnify and
hold GE Capital, its agents and employees, harmless from any and all losses,
costs, or expenses which GE Capital, may sustain as a result of: (a) selling
the real or personal property so acquired for less than the total sums owed
with respect to the obligations of the Borrower to GE Capital or the
Obligations, as the case may be; provided, however, that any such sale by GE
Capital is done in a commercially reasonable manner, or (b) any action brought
against GE Capital under ss. 548 or ss. 544(b) of the United States Bankruptcy
Code, as amended, or other similar statutory provision, on the ground that the
consideration paid by GE Capital for the real or personal property was not
"reasonably equivalent value," within the contemplation of ss. 548 or ss.
544(b) of the United States Bankruptcy Code, as amended, or other similar
statutory provision or "fair consideration," within the contemplation of any
applicable state fraudulent conveyance or transfer law or was otherwise
inadequate.
Section 5. Reporting Requirements. The Guarantor shall deliver, or
cause the Borrower to deliver, to GE Capital (a) as soon as available but in no
event more than one hundred twenty (120) days after the end of each fiscal year
of the Guarantor, the consolidated and consolidating financial statements of
the Guarantor and its subsidiaries, prepared in accordance with generally
accepted accounting principles ("GAAP"), all in reasonable detail and certified
by independent certified public accountants of recognized standing selected by
the Guarantor and acceptable to GE Capital; (b) as soon as available but in no
event more than sixty (60) days after the end of each quarter of the
Guarantor's fiscal year, the consolidated financial statements of the Guarantor
and its subsidiaries for such quarter, prepared in accordance with GAAP and
certified by the chief financial officer of the Guarantor; (c) as soon as
available, all other statements filed with the Securities and Exchange
Commission or any successor agency thereof; and (d) such other financial
information as GE Capital may reasonably request from time to time.
Section 6. GE Capital Need Not Pursue Other Rights Before Enforcing
Guaranty. GE Capital shall be under no obligation to pursue its rights against
the Borrower or any of the collateral of
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the Borrower securing the Loan or against any other guarantor or any other
person that is now or hereafter liable upon or in connection with any of the
obligations of the Guarantor or the Borrower to GE Capital or that has granted
any lien or security interest to or for the benefit of GE Capital to secure any
of the obligations of the Guarantor or the Borrower to GE Capital ("Other
Obligor") or any collateral of any Other Obligor before pursuing its rights
against the Guarantor.
Section 7. Right of GE Capital to Act With Respect to the Borrower,
Other Obligors, and Collateral. The Guarantor hereby assents to any and all
terms and agreements between GE Capital and the Borrower or between GE Capital
and any Other Obligor, and all amendments and modifications thereof, whether
presently existing or hereafter made and whether oral or in writing. GE Capital
may, without compromising, impairing, diminishing, or in any way releasing the
Guarantor from the Obligations and without notifying or obtaining the prior
approval of the Guarantor, at any time or from time to time: (a) waive or
excuse any default by the Borrower or any Other Obligor, or delay in the
exercise by GE Capital of any or all of GE Capital's rights or remedies with
respect to such default; (b) grant extensions of time for payment or
performance by the Borrower or any Other Obligor; (c) release, substitute,
exchange, surrender, or add collateral of the Borrower or of any Other Obligor,
or waive, release, or subordinate, in whole or in part, any lien or security
interest held by GE Capital on any real or personal property securing payment
or performance, in whole or in part, of the obligations of the Borrower or of
any Other Obligor to GE Capital; (d) release the Borrower or any Other Obligor;
(e) apply payments made by the Borrower, or by any Other Obligor, to any sums
owed by the Borrower or any Other Obligor to GE Capital, in any order or
manner, or to any specific account or accounts, as GE Capital may elect; and
(f) modify, change, renew, extend, or amend, in any respect GE Capital's
agreement with the Borrower or any Other Obligor, or any document, instrument,
or writing embodying or reflecting the same.
Section 8. Waivers by the Guarantor. The Guarantor hereby waives: (a)
any and all notices whatsoever with respect to this Guaranty or with respect to
any of the obligations of the Borrower to GE Capital, including, but not
limited to, notice of: (i) GE Capital's acceptance hereof or GE Capital's
intention to act, or GE Capital's action, in reliance hereon; (ii) the present
existence or future incurring of any of the obligations of the Borrower to GE
Capital or any terms or amounts thereof or any change therein; (iii) any
default by the Borrower or any Other Obligor; and (iv) the obtaining or release
of any guaranty or surety agreement, pledge, assignment, or other security for
any of the obligations of the Borrower to GE Capital; (b) presentment and
demand for payment of any sum due from the Borrower or any Other Obligor and
protest of nonpayments; and (c) demand for performance by the Borrower or any
Other Obligor.
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Section 9. Unenforceability of Obligations of the Borrower. This
Guaranty shall be valid, binding, and enforceable even if the obligations of
the Borrower to GE Capital which are guaranteed hereby are now or hereafter
become invalid or unenforceable for any reason.
Section 10. No Conditions Precedent. This Guaranty shall be effective
and enforceable immediately upon its execution. The Guarantor acknowledges that
no unsatisfied conditions precedent to the effectiveness and enforceability of
this Guaranty exist as of the date of its execution and that the effectiveness
and enforceability of this Guaranty are not in any way conditioned or
contingent upon any event, occurrence, or happening, or upon any condition
existing or coming into existence either before or after the execution of this
Guaranty.
Section 11. Information Concerning the Borrower, Collateral, or Other
Obligors. GE Capital shall have no present or future duty or obligation to
discover or to disclose to the Guarantor any information, financial or
otherwise, concerning the Borrower, any Other Obligor, or any collateral
securing the obligations of the Borrower to GE Capital or of any Other Obligor
to GE Capital. The Guarantor waives any right to claim or assert any such duty
or obligation on the part of GE Capital. The Guarantor agrees to obtain all
information which the Guarantor considers either appropriate or relevant to
this Guaranty from sources other than GE Capital to the extent they exist and
to become and remain at all times current and continuously apprised of all
information concerning the Borrower, Other Obligors, and any collateral which
is material and relevant to the Obligations of the Guarantor under this
Guaranty.
Section 12. Cumulative Liability. The liability of the Guarantor under
this Guaranty shall be cumulative to, and not in lieu of, the Guarantor's
liability under any other Loan document or in any capacity other than as the
Guarantor hereunder.
Section 13. Obligations Unconditional. The payment and performance of
the Obligations shall be the absolute and unconditional duty and obligation of
the Guarantor, and shall be independent of any defense or any rights of
set-off, recoupment or counterclaim which the Guarantor might otherwise have
against GE Capital, and the Guarantor shall pay and perform the Obligations,
free of any deductions and without abatement, diminution or set-off; and until
such time as the Obligations have been fully paid and performed, the Guarantor:
(a) shall not suspend or discontinue any payments provided for therein; (b)
shall perform and observe all of the covenants and agreements contained in this
Guaranty; and (c) shall not terminate or attempt to terminate this Guaranty for
any reason. No delay by GE Capital in making demand on the Guarantor for
satisfaction of the Obligations shall prejudice or in any way impair GE
Capital's ability to enforce this Guaranty.
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Section 14. Defenses Against Debtor. The Guarantor waives any right to
assert against GE Capital any defense (whether legal or equitable), claim,
counterclaim, or right of set-off or recoupment which the Guarantor may now or
hereafter have against the Borrower or any Other Obligor.
Section 15. Covenants of Guarantor. Until all sums due by the Borrower
and the Guarantor have indefeasibly been paid in full, the Guarantor hereby
covenants that it will at all times maintain a ratio of Debt to Net Worth of
not more than 5.5 to 1. For purposes hereof, "Debt" means total debt and other
liabilities and "Net Worth" means shareholder equity, in each case as defined
by general acceptable accounting principles applied on a consistent basis.
Section 16. Events Authorizing Acceleration of the Obligations. If any
of the following shall happen or occur, GE Capital, without notice or demand,
may accelerate and call due the Obligations, even if GE Capital has not
accelerated and called due the sums owed to GE Capital by the Borrower: (a) a
default by the Borrower or any Other Obligor of any existing or future
obligation owed by the Borrower or Other Obligor to GE Capital; (b) the failure
of the Guarantor to perform any covenant or agreement contained in this
Guaranty; (c) a default in any other agreement, instrument or document between
the Guarantor, the Borrower or Other Obligor and GE Capital, or any corporate
affiliate of GE Capital, whether previously, simultaneously, or hereafter
entered into; (d) a material adverse change in the financial condition of the
Guarantor, the Borrower or Other Obligor from that expressed in the financial
statement most recently submitted to GE Capital prior to the date of this
Guaranty, as determined in good faith by GE Capital in its sole discretion; (e)
institution of bankruptcy, insolvency, reorganization or receivership
proceedings by or against the Guarantor, the Borrower or Other Obligor in any
state or federal court; (f) the appointment of a receiver, assignee, custodian,
trustee or similar official under any federal or state insolvency or creditors'
rights law for any property of the Guarantor, the Borrower or Other Obligor;
(g) any warranty, representation, or statement to GE Capital by or on behalf of
the Guarantor, the Borrower or Other Obligor proving to have been incorrect in
any material respect when made or furnished; (h) the occurrence of any event
which is, or would be in the passage of time or the giving of notice or both, a
default under any indebtedness of the Guarantor, the Borrower or Other Obligor
to any person other than GE Capital; (i) any material loss, theft or
substantial damage, not fully insured for the benefit of GE Capital, to any of
the assets of the Guarantor, the Borrower or Other obligor, or the transfer or
encumbrance of any material part of the assets of the Guarantor, the Borrower
or Other Obligor other than in the ordinary course of business; (j) the entry
of any final judgment against the Guarantor, the Borrower or Other Obligor for
the payment of money in excess of $250,000 (to the extent not covered by
insurance) and such judgment is not satisfied or, if
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appealed, bonded off within thirty (30) days thereafter; (k) the levy upon or
attachment of any assets of the Guarantor, the Borrower or Other Obligor and
such levy or attachment is not released or bonded off within thirty (30) days
of the date thereof; (l) the recordation of any federal, state or local tax
lien against the Guarantor, the Borrower or Other Obligor that is not satisfied
or bonded over within thirty (30) days thereafter; (m) a change of ownership,
merger or consolidation of the Borrower or Other Obligor or the dissolution,
liquidation or reorganization of the Guarantor, the Borrower or any Other
Obligor; or (n) the failure of the Guarantor, the Borrower or Other Obligor to
furnish to GE Capital such financial information as GE Capital may reasonably
request from time to time and such failure shall continue unremedied for a
period of ten (10) days thereafter.
Section 17. Expenses of Collection and Attorney's Fees. The Guarantor
shall pay all reasonable costs and expenses incurred by GE Capital in
collecting sums due under this Guaranty, including, without limitation, the
costs of any lien, judgment or other record searches, appraisals, travel
expenses and the like. In addition, if this Guaranty is referred to an attorney
for collection, whether or not judgment has been confessed or suit has been
filed, the Guarantor shall pay all of GE Capital's costs, fees (including, but
not limited to, GE Capital's reasonable attorneys' fees, charges and expenses)
and all other expenses resulting from such referral (to the extent not
prohibited by law).
Section 18. Interest Rate After Judgment. If judgment is entered
against the Guarantor on this Guaranty, the amount of such judgment (which may
include principal, interest, charges, fees and costs) shall bear interest to
the extent permitted by applicable law at the higher of the default interest
rate set forth in the Loan Documents, as determined on the date of the entry of
the judgment, or the legal rate of interest then applicable to judgments in the
jurisdiction in which judgment was entered.
Section 19. Enforcement During Bankruptcy. Enforcement of this
Guaranty shall not be stayed or in any way delayed, as a result of the filing
of a petition under the United States Bankruptcy Code, as amended, or other
similar statutory scheme, by or against the Borrower. Should GE Capital be
required to obtain an order of the United States Bankruptcy Court or other
court of competent jurisdiction to begin enforcement of this Guaranty after the
filing of a petition under the United States Bankruptcy Code, as amended, or
other similar statutory scheme, by or against the Borrower, the Guarantor
hereby consents to this relief and agrees to file or cause to be filed all
appropriate pleadings to evidence and effectuate such consent and to enable GE
Capital to obtain the relief requested.
Section 20. Remedies Cumulative. All of GE Capital's rights and
remedies shall be cumulative and any failure of GE Capital to exercise any
right hereunder shall not be construed as a waiver of
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the right to exercise the same or any other right at any time, and from time to
time, thereafter.
Section 21. Discharge of Guaranty. This Guaranty shall not be
discharged and the Guarantor shall not be released from liability until all
Obligations have been satisfied in full and the satisfaction of the Obligations
is not subject to challenge or contest. If all or any portion of the
Obligations are satisfied and GE Capital is required for any reason to pay to
any person the sums used to satisfy the Obligations, the Obligations shall
remain in effect and enforceable to the extent thereof.
Section 22. Termination. This Guaranty may be terminated only in
writing by GE Capital and upon such terms and conditions as GE Capital may
impose.
Section 23. Rights of Subrogation, Etc. In the event the Guarantor
pays any sum to or for the benefit of GE Capital pursuant to this Guaranty, the
Guarantor shall have no right of contribution, indemnification, exoneration,
reimbursement, subrogation or other right or remedy against or with respect to
the Borrower, any Other Obligor, or any collateral, whether real, personal, or
mixed, securing the obligations of the Borrower to GE Capital or the
obligations of any Other Obligor until such time as the Borrower and/or the
Guarantor have indefeasibly paid in full all sums due GE Capital.
Section 24. Subordination of Certain Indebtedness. If the Guarantor
has advanced or hereafter advances any sums to the Borrower or its successors
or assigns or if the Borrower or its successors or assigns is now or shall
hereafter become indebted to the Guarantor, such sums and indebtedness shall be
subordinate in all respects to the amounts now and hereafter due and owing to
GE Capital by the Borrower.
Section 25. Setoff. GE Capital shall have the right to setoff and
apply against the Obligations any sums of the Guarantor at any time on deposit
with GE Capital whether such deposits are general or special, time or demand,
provisional or final, and the Guarantor hereby pledges and grants to GE Capital
a security interest in all such deposits.
Section 26. Choice of Law. The laws of the State of New York
(excluding, however, conflict of law principles) shall govern and be applied to
determine all issues relating to this Guaranty and the rights and obligations
of the parties hereto, including the validity, construction, interpretation,
and enforceability of this Guaranty and its various provisions and the
consequences and legal effect of all transactions and events which resulted in
the issuance of this Guaranty or which occurred or were to occur as a direct or
indirect result of this Guaranty having been executed.
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Section 27. Consent to Jurisdiction; Agreement as to Venue. The
Guarantor irrevocably consents to the non-exclusive jurisdiction of the federal
and state courts located in the State of New York. The Guarantor agrees that
venue shall be proper in any such courts. The Guarantor hereby consents to
process being served in any suit, action, or proceeding instituted in
connection with this Guaranty by the mailing of a copy thereof by certified
mail, postage prepaid, return receipt requested, to the Guarantor. The
Guarantor irrevocably agrees that such service shall be deemed to be service of
process upon the Guarantor in any such suit, action, or proceeding. Nothing in
this Section shall affect the right of GE Capital to serve process in any
manner otherwise permitted by law and nothing in this Section will limit the
right of GE Capital otherwise to bring proceedings against the Guarantor in the
courts of any jurisdiction or jurisdictions.
Section 28. Actions Against GE Capital. Any action brought by the
Guarantor against GE Capital which is based, directly or indirectly, on this
Guaranty or any matter in or related to this Guaranty, including, but not
limited to, the obligations of the Borrower to GE Capital, or the
administration, collection, or enforcement thereof, shall be brought only in
the federal or state courts of the State of New York. The Guarantor shall not
file a counterclaim against GE Capital in a suit brought by GE Capital against
the Guarantor in a state other than the State of New York unless under the
rules of procedure of the court in which GE Capital brought the action the
counterclaim is mandatory, and not merely permissive, and will be considered
waived unless filed as a counterclaim in the action instituted by GE Capital.
The Guarantor agrees that any forum other than the State of New York is an
inconvenient forum and that a suit brought by the Guarantor against GE Capital
in a court of any state other than the State of New York should be forthwith
dismissed or transferred to a court located in the State of New York by that
court.
Section 29. Invalidity of any Part. If any provision or part of any
provision of this Guaranty shall for any reason be held invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions or the remaining part of any effective
provisions of this Guaranty, and this Guaranty shall be construed as if such
invalid, illegal, or unenforceable provision or part thereof had never been
contained herein, but only to the extent of its invalidity, illegality, or
unenforceability.
Section 30. Amendment or Waiver. This Guaranty may be amended only be
a writing duly executed by the Guarantor and GE Capital. No waiver by GE
Capital of any of the provisions of this Guaranty or any of the rights or
remedies of GE Capital with respect hereto shall be effective or enforceable
unless in writing.
Section 31. Binding Nature. This Guaranty shall inure to the benefit
of and be enforceable by GE Capital and GE Capital's successors and assigns and
any other person to whom GE Capital may
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grant an interest in the obligations of the Borrower to GE Capital, and shall
be binding upon and enforceable against the Guarantor and the Guarantor's
successors and permitted assigns.
Section 32. Assignability. This Guaranty or any interest herein may be
assigned by GE Capital, at any time or from time to time and upon the
Guarantor's receipt of notice thereof, the Guarantor shall acknowledge and
consent to the same in writing.
Section 33. Notices. Any notice or demand required or permitted by or
in connection with this Guaranty, without implying the obligation to provide
any notice or demand, shall be in writing at the address set forth below or to
such other address as may be hereafter specified by written notice to GE
Capital by the Guarantor. Any such notice or demand shall be deemed to be
effective as of the date of hand delivery or facsimile transmission, one (1)
day dispatch if sent by telegram, mailgram, overnight delivery, express mail or
federal express, or five (5) days after mailing if sent by first class mail
with postage prepaid.
Section 34. Final Agreement. This Guaranty contains the final and
entire agreement between GE Capital and the Guarantor with respect to the
guaranty by the Guarantor of the Borrower's obligations to GE Capital. There
are no separate oral or written understandings between GE Capital and the
Guarantor with respect thereto.
Section 35. Tense, Gender, Defined Terms, Captions. As used herein,
the plural shall refer to and include the singular, and the singular, the
plural, and the use of any gender shall include and refer to any other gender.
If more than one person has executed this Guaranty, the term "Guarantor" shall
mean all such persons collectively or any one or more of such persons
individually or collectively, as the case may be and as the context may
require. All captions are for the purpose of convenience only.
Section 36. Seal and Effective Date. This Guaranty is an instrument
executed under seal and is effective and enforceable as of the date set forth
below, independent of the date of actual execution.
SECTION 37. WAIVER OF TRIAL BY JURY. THE GUARANTOR HEREBY
UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS GUARANTY, ANY
AMOUNTS SECURED HEREBY, ANY DEALINGS BETWEEN THE GUARANTOR AND GE CAPITAL
RELATING TO THE SUBJECT MATTER OF THIS GUARANTY OR ANY RELATED TRANSACTIONS.
The scope of this waiver is intended to be all encompassing of any and all
disputes that may be filed in any court (including, without limitation,
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims). THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING,
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AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS GUARANTY, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THIS GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY. In
the event of litigation, this Guaranty may be filed as a written consent to a
trial by the court.
[Remainder of page intentionally left blank]
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<PAGE> 11
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed, under seal, by one of its duly authorized officers as of the 17 day
of December, 1998.
WITNESS: LEISURE TIME TECHNOLOGY, INC.
By: /s/ (SEAL)
--------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
Attn:
---------------------------
Facsimile No.:
-------------------
11
<PAGE> 1
EXHIBIT 10.34
FIRST PREFERRED SHIP MORTGAGE
From
LEISURE BELLE CRUISE L.L.C.
Mortgagor,
In Favor Of
GENERAL ELECTRIC CAPITAL CORPORATION,
as Mortgagee,
On the United States Flag Vessel
BILOXI BELLE
Official No. 985792
<PAGE> 2
SYNOPSIS OF MORTGAGE
Name of Vessel: BILOXI BELLE
Official Number: 985792
Type of Instrument: First Preferred Ship Mortgage
Date of Instrument: December ___, 1998
Name of Owner LEISURE BELLE CRUISE L.L.C.
(Percentage of (100%)
Vessel owned):
Address of Owner: 5825-B Peachtree Corners East
Norcross, Georgia 30092
Name of Mortgagee: General Electric Capital Corporation
Address of Mortgagee: 44 Old Ridgebury Road
Danbury, Connecticut 06810-5105
Total Amount of One Million Five Hundred Thousand United States Dollars
Mortgage: (US $1,500,000), plus interest, expenses and fees
<PAGE> 3
FIRST PREFERRED SHIP MORTGAGE
This FIRST PREFERRED SHIP MORTGAGE (the "Mortgage") is given this 17th
day of December, 1998 by LEISURE BELLE CRUISE L.L.C., a Colorado limited
liability company, having its principal place of business at 5825-B Peachtree
Corners East, Norcross, Georgia 30092 (the "Mortgagor"), to GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation, with its principal place of
business at 44 Old Ridgebury Road, Danbury, Connecticut 06810-5105 (the
"Mortgagee").
RECITALS
WHEREAS, the Mortgagor is the sole and absolute owner of the whole of
the casino boat named BILOXI BELLE, Official No. 985792 (the "Vessel"), which
Vessel is duly documented in the name of the Mortgagor under the laws and flag
of the United States of America; and
WHEREAS, in order to secure the prompt payment of all sums due
hereunder and under that certain Loan and Security Agreement dated the date
hereof (the "Loan Agreement"), between the Mortgagor and the Mortgagee and the
promissory note executed pursuant thereto (the "Note") (copies of which are
annexed hereto as Exhibits A and B, respectively), and the performance of all
covenants, terms and conditions herein and therein contained, the Mortgagor has
executed and delivered this Mortgage under and pursuant to Chapter 313 Title 46
of the United States Code.
NOW, THEREFORE, This Mortgage Witnesseth:
That in consideration of the foregoing and of the sum of Ten Dollars
($10.00) lawful money of the United States of America in hand paid, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to secure the prompt payment of the principal of,
prepayment premium, if any, and interest on, and other amounts due under the
Note as well as all other liabilities of the Mortgagor to the Mortgagee, whether
as maker, promisor, guarantor, surety, indemnitor or otherwise and the
performance of and compliance with all of the covenants, terms, and conditions
contained in this Mortgage, the Loan Agreement and the Note, the Mortgagor by
these presents does hereby grant, bargain, sell, demise, release, convey,
assign, transfer, mortgage, deliver and pledge or cause to be granted,
bargained, sold, demised, released, conveyed, assigned, transferred, mortgaged,
delivered and pledged, to the Mortgagee, its successors and assigns, the whole
of the Vessel named below:
<TABLE>
<CAPTION>
Official Gross
Name Registration Number Tons
---- ------------ -------- -----
<S> <C> <C> <C>
Falling Waters,
BILOXI BELLE W. Virginia 985792 --
</TABLE>
together with all of her engines, boilers, machinery, masts, spars, spare parts,
gear, broached and unbroached consumable stores, provisions, unused rope,
furniture, fuel, pumps, anchors, cables,
<PAGE> 4
chains, apparel, rigging, tackle, fittings, tools and equipment and all other
appurtenances and accessories thereunto now, or at any time hereafter, belonging
or appertaining thereto, other than gaming equipment, whether now owned or
hereafter acquired, whether on board or not, and in all additions, improvements,
substitutions and replacements hereafter made in and to the Vessel or any part
or appurtenance thereto, and all freights, subfreights, rents, earnings, hire
and other monies derivable and to be derived in connection with the use,
operation or employment thereof, all of which shall be deemed to be included in
any reference herein to the Vessel, and all books and records pertaining to the
use, operation and employment of the Vessel; it being understood, however, that
nothing contained herein shall be deemed or construed to subject to the lien of
this Mortgage any property other than a "vessel" as defined in Chapter 313,
Title 46 of the United States Code, and if any determination is made by a court
of competent jurisdiction or if the parties mutually agree at any time, or for
any reason, that this Mortgage does include any property other than a "vessel",
then such property may be separately discharged from the lien of this Mortgage
by payment of .01% of the hereinafter referred to total discharge amount.
TO HAVE AND TO HOLD said Vessel and all the property and appurtenances
aforementioned unto the Mortgagee, its successors and assigns, to its and their
own use and benefit forever;
PROVIDED, HOWEVER, and these presents are upon the condition that, if
the Mortgagor pays all sums due under and in accordance with the terms of the
Note, and all other sums that may be hereafter secured by the lien of this
Mortgage and performs and observes each and every term, covenant and agreement
contained herein, in the Note and in the Loan Agreement, then this Mortgage
shall cease, terminate and be void, but otherwise will remain in full force and
effect.
For purposes of this Mortgage, the total amount secured hereby and the
discharge amount is One Million Five Hundred Thousand United States Dollars
($1,500,000), plus interest, costs and mortgage covenants. The date of maturity
of this Mortgage is June 22, 2003. The interest of the Mortgagor in the Vessel
is 100%. The interest mortgaged with respect to the Vessel is 100%.
I. REPRESENTATIONS, WARRANTIES AND COVENANTS
The Mortgagor hereby represents, warrants, covenants and agrees to and
with the Mortgagee as follows:
1. The Mortgagor is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Colorado; lawfully
owns and is lawfully possessed of the Vessel, free and clear of all liens,
mortgages and other encumbrances; and is duly authorized to mortgage the Vessel
as contemplated herein.
2. All action necessary or required by law for the execution and
delivery this Mortgage has been duly and effectively taken; and this Mortgage
constitutes a valid and enforceable obligation of the Mortgagor in accordance
with the terms hereof.
2
<PAGE> 5
3. The address stated in the preamble of this Mortgage is the chief
place of business and chief executive office of the Mortgagor.
4. The Mortgagor hereby warrants and shall defend the title and
possession of the Vessel and to every part thereof, including her freights, for
the benefit of the Mortgagee against the claims and demands of all persons
whomsoever.
5. To its knowledge, the Mortgagor is not in default in the
performance, observance or fulfillment of the obligations, covenants or
agreements contained in any agreement or instrument to which it is a party or by
which it or any of its property is bound.
6. The Mortgagor shall cause this Mortgage to be duly recorded in
accordance with the provisions of Chapter 313, Title 46 of the United States
Code (hereinafter as the same may be amended or supplemented from time to time,
the "Ship Mortgage Act") on the date hereof, and will otherwise comply with and
satisfy all of the provisions of the Ship Mortgage Act in order to establish and
maintain this Mortgage as a first preferred mortgage on the Vessel, on all
replacements and improvements made in or to the same, and on the Vessel's
freights and other earnings, and will comply with and satisfy all other
requirements in order that the Vessel may remain qualified to engage in the
United States coastwise trade, to the extent applicable or necessary for the
conduct of the Mortgagor's operations upon the Vessel.
7. The Mortgagor shall duly and punctually pay or cause to be paid to
the Mortgagee the principal of, prepayment premium, if any, and interest on, and
all other fees and charges provided for in, the Loan Agreement and the Note in
accordance with the terms thereof, and shall keep, perform and observe all and
singular the covenants, representations, warranties, terms and agreements
contained herein, in the Loan Agreement and the Note, expressed or implied, to
be kept, performed, and observed by the Mortgagor; and the terms of the Loan
Agreement and the Note are expressly incorporated herein by reference and made a
part hereof.
8. (a) The Mortgagor shall not cause or permit the Vessel to be
operated in any manner contrary to law, and the Mortgagor will not engage in any
unlawful trade or violate any law or carry any cargo that will expose the Vessel
to penalty, forfeiture or capture. The Mortgagor shall not operate the Vessel
nor cause or permit the Vessel to be operated in waters not covered by its
current trading warranties.
(b) The Mortgagor shall not do, or suffer or permit to be done,
anything which can or may injuriously affect the documentation of the Vessel
under the laws and regulations of the United States of America and shall at all
times keep the Vessel duly documented under the laws and flag of the United
States of America, to the extent applicable or necessary for the conduct of the
Mortgagor's operations upon the Vessel.
9. The Mortgagor is and will at all times, so long as this Mortgage
shall remain in effect, remain a citizen of the United States within the meaning
of Section 2 of the Shipping Act of
3
<PAGE> 6
1916, as amended, and all regulations from time to time promulgated pursuant
thereto, qualified to engage in the coastwise trade.
10. The Mortgagor shall from time to time pay and discharge, or cause
to be paid and discharged, as they become due and payable all taxes, assessments
and governmental charges, fines and penalties lawfully levied or assessed or
imposed upon the Vessel or any income therefrom, whether directed to the
Mortgagor, the Mortgagee or against their properties or upon any income
therefrom (excluding taxes on the overall net income of the Mortgagee or other
holder of the Note); provided, however, that the Mortgagor shall have the right
to contest, in good faith and by appropriate and diligent legal proceedings, any
such tax, assessment or governmental charge, and, pending such contest, may
defer or cause to be deferred the payment thereof, so long as such deferment of
payment shall not subject the Vessel to arrest, detention, or forfeiture of
title.
11. Neither the Mortgagor, any charterer, the Master of the Vessel nor
any other person has or shall have any right, power or authority to create,
incur or permit to be placed or imposed upon the Vessel any mortgage, security
interest, or lien whatsoever other than (i) liens for crew's wages, general
average and salvage, (ii) the lien of this Mortgage and other Permitted Liens
(as defined in the Loan Agreement).
12. The Mortgagor shall place, and at all times and places will retain,
a properly certified copy of this Mortgage on board the Vessel and will cause
such certified copy and the Vessel's marine documents to be exhibited to any and
all persons having business therewith which might give rise to any lien thereon
(other than Permitted Liens), and to any representatives of the Mortgagee; and
will place and keep prominently displayed in the chart room in the pilot's house
of the Vessel a framed printed notice reading as follows:
NOTICE OF MORTGAGE
This Vessel is covered by a First Preferred Ship
Mortgage in favor of General Electric Capital Corporation,
Mortgagee, under authority of Chapter 313, Title 46 of the
United States Code. Under the terms of said Mortgage, neither
the Owner, any charterer, the Master of this Vessel nor any
other person has any right, power or authority to create,
incur or permit to be placed or imposed upon this Vessel any
lien whatsoever other than the lien of this Mortgage and liens
for crew wages, general average and salvage.
13. The Mortgagor shall not suffer to be continued any lien,
encumbrance or charge on the Vessel (other than Permitted Liens) or her
freights. The Mortgagor will pay and discharge, or cause to be paid and
discharged, or make adequate provision for the satisfaction or discharge of, all
lawful claims or demands which, if not paid or discharged, might result in the
creation of such a security interest, lien, encumbrance or charge, and will
cause the Vessel to be released or discharged from any lien, encumbrance or
charge therefor.
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<PAGE> 7
14. If a libel is filed against the Vessel or the Vessel shall be
attached, levied upon or taken into custody or detained by virtue of any legal
proceeding in any court, or tribunal or by any government or other authority,
the Mortgagor will promptly notify the Mortgagee thereof by telefax, confirmed
by letter, addressed to the Mortgagee, and within thirty (30) days will cause
the Vessel to be released and will promptly notify the Mortgagee thereof in the
manner aforesaid.
15. The Mortgagor shall at all times and without cost or expense to the
Mortgagee maintain and preserve, or cause to be maintained and preserved, the
Vessel in good running order and repair, ordinary wear and tear excepted, so
that the Vessel shall be, insofar as due diligence can make her so, tight,
staunch, strong and sufficiently well tackled, appareled, furnished, equipped
and in every respect seaworthy and fit for her intended service. The Vessel
shall, and the Mortgagor covenants that it will, at all times comply with all
applicable laws, treaties and conventions of the United States of America, and
rules and regulations issued thereunder, and shall have on board as and when
required thereby valid certificates showing compliance therewith. The Mortgagor
will not make, or permit to be made, any changes to the Vessel which would (i)
detract from her value, (ii) limit or reduce her utility, or (iii) alter her
ability to participate in the trade for which she is designed, without the
Mortgagee's prior written consent (which consent shall not be unreasonably
withheld). The Mortgagor will not, without the prior written consent of the
Mortgagee (which consent shall not be unreasonably withheld), effect any repairs
to the Vessel, where the amount of such repairs exceeds or is likely to exceed
$250,000 (or the equivalent thereof in any other currency).
16. The Mortgagee shall have the right at any time, on reasonable
notice during normal business hours and at the Mortgagor's expense, to inspect
or survey the Vessel, to ascertain her condition and to satisfy itself that the
Vessel is being properly maintained and, when required, repaired. The Mortgagor
shall make or cause to be made all such repairs, without expense to the
Mortgagee, as such inspection or survey may show to be required. The Mortgagor
shall also permit the Mortgagee to inspect the Vessel and her logs, whenever
requested.
17. The Mortgagor shall not transfer or change the flag or port of
documentation of the Vessel without the prior written consent of the Mortgagee,
and any such written consent to any one transfer or change of flag or port of
documentation shall not be construed to be a waiver of this provision with
respect to any subsequent proposed transfer or change of flag or port of
documentation.
18. The Mortgagor shall not demise charter, transfer, mortgage or
change the management of the Vessel, without the prior written consent of the
Mortgagee. Any such written consent to any one demise charter, transfer,
mortgage or change of management shall not be construed to be a waiver of this
provision with respect to any subsequent proposed demise charter, transfer,
mortgage or change of management. Any demise charter, transfer, mortgage or
management agreement or other similar agreement relating to the Vessel shall be
subject and subordinate to the provisions of this Mortgage and any other
mortgage given by the Mortgagor in favor of the Mortgagee on the Vessel. The
Mortgagor will not charter the Vessel to, or permit the Vessel to serve under
any contract of affreightment with, a person included within the definition of
"designated foreign country" or "national" of a "designated foreign country" as
defined in the
5
<PAGE> 8
Foreign Assets Control Regulations, Cuban or Iranian Assets Control Regulations,
the Rhodesian, Libyan, Yugoslavian or Iraqi Sanction Regulations, or the Haitian
Transactions Regulations of the United States Treasury Department, 31 C.F.R.,
Chapter V, as amended, within the meaning of said Regulations or of any
regulation, interpretation or ruling issued thereunder.
19. The Mortgagor shall reimburse the Mortgagee for all costs and
expenses which the Mortgagee may from time to time incur, lay out or expend,
together with interest at the Default Rate (as hereinafter defined) in insuring
the Vessel, discharging liens, paying taxes, dues, assessments, governmental
charges, fines and penalties that may be lawfully imposed, making repairs or in
performing any other duty which the Mortgagor is obligated to perform hereunder,
but otherwise fails to perform. The obligation to reimburse the Mortgagee for
such costs and expenses shall be an additional indebtedness due from the
Mortgagor, secured by this Mortgage, and shall be payable by the Mortgagor on
demand. The Mortgagee, though privileged so to do, shall be under no obligation
to make any such expenditures, nor shall the making thereof relieve the
Mortgagor of any default in that respect.
20. The Mortgagor hereby covenants and agrees to certify to any person
or corporation who may desire to purchase the Mortgage that the Mortgagor has no
chargeback, claim, set-off or other defense of any kind whatsoever to the
payment of any part of the obligations under the Guaranty, either as to
principal or interest, then due and payable by the terms thereof.
21. The Mortgagor has filed or has caused to have been filed all tax
returns which, to the knowledge of the Mortgagor, are required to be filed, and
has paid or caused to have been paid all taxes as shown on such returns or on
any assessment received by it, to the extent that such taxes have become due,
unless and to the extent only that such taxes, assessments and governmental
charges are currently being contested in good faith and by appropriate and
diligent legal proceedings and adequate reserves therefor have been established
as required under generally accepted accounting principles consistently applied.
22. The Mortgagor is not, to its knowledge, in violation of any
material law, ordinance, governmental rule or regulation to which it is subject,
and the Mortgagor has obtained any and all licenses, permits (including all
Gaming Permits (as defined in the Loan Agreement)), franchises or other
governmental authorizations necessary for the ownership of its properties and
the conduct of its business.
23. The Vessel (i) meets, and at all times shall meet (except during
any period when (1) there has been an actual or constructive total loss or an
agreed, arranged or compromised total loss of the Vessel or (2) there has been
any other loss with respect to the Vessel and the Mortgagor shall not have had a
reasonable time to repair the same) all requirements of applicable laws,
treaties and conventions and of applicable rules and regulations thereunder,
including, to the extent applicable, the International Convention for the Safety
of Life at Sea, 1960, as amended, and all applicable laws, rules and regulations
administered by the United States Coast Guard, the Bureau of Customs, the
Treasury Department and any other United States agency having jurisdiction in
connection with the
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<PAGE> 9
use, operation and condition of the Vessel, and (ii) has on board all required
certificates and licenses for such use and operation.
24. No condition exists, and the Mortgagor shall not cause or permit
any condition to exist, which may result in any lien in favor of the United
States of America or any state or political subdivision thereof against the
Vessel under the provisions of the Employee Retirement Income Security Act of
1974, as amended, or other similar Federal, state or local legislation.
25. The Mortgagor shall promptly inform the Mortgagee of any pending or
threatened litigation involving the Mortgagor, where the amount claimed exceeds
$250,000 and such amount is not covered by insurance, and of any other event,
condition or occurrence which the Mortgagor would likely expect to adversely
impact its ability to repay in timely fashion all amounts due under the Loan
Agreement and the Note.
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<PAGE> 10
26. At all times during the term hereof, the Mortgagor shall obtain and
keep the Vessel insured against the risks indicated and in the amounts specified
in the Loan Agreement. The Vessel shall not carry any cargoes nor proceed into
any areas then excluded by the trading warranties under the above referenced
policies without first obtaining any necessary additional coverage, satisfactory
in form and substance, and evidence of which shall be furnished, to the
Mortgagee. All insurance shall be in form and with companies reasonably
satisfactory to the Mortgagee. All insurance for loss or damage shall provide
that losses, if any, shall be payable to the Mortgagee and the Mortgagor as
their interests may appear. Notwithstanding the foregoing, unless otherwise
required by the Mortgagee by notice to the underwriters, (i) any loss under any
insurance on the Vessel with respect to protection and indemnity risks may be
paid directly to the Mortgagor to reimburse it for any loss, damage or expense
incurred by it and covered by such insurance or to the person to whom any
liability covered by such insurance has been incurred and (ii) in the case of
any loss (other than a "Total Loss" as hereinafter defined) under any insurance
with respect to the Vessel involving any damage to the Vessel, the underwriters
may, so long as no Event of Default, or event which with the giving of notice or
passage of time or both would constitute an Event of Default hereunder, has
occurred and be continuing and upon receipt of evidence satisfactory to it of
the completion of such repairs or other charges, pay direct for the repair,
salvage or other charges involved or, if the Mortgagor shall have first fully
repaired the damage or paid all of the salvage or other charges, may pay the
Mortgagor as reimbursement therefor; provided, however, that if such damage
involves a loss in excess of $250,000, the underwriters shall not make such
payment without first obtaining the prior written consent thereto of the
Mortgagee. Any loss covered by this paragraph which is paid to the Mortgagee but
which might have been paid, in accordance with the provisions of this paragraph,
directly to the Mortgagor or others, shall be paid by the Mortgagee to, or as
directed by, the Mortgagor and all other payments to the Mortgagee of losses
covered by this paragraph shall be applied by the Mortgagee towards payment of
any fees or other expenses then outstanding and otherwise in accordance with the
last sentence of this paragraph. The Mortgagor shall pay the premiums and calls,
if any, therefor and deliver to the Mortgagee the policies of insurance or
duplicates thereof, or other evidence satisfactory to the Mortgagee of such
insurance coverage and of each rider and endorsement thereto or renewal thereof.
In addition, the Mortgagor shall use its efforts to furnish to the Mortgagee
annually a detailed report signed by a firm of marine insurance brokers
satisfactory to the Mortgagee as to the insurance maintained on the Vessel, as
to their opinion as to the adequacy thereof and as to the Mortgagor's compliance
with the terms hereof. Each insurer shall agree, by endorsement upon the policy
or policies issued by it, or by independent instrument furnished to the
Mortgagee, that it will give the Mortgagee fourteen (14) days' prior written
notice of the effective date of any material alteration, cancellation or
non-renewal of such policy or policies. In the event of: (i) an actual or
constructive total loss or an agreed, arranged or compromised total loss of the
Vessel; or (ii) any loss, theft or destruction of the Vessel or damage thereto
to such extent as shall make repair thereof uneconomical or shall render the
Vessel permanently unfit for normal use for any reason whatsoever; or (iii) the
condemnation, confiscation or requisition, forfeiture or other taking of title
to or use of the Vessel; or (iv) the loss, suspension, revocation, or material
adverse modification of the Mortgagor's authority to operate its gaming
operations on the Vessel, unless the Mortgagor has the ability to move the
Vessel to another jurisdiction where such operations are permitted, and the
Mortgagor moves the Vessel to such a jurisdiction and takes all necessary steps
to perfect the Mortgagee's first lien upon the Vessel, within
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<PAGE> 11
ten (10) days after such loss, suspension, revocation or modification(any such
occurrence being hereinafter referred to as a "Total Loss"), the Mortgagor shall
give the Mortgagee prompt written notice thereof. Any amounts received by the
Mortgagee as a result of such Total Loss shall be applied by it to prepay the
remaining principal installments due under the Note, any other amounts then due
the Mortgagee and the balance, if any, to the Mortgagor or to whomsoever may be
lawfully entitled thereto.
27. The Mortgagor will comply with and satisfy all of the provisions of
any applicable law, regulation, proclamation or order concerning financial
responsibility for liabilities imposed on the Mortgagor or the Vessel with
respect to pollution including, to the extent applicable, the U.S. Water
Pollution Act, as amended by the Water Pollution Control Act Amendment of 1972,
and as further amended by the Oil Pollution Act of 1990 (as the same may be
further amended from time to time), and will maintain all certificates or other
evidence of financial responsibility as may be required of it by any such law,
regulation, proclamation or order with respect to the trade which the Vessel
from time to time is engaged in.
28. The Mortgagor irrevocably appoints the Mortgagee as the Mortgagor's
attorney-in-fact to make claim for, receive payment of, and execute and endorse
all documents, checks or drafts received in payment for loss or damage under any
of said insurance policies, but only to the extent the same relates to the
Vessel. Should the Mortgagor fail to maintain, or cause to be maintained,
insurance as herein provided, the Mortgagee may, at its option (but shall not be
obligated to), provide such insurance, and, in such event, the Mortgagor shall,
upon demand of the Mortgagee, reimburse the Mortgagee for the cost thereof,
together with interest thereon at the rate of 11.90% per annum (the "Default
Rate"), until paid in full.
29. The Mortgagor shall promptly and duly execute and deliver to the
Mortgagee such further documents, instruments, and assurances and take such
further action as the Mortgagee may from time to time reasonably request in
order to carry out the intent and purpose of this Mortgage and to establish and
protect the rights and remedies created or intended to be created in favor of
the Mortgagee hereunder, including, without limitation, the execution and
delivery of other documents reasonably required, and the payment of all
necessary costs to record such documents and the payment of any documentary or
recordation taxes, to perfect and maintain perfected the liens granted under
this Mortgage and the payment of all expenses incurred by the Mortgagee in
connection with the transactions contemplated by this Mortgage, including,
without limitation, costs of printing, documentation, surveys, appraisals,
inspection reports, commitment fees, credit and lien reports, and reasonable
attorney's (and paralegal's) fees and expenses.
II. DEFAULT AND REMEDIES
1. The Mortgagor shall be deemed to be in default hereunder upon the
occurrence of any of the following events (each, an "Event of Default"):
(a) the Mortgagor fails to pay any amount when due under the
Note or the Loan Agreement; or
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<PAGE> 12
(b) the Mortgagor fails to perform, observe or comply with any
agreement, covenant, term or condition contained in Article I, Sections 1
through 10 inclusive, 14, the last two sentences of Section 15, 17, 18, 22, and
26; or
(c) the Mortgagor fails to perform, observe or comply with any
agreement, covenant, term or condition contained in Article I, Sections 11, 13,
16, 19, 20, 23 and 28 and such failure continues unremedied for a period of
fourteen (14) days after written notice thereof shall have been given by the
Mortgagor to the Mortgagee; or
(d) the Mortgagor fails to perform, observe or comply with any
other agreement, covenant, term or condition contained herein and such default
continues unremedied for a period of thirty (30) days after written notice
thereof shall have been given by the Mortgagee to the Mortgagor; provided,
however, that if such default can be remedied but such remedy can not be
effectuated within such thirty (30) day period, no Event of Default shall be
deemed to have occurred so long as, in the Mortgagee's good faith judgment, the
Mortgagor is taking appropriate remedial action to cure such default; or
(e) any warranty, representation or written statement made or
furnished to the Mortgagee by or on behalf of Mortgagor proves not to have been
true in any material respect when made; or
(f) there occurs any unauthorized sale, transfer or other
disposition of the Vessel; or
(g) the Mortgagor shall become insolvent or bankrupt or files
a voluntary petition in bankruptcy or is unable, or admits in writing its
inability to pay its debts as they mature or makes an assignment for the benefit
of its creditors or consents to the appointment of a trustee or receiver, or a
trustee or a receiver shall be appointed for the Mortgagor or for a substantial
part of its property without its consent and shall not be dismissed for thirty
(30) days; or
(h) one or more final judgments for the payment of money in
excess of $250,000 (which is not covered by insurance and for which no
reservation of rights letter has been issued by the insurer defending such
action) in the aggregate is entered by a court or courts of competent
jurisdiction against the Mortgagor and such judgment is not effectively stayed
and remains undischarged and unbonded for thirty (30) days;
(i) there occurs an event of default (after giving effect to
any applicable grace or cure period) under the Loan Agreement or any other
document executed pursuant thereto.
2. Upon the occurrence and during the continuance of an Event of
Default, the Mortgagee may, at any time thereafter, do any of the following:
(a) declare any and all amounts due or owing by the Mortgagor
to the Mortgagee under the Loan Agreement, the Note and this Mortgage to be
immediately due and payable,
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<PAGE> 13
whereupon the same, together with interest thereon to the date of declaration,
shall become and be immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby waived by the Mortgagor.
The Mortgagor agrees that upon such declaration it will immediately pay all such
amounts to the Mortgagee and thereafter any such amounts not so paid (including
such accrued interest and additional amounts) and such further amounts as may be
necessary to compensate the Mortgagee for any such loss or expense incurred
after the date of such declaration or by reason of any Event of Default
occurring after the date of such declaration shall bear interest, from the date
thereof until paid in full at the Default Rate (in no event to exceed the
maximum rate allowed by law);
(b) exercise any and all of the rights and remedies in
foreclosure and otherwise given to mortgagees by the provisions of the Ship
Mortgage Act, or of the laws of any applicable jurisdiction;
(c) bring suit at law, in equity or in admiralty, as it may be
advised, to recover judgment for any and all amounts due under the Guaranty, or
otherwise hereunder, and collect the same out of any and all property of the
Mortgagor whether covered by this Mortgage or otherwise;
(d) to the extent permitted by applicable law, take possession
of the Vessel, at any time, wherever the same may be, without legal process and
without being responsible for loss or damage, and the Mortgagor or other person
in possession forthwith upon demand of the Mortgagee shall surrender to the
Mortgagee possession of the Vessel and the Mortgagee, without being responsible
for loss or damage, may hold, lay up, lease, charter, operate or otherwise use
the Vessel (subject to the provisions of Section 12 of Article II hereof) for
such time and upon such terms as are in accordance with applicable law and as it
may deem to be for its best advantage, and, upon taking possession thereof, may
demand, collect and retain all hire, freights, earnings, issues, revenues,
income, profits, return premiums, salvage awards or recoveries, recoveries in
general average, and all other sums due or to become due in respect of the
Vessel or in respect of any insurance thereon from any person whomsoever,
accounting only for the net profits, if any, arising from such use of the Vessel
and charging upon all receipts from the use of the Vessel or from the sale
thereof by court proceedings or as set forth below, all costs, expenses,
charges, damages or losses by reason of such use; and if at any time the
Mortgagee shall avail itself of the right herein given it to take the Vessel,
the Mortgagee shall have the right to dock the Vessel for a reasonable time at
any dock, pier or other premises of the Mortgagor without charge, or to dock the
Vessel at any other place at the cost and expense of the Mortgagor;
(e) to the extent permitted by applicable law, take and enter
into possession of the Vessel at any time, wherever the same may be, without
legal process, and if it seems desirable to the Mortgagee and without being
responsible for loss or damage (other then caused by the Mortgagee's own gross
negligence or willful misconduct), sell the Vessel upon such terms and
conditions as the Mortgagee shall deem best, free from any claim of or by the
Mortgagor, at public or private sale, by sealed bids or otherwise, by mailing,
by fax or otherwise, notice of such sale, whether public or private, addressed
to the Mortgagor at its last known address, fourteen (14) days prior to the date
fixed for entering into the contract of sale, and, by first publishing notice of
any such
11
<PAGE> 14
public sale for ten (10) consecutive days, in some newspaper published
in the City of New York, State of New York, or if required by law, in the
jurisdiction in which the Vessel is then located. In the event that the Vessel
shall be offered for sale by private sale, no newspaper publication of notice
shall be required, nor notice of adjournment of sale; sale may be held at such
place and at such time as the Mortgagee by notice may have specified, or may be
adjourned by the Mortgagee from time to time by announcement at the time and
place appointed for such sale or for such adjourned sale, and without further
notice or publication the Mortgagee may make any such sale at the time and place
to which the same shall be so adjourned; and any sale may be conducted without
bringing the Vessel to the place designated for such sale and in such manner as
the Mortgagee may deem to be for its best advantage, and the Mortgagee may
become the purchaser at any sale. If the Vessel is to be sold by private sale
and the Mortgagor and Mortgagee have not reached agreement that the price to be
paid is fair and reasonable, the parties shall each appoint a marine broker who
in turn shall appoint a third marine broker. The average value arrived at by the
three marine brokers shall be deemed to be the then fair market value of the
Vessel and the Mortgagee shall be deemed to have sold the Vessel in a commercial
reasonable manner so long as the price received therefor equals or exceeds such
value.
Any sale of the Vessel made in pursuance of this Mortgage, whether
under the power of sale hereby granted or any judicial proceedings, shall
operate to divest all right, title and interest of any nature whatsoever of the
Mortgagor therein and thereto, and shall bar the Mortgagor, its successors and
assigns, and all persons claiming by, through or under them. No purchaser shall
be bound to inquire whether notice has been given, or whether any default has
occurred, or as to the propriety of the sale, or as to the application of the
proceeds thereof. In case of any such sale, any purchaser who is the holder of
the Note shall be entitled, for the purpose of making settlement or payment for
the property purchased, to use and apply all amounts due it under the Note as a
credit against the purchase price after payment of all costs and expenses of
sale; and thereupon such purchaser shall be credited, on account of such
purchase price, with the net proceeds that shall have been so credited upon such
Note. At any such sale, the holder of the Note may bid for and purchase such
property and upon compliance with the terms of sale and, to the extent permitted
by law, may hold, retain and dispose of such property without further
accountability therefor.
3. The Mortgagee is hereby appointed attorney-in-fact of the Mortgagor
and, following the occurrence and during the continuance of an Event of Default,
shall be permitted to execute and deliver to any purchaser, in the name and on
behalf of the Mortgagor, a bill of sale conveying to said purchaser good and
marketable title to the Vessel. Alternatively, in the event the Vessel is sold
pursuant to any power granted herein, the Mortgagor will, if and when required
by the Mortgagee, execute such form of conveyance of the Vessel as the Mortgagee
may direct or approve.
4. The Mortgagee is hereby appointed attorney-in-fact of the Mortgagor
and, following the occurrence and during the continuance of an Event of Default,
may, in the name of the Mortgagor or in its own name, demand, collect, receive,
compromise and sue for, so far as may be permitted by law, all freights,
subfreights, hire, earnings, issues, revenues, income and profits of the Vessel
and all amounts due from underwriters under any insurance thereon as payment of
losses or as return premiums or otherwise, salvage awards and recoveries,
recoveries in general average or otherwise, and all other sums due or to become
due at the time of the happening of any Event of
12
<PAGE> 15
Default in respect of the Vessel, or in respect of any insurance thereon, from
any person whomever, and to make, give and execute in the name of the Mortgagor
acquittances, receipts, releases or other discharges for the same, whether under
seal or otherwise, and to endorse and accept in the name of the Mortgagor all
checks, notes, drafts, warrants, agreements and other instruments in writing
with respect to the foregoing.
5. Whenever the Mortgagee becomes entitled to enter and take possession
of the Vessel, it may require the Mortgagor to deliver, and the Mortgagor shall
deliver, at its own cost and expense, the Vessel to the Mortgagee upon demand.
If any legal proceedings shall be taken to enforce any right under this
Mortgage, the Mortgagee shall be entitled as a matter of right to the
appointment of a receiver of the Vessel pursuant to 46 U.S.C. Section 31325(e)
and of the freights, hire, earnings, issues, revenues, income and profits due or
to become due and arising from the operation, use, or employment thereof.
6. The Mortgagor hereby authorizes and empowers the Mortgagee or its
appointees or any of them to appear in the name of the Mortgagor, its successors
and assigns, in any court of any country or nation of the world where a suit is
pending against the Vessel because of or on account of any alleged lien against
the Vessel, and, if they so desire (but without any obligation to do so) to take
such actions as the Mortgagee or its appointees may deem proper to defend such
suit and to discharge such lien, and all expenditures made or incurred by it or
them for the purpose of such defense or discharge shall be a debt due from the
Mortgagor, its successors and assigns, to the Mortgagee, and shall bear interest
at the Default Rate, until paid in full, and shall be secured by the lien of
this Mortgage in like manner and extent as if the amount and description thereof
were written herein.
7. Each and every power and remedy herein given to the Mortgagee shall
be cumulative and shall be in addition to every other power and remedy herein
given or now or hereafter existing in law, in equity, in admiralty or by
statute, and each and every power and remedy whether herein given or otherwise
existing may be exercised from time to time and as often and in such order as
may be deemed expedient by the Mortgagee, and the exercise or the beginning of
the exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other power or remedy. No
delay or omission by the Mortgagee in the exercise of any right or power or in
the pursuance of any remedy accruing upon any Event of Default shall impair any
such right, power or remedy or be construed to be a waiver of any such Event of
Default or to be an acquiescence therein; nor shall the acceptance by the
Mortgagee of any security or of any payment of or on account of the Note
maturing after any Event of Default or of any payment on account of any past
default be construed to be a waiver of any right to take advantage of any future
Event of Default or of any past Event of Default not completely cured thereby.
8. If at any time after an Event of Default and prior to the actual
sale of the Vessel by the Mortgagee or prior to the completion of any
foreclosure proceedings the Mortgagor offers completely to cure all Events of
Default and to pay all expenses, advances and damages to the Mortgagee arising
from such Event of Default, with interest at the Default Rate, then the
Mortgagee may, if it so elects, accept such offer and payment and restore the
Mortgagor to its former position, but such action shall not affect any
subsequent Event of Default or impair any rights consequent thereon.
13
<PAGE> 16
9. In case the Mortgagee shall have proceeded to enforce any right,
power or remedy under this Mortgage by foreclosure, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Mortgagee, then and in every such case the
Mortgagor and the Mortgagee shall be restored to their former positions and
rights hereunder with respect to the property subject or intended to be subject
to this Mortgage, and all rights, remedies and powers of the Mortgagee shall
continue as if no such proceedings had been taken.
10. The proceeds of any sale of the Vessel either under a power of sale
hereby granted to the Mortgagee or under a judgment or decree in any judicial
proceeding for foreclosure of this Mortgage or proceeds arising from the
enforcement of any remedy granted to the Mortgagee hereunder or any net earnings
from any charter or other use of the Vessel by the Mortgagee or any requisition
compensation or other moneys received by the Mortgagee pursuant to or under the
terms of this Mortgage shall be applied as follows:
FIRST: To pay or reimburse all costs and expenses (together
with interest at the Default Rate) of the Mortgagee, including the
compensation of its agents and attorneys, by reason of any sale,
retaking, management or operation of the Vessel and all other sums
payable to the Mortgagee hereunder by reason of any expenses or
liabilities incurred or advances made by it for the protection,
maintenance and enforcement of the security or of any of its rights
hereunder or in pursuit of any remedy hereby conferred; and, at the
option of the Mortgagee, to the payment of all taxes, assessments or
liens claiming priority over the lien of this Mortgage;
SECOND: To pay all amounts then due under the Loan Agreement
and the Note in the manner provided therein; and
THIRD: The surplus, if any, to the Mortgagor or to whomsoever
may be lawfully entitled thereto.
11 Unless one or more Events of Default shall have occurred and be
continuing, the Mortgagor shall (a) be suffered and permitted to retain actual
possession and use of the Vessel, and (b) have the right, from time to time, in
its discretion, and without application to the Mortgagee, and without obtaining
a release thereof by the Mortgagee, to dispose of, free from the lien hereof,
any engines, boilers, machinery, bowsprits, masts, spars, rigging, boats,
anchors, cables, chains, tackle, apparel, furniture, fittings, tools, pumps or
equipment or any other appurtenances of the Vessel that are no longer useful,
necessary, profitable or advantageous in the operation of the Vessel, after
first or simultaneously replacing the same by new engines, boilers. machinery,
bowsprits, masts, soars, rigging, boats, anchors, cables, chains, tackle,
apparel, furniture, fittings, tools, pumps or equipment, or other appurtenances
of substantially equal value to the Mortgagor which shall forthwith become
subject to the lien of this Mortgage as a preferred mortgage thereon.
14
<PAGE> 17
III. SUNDRY PROVISIONS
1 Anything contained herein to the contrary notwithstanding, it is
intended that nothing herein shall waive the preferred status of this Mortgage
and that, if any provision in this Mortgage or portion thereof shall be
construed to waive the preferred status of this Mortgage, then such provision to
such extent shall be void and of no effect.
2 This Mortgage may be executed in any number of counterparts, and each
of such counterparts shall for all purposes be deemed to be an original.
3 The titles of the Articles herein are for convenience only and shall
not affect the construction hereof.
4 If any part of this Mortgage shall be adjudged invalid, then such
partial invalidity shall not cause the remainder of this Mortgage to be or to
become invalid, and if a provision hereof is held invalid in one or more of its
applications, the parties hereto agree that said provision shall remain in
effect in all valid applications that are severable from the invalid application
or applications.
5 In the event this Mortgage or any provision hereof shall be deemed
invalidated in whole or in part by any present or future law of the United
States of America or any decision of any court of competent jurisdiction, the
Mortgagor will execute such other and further instruments and do such things as
in the opinion of counsel for the Mortgagee will carry out true intent and
spirit of this Mortgage. From time to time for the reasons aforesaid, or for any
other reason deemed sufficient by the Mortgagee, the Mortgagor will execute such
assurances as in the opinion of such counsel may be required to perfect the
interest of the Mortgagee in the Vessel as security for the indebtedness secured
hereby and for the performance by the Mortgagor of all its covenants, promises
and conditions herein contained.
6 All the covenants, conditions, representations, warranties,
stipulations and agreements of the Mortgagor contained in this Mortgage shall
bind the Mortgagor, its successors and assigns, and shall inure to the benefit
of the Mortgagee, its successors and assigns.
7 All notices, requests, and demands under this Mortgage shall be given
in writing or by telex or telefax and shall be delivered, telexed or telefaxed
as follows:
To the Mortgagor:
Leisure Belle Cruise L.L.C.
5825-B Peachtree Corners East
Norcross, Georgia
Attn: Eldon Rance
Facsimile No.: (770) 466-2211
15
<PAGE> 18
with copies to:
Leisure Time Technology, Inc.
5825-B Peachtree Corners East
Norcross, Georgia
Attn: Eldon Rance
Facsimile No.: (770) 466-2211
Leisure Time Casinos & Resorts, Inc.
1248 Miller Road
Avon, Ohio 44052
Attn: Mr. A. N. Johnson
Facsimile No.: (216) 934-1027
and
Smith McCullogh, P.C.
4643 S. Ulster Street
Suite 900
Denver, Colorado 80237
Attn: Thomas S. Smith, Esq.
Facsimile No.: (303) 221-6001
To the Mortgagee:
General Electric Capital Corporation
c/o Commercial Equipment Financing
44 Old Ridgebury Road
Danbury, Connecticut 06810-5105
Telefax: (203) 796-1315
with a copy to:
Region Counsel
General Electric Capital Corporation
777 Long Ridge Road, Building B, First Floor
Stamford, Connecticut 06927
Telecopy: (203) 703-1777
or to such other address, telex or telefax number as the parties may designate
time to time and unless otherwise specified herein, all such notices, requests
and demands shall be deemed to have been given when dispatched by telex, telefax
or delivery.
16
<PAGE> 19
8 The parties agree that whenever the consent of the Mortgagee is
required for the taking of any action by the Mortgagor hereunder, such consent
shall not be unreasonably withheld.
WITNESS THE DUE EXECUTION HEREOF by the Mortgagor this 17th day of
December, 1998.
WITNESS: LEISURE BELLE CRUISE L.L.C.
By: LEISURE TIME CRUISE CORPORATION
By: /s/ (SEAL)
-------------------------
17
<PAGE> 20
ACKNOWLEDGMENT
STATE OF MARYLAND )
)
CITY OF BALTIMORE )
On this 17th day of December, 1998, before me personally came and
appeared ______________, to me known, who being by me duly sworn, did depose and
say that he is the _________ of Leisure Time Cruise Corporation, the sole member
of Leisure Belle Cruise L.L.C., the limited liability company described in and
which executed the foregoing First Preferred Ship Mortgage; that he signed his
name thereto by order of the Board of Directors of the sole member of said
limited liability company; and he acknowledged to me that he executed said First
Preferred Mortgage as such officer of said limited liability company;; and that
the same is the free and voluntary act and deed of said limited liability
company and of himself as said officer thereof, for the uses and purposes
therein expressed.
/s/
(SEAL) ---------------------------------
Notary Public
My commission expires:
-------------------------
<PAGE> 1
EXHIBIT 10.35
March 31, 1998
Mr. A. J. Siciliano
Sentry Marine Services, Inc.
18 Neil Drive
Smithtown, New York 11787
Re: Consulting Agreement
Dear Tony:
It is the understanding of Leisure Time Casinos & Resorts, Inc.
("Company") that effective March 31, 1998, you are resigning as an officer,
director and employee of the Company and as an officer and director, as
applicable, of all of the Company's subsidiaries. Effective April 1, 1998, the
Company would like to retain you as a management consultant to the Company on
the following terms and conditions:
1. You will provide a maximum of 10 hours of consulting per week for
the Company and its subsidiaries. The consulting that you will be asked to
perform will be consulting on such matters as are designated by Alan N. Johnson
or his designee and your sole reporting obligation with respect thereto will be
to Mr. Johnson or his designee.
2. In performing your consulting duties, you will make recommendations
to the Company but will have no authority to act on behalf of the Company or to
make policy decisions for the Company or its subsidiaries. You will be, and will
be deemed to be, an independent contractor in performing your consulting duties
hereunder. You will be free to pursue, conduct and carry on for your own account
(or for the account of others) such activities, employments, ventures,
businesses and other pursuits as you may determine in your sole, absolute and
unfettered discretion.
3. For each month during which you are a consultant to the Company, you
will be paid an amount of $___________ per month, which amount will be paid
within 15 days after the end of the month for which the services are performed.
In addition, you will be reimbursed for all out-of-pocket expenses incurred in
performing your consulting duties hereunder, provided, however, that any such
costs in excess of $100 per month shall be approved in writing in
<PAGE> 2
Mr. A. J. Siciliano
March 31, 1998
Page 2
advance by Alan N. Johnson.
4. For each month during which you are a consultant to the Company, you
will also be paid an amount equal to the payments you are required to make to
maintain the current health insurance you have with the Company.
5. Either you or the Company will be able to terminate the consulting
agreement upon 30 days written notice to the other and, in the absence of any
such notice, the consulting agreement will automatically terminate on
___________________, 1999, or upon your earlier death or disability.
6. You recognize and acknowledge that the Company's and its
subsidiaries and affiliates' customers and potential customers, as they may
exist from time to time, and any proprietary or confidential information,
including, but not limited to financial information and information pertaining
to the Company's, its subsidiaries' and affiliates' gaming licenses,
manufacturing, marketing and sales operations and potential acquisitions, used
by the Company in its Business (as hereinafter defined) are valuable and unique
assets of the Company. You agree that you will not during or after the term of
this agreement, disclose the names of the Company's, its subsidiaries' or
affiliates' customers or potential customers or any part thereof or disclose any
other propriety or confidential information of the Company to any person, firm,
corporation, association, or other entity for any reason or purpose whatsoever
without the prior written consent or authorization of the Board of Directors of
the Company. Upon termination of this agreement, you agree that you will neither
take nor retain any papers, customer lists, manuals, files, or other document or
copies thereof belonging to the Company, its subsidiaries or its affiliates.
You agree to disclose to the Company all ideas and business plans
developed by the you during the term of this agreement which relate to the
Business of the Company, its subsidiaries or affiliates or any business
conducted by the Company, its subsidiaries or affiliates. All patents, patent
applications, patent licenses, formulas, inventions, processes, copyrights,
know-how, proprietary information, rights, trademarks, or trade names, or future
improvements thereto developed or conceived by you during the term of this
agreement shall be promptly disclosed to, and all rights with respect thereto
shall be assigned by you to the Company in consideration of the remuneration
paid or payable to you hereunder.
In the event that any provision of this paragraph 6 should ever be
deemed to exceed the time, geographic, or other limitations permitted by
applicable law, then such provision shall be reformed to the maximum time
geographic, or other limitations permitted by applicable law. The provisions of
this paragraph 6 shall be applicable for the period indicated and shall survive
the termination of this agreement.
<PAGE> 3
Mr. A. J. Siciliano
March 31, 1998
Page 3
7. During the term of this agreement and for a period of _____ years
after the termination of this agreement, you agree that you will refrain from
carrying on (as hereinafter defined) any business of providing services similar
to the Business of the Company and its subsidiaries and affiliates or carrying
on any business relating to any product or service which is in competition, in
whole or in part, with the Business of the Company or its subsidiaries or
affiliates in the United States. For purposes of this agreement, "Business"
means the business of manufacturing and distributing gaming equipment, owning or
operating gaming vessels or owning or operating route operations of video gaming
devices or otherwise engaging in the gaming industry. For purposes of this
agreement, "carrying on" a Business means being engaged, directly or indirectly,
through a spouse, member of your immediate family or otherwise, in a Business as
an employer, manager, stockholder or any other representative or individual
capacity. Nothing herein shall preclude you from owning less than 5% of any
corporation actively traded on a national securities exchange or on the
over-the-counter market, which is engaged in such business.
8. All notices hereunder shall be in writing and addressed to you or to
the Company at the addresses herein set forth, or at such other addresses as to
which notice pursuant to this paragraph may be given, and shall be given by
personal delivery, by certified mail (return receipt requested), express mail or
by national overnight courier. Notices will be deemed given upon the earlier of
actual receipt or three (3) business days after being mailed or delivered to
such courier service. Notices shall be addressed to you at:
A. J. Siciliano
Sentry Marine Services, Inc.
18 Neil Drive
Smithtown, New York 11787
and to the Company at:
Leisure Time Casinos & Resorts, Inc.
1284 Miller Road
Avon, Ohio 44011
Attention: President
Any notices to be given hereunder will be effective if executed by and sent by
the attorneys for you or the Company giving such notice and, in connection
therewith, you and the Company and your and its respective counsel agree that,
in giving such notice, such counsel may communicate directly in writing with you
or the Company to the extent necessary to give such notice.
9. No provision of this agreement may be waived except by agreement in
writing signed by the waiving party. A waiver of any term or provision of this
agreement shall not be
<PAGE> 4
Mr. A. J. Siciliano
March 31, 1998
Page 4
construed as a waiver of any other term or provision.
10. This agreement shall be governed by and interpreted under the laws
of the State of Ohio (without giving effect to any provisions regarding
conflicts of laws), which shall be applied by any court or arbitration panel
before which any action concerning the rights or obligations of the parties is
brought hereunder.
11. All actions brought to enforce any rights or obligations arising
hereunder shall be brought in arbitration under the applicable rules of the
American Arbitration Association as then in effect; provided however, that in
the case where any breach or default would result in irreparable injury to the
non-breaching or defaulting party, such party shall be allowed to bring suit in
equity for the specific performance of any term contained in this agreement or
for an injunction against the breach of any such term or in aid of the exercise
of any power granted in this agreement or to enforce any other equitable right
of such party or to take any one or more of such actions.
In any action brought in arbitration, the procedural and substantive
rules of discovery provided for under Ohio law applicable to a civil case
brought in a court which, but for this arbitration clause, would have
appropriate jurisdiction over the case, shall govern the discovery allowed in
any such proceeding.
In the event a party brings any action hereunder, the prevailing party
in such dispute shall be entitled to recover from the losing party all fees,
costs and expenses of enforcing any right of such prevailing party under or with
respect to this agreement, including without limitation such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals.
This jurisdiction and venue of any such proceeding in equity shall be
in the Courts of the State of Ohio in Cuyahoga County, Ohio, the county in which
the Company has its principal place of business. Any proceeding in arbitration
shall be conducted in Cuyahoga County, Ohio. No party shall object to such venue
on the basis of inconvenience to such party.
12. This agreement is not assignable without the written consent of the
non-assigning party.
13. This agreement may be executed in multiple counterparts, each of
which shall be deemed an original. It shall not be necessary that each party
execute each counterpart, or that any one counterpart be executed by more than
one party, so long as each party executes at least one counterpart.
14. If any provision of this agreement is declared by any court of
competent
<PAGE> 5
Mr. A. J. Siciliano
March 31, 1998
Page 2
jurisdiction to be invalid for any reason, such invalidity shall not
affect the remaining provisions of this agreement.
If this consulting agreement meets with your approval, please so
indicate by signing a copy of this letter where provided and this agreement
shall be binding upon you and the Company.
Sincerely yours,
Alan N. Johnson, President
A. J. Siciliano hereby confirms his resignation as an officer, director
and employee of Leisure Time Casinos & Resorts, Inc. and as an officer and
director of all of the subsidiaries of Leisure Time Casinos & Resorts, Inc.
effective March 31, 1998. Further, A. J. Siciliano agrees with the terms of this
agreement as expressed above.
Dated: March 31, 1998
/s/
-----------------------------------------
A. J. Siciliano
<PAGE> 1
EXHIBIT 10.36
BAREBOAT CHARTER PARTY
THIS BAREBOAT CHARTER PARTY, dated as of January, 22 1999 (hereinafter
called the "Charter Party") between Florida Casino Cruises, Inc., a corporation
organized and existing under and by virtue of the laws of the State of Georgia,
with an office at Manley Farms, 2017 Pine Ridge Road, Naples, FL 34109
(hereinafter called the "Owner") and Leisure Express Cruise, L.L.C., a limited
liability company organized under and by virtue of the laws of the State of
Colorado, with an office at 1284 Miller Road, Avon, OH 44011 (hereinafter called
the "Charterer").
WHEREAS, Owner is the owner of the VEGAS EXPRESS (Official No. 594643),
WHEREAS, Owner and Charterer desire to enter into this Charter Party in
accordance with the terms and conditions hereof, and
NOW, THIS CHARTER PARTY WITNESSETH that, in consideration of the
premises above recited and the covenants contained herein, Owner agrees to let
and Charterer agrees to hire the Vessel (as hereinafter defined) on the
following terms and conditions.
SECTION 1
DEFINITIONS
1.1 "Vessel" shall mean the VEGAS EXPRESS, together with all of its
boilers, engines, machinery, masts, rigging, anchors, chains, tackle, apparel,
furniture, fittings and equipment and all other appurtenances thereunto
appertaining or belonging, whether now owned or hereafter acquired, whether on
board or not, and all additions, improvements and replacements hereafter made in
or to said Vessel, and including all gaming equipment, machinery or accessories
related to gaming operations.
1.2 "Delivery Date", as used in Sections 3, 4 and 5, hereof, shall mean
the date hereof.
SECTION 2
DELIVERY OF THE VESSEL
2.1 The Vessel will be delivered to Charterer at Gloucester,
Massachusetts on January 21, 1999. At the time the Vessel is delivered by Owner,
Charterer shall accept the Vessel by executing and delivering to Owner an
Acceptance Supplement therefor, substantially in the form attached hereto as
Exhibit A, and by this reference made a part hereof, whereupon the Vessel shall
(i) be deemed to have been accepted by Charterer on the Delivery Date specified
in such Acceptance Supplement, and (ii) become subject to and governed by all
the provisions of this Charter Party.
<PAGE> 2
SECTION 3
CONDITIONS PRECEDENT TO DELIVERY OF VESSEL
3.1 Owner's obligation to deliver the Vessel to Charterer is subject to
the satisfaction on or before the Delivery Date of each of the following
conditions:
(a) The representations and warranties contained in Section 7
of this Charter Party shall be true on and as of the Delivery Date of the Vessel
and there shall exist on such Delivery Date no Event of Default as defined in
Section 15 in this Charter party, nor any condition, event or act which with
notice or lack of time or both would become an Event of Default as so defined
which Event of Default, condition, event or act has not been remedied or waived.
(b) Owner shall have received evidence satisfactory to Owner
that the insurance required under the terms of this Charter Party is in full
force and effect.
(c) Owner shall have received a certified copy of a resolution
of the board of Directors of Charterer authorizing Charterer's execution and
delivery of this Charter Party and the chartering of the Vessel from Owner
pursuant to the provisions hereof.
3.2 Charterer's obligation to accept delivery of the Vessel from Owner
is subject to the satisfaction on or before the Delivery Date of each of the
following conditions:
(a) Charterer has inspected the Vessel and Owner shall have
warranted that the Vessel is in the same condition, reasonable wear and tear
excepted, at the Delivery Date as reflected in the inspection report prepared by
attached hereto as Exhibit B.
(b) The representations and warranties contained in Section
7.2 of this Charter Party and be true on and as of the Delivery Date of the
Vessel.
(c) Charterer shall have received a certified copy of a
resolution of the Board of Directors of Owner authorizing Owner's execution and
delivery of this Charter Party and the chartering of the Vessel to Charterer
pursuant to the provisions thereof.
SECTION 4
TERM OF CHARTER PARTY
4.1 The term of this Charter Party shall commence upon the Delivery
Date and unless sooner terminated as provided herein, shall continue until April
21, 1999.
4.2 At all times during the term of this Charter Party, title to the
Vessel shall be vested in Owner to the exclusion of Charterer, and delivery of
the Vessel to Charterer and Charterer's possession thereof shall constitute a
letting and bailment.
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4.3 This Charter Party shall not be subject to termination by Owner
unless Charterer is in default hereunder, nor by Charterer except in the event
of a breach of Owner's obligations hereunder.
SECTION 5
CHARTER HIRE PAYMENTS
5.1 Charterer agrees to pay Owner as charter hire equal consecutive
monthly payments of FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00) per month
commencing on the date hereof prorated for the balance of the month of January
1999, and for February, 1999, and on the first day of each and every month
thereafter during the Term of the Charter Party, together with any applicable
sales and/or use taxes imposed by applicable government authority. All agreed
charter payments shall be paid to Owner, or as hereinafter set forth, plus
applicable sales and/or use taxes and shall be payable without demand and in
advance without any set-off, counterclaim or deduction whatsoever; provided,
however, Charterer shall have the right to make payments in the amount of
FORTY-FIVE THOUSAND TWO HUNDRED NINETEEN AND NO/100 DOLLARS ($45,219.00)
directly to Brownsville Bank (for the account of Owner) under the existing ship
mortgage encumbering the Vessel as a first lien thereon and thereafter to pay
the balance of such monthly payment, FOUR THOUSAND SEVEN HUNDRED EIGHTY-ONE AND
NO/100 DOLLARS ($4,781.00), to Owner. In the event Charterer fails to pay the
Brownsville Bank Mortgage as and when due and Owner becomes liable for a late
payment fee or a default rate of interest charge, Charterer shall be liable for
payment of same in addition to the above described monthly payments.
5.2 Charterer shall pay as additional Charter Hire the sum of $3.00 per
passenger for every passenger carried in excess of 12,000 passengers per month.
The payment of additional charter hire shall be made 30 days in arrears; that
is, if in the month of March more than 12,000 passengers are carried, Charterer
will pay the additional hire at the time of making the payment for April charter
hire.
5.3 All payments under Sections 5.1 and 5.2 and all other payments by
Charterer to Owner under this Charter Party shall be made in United States
Dollars in immediately available funds net of any withholding or other taxes
except franchise or income taxes of the Owner, either at the office of Owner as
set forth in Section 23 hereof, or at such other address in the United States as
Owner may notify Charterer giving ten (10) days notice in writing.
SECTION 6
NO WARRANTIES: QUIET ENJOYMENT
6.1 Notwithstanding any other provisions of this Charter Party,
simultaneously with the delivery of the Vessel and execution by Charterer and
Owner of the Acceptance Supplement therefor, Charterer shall be deemed to have
accepted delivery of the Vessel
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under this Charter Party "as is, where is", without any agreement,
representation or warranty, express or implied, by Owner except as set forth in
Section 7.2. OWNER SHALL NOT, BY VIRTUE OF MERELY HAVING CHARTERED AND LET THE
VESSEL UNDER THIS CHARTER PARTY, BE DEEMED TO HAVE MADE ANY REPRESENTATION OR
WARRANTY EITHER EXPRESS OR IMPLIED AS TO THE DESIGN, CONDITION, MERCHANTABILITY,
OR SEAWORTHINESS OF, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN, OR
AS TO THE CONSUMABLE STORES ON BOARD THE VESSEL, OR AS TO THE FITNESS OF THE
VESSEL FOR ANY PARTICULAR PURPOSE OR ANY PARTICULAR TRADE, OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER except as set forth in Section 7.2, it
being agreed and understood that all such risks as between Owner and Charterer
are to be borne under this Charter Party by Charterer, except as set forth in
Section 7.2.
6.2 AS BETWEEN OWNER AND CHARTERER, CHARTERER ACKNOWLEDGES AND AGREES
THAT OWNER HAS NOT MADE, AND DOES NOT HEREBY MAKE, ANY REPRESENTATION OR
WARRANTY OR COVENANT WITH RESPECT OF THE MERCHANTABILITY, CONDITION, QUALITY,
DURABILITY, OR SUITABILITY WITH OR FOR THE PURPOSES AND USES OF CHARTERER, OR
ANY OTHER REPRESENTATION OR WARRANTY OR COVENANT OF ANY KIND OR CHARACTER,
EXPRESS OR IMPLIED, EXCEPT AS SET FORTH IN SECTION 7.2, AND THAT CHARTERER
AGREES THAT OWNER SHALL NOT BE LIABLE TO CHARTERER FOR ANY LIABILITY, CLAIM,
LOSS, DAMAGE, OR EXPENSE OF ANY KIND OR NATURE CAUSED, DIRECTLY OR INDIRECTLY,
TO THE VESSEL OR ANY INADEQUACY THEREOF FOR ANY PURPOSE, OR ANY DEFICIENCY OR
DEFECT THEREIN, OR THE USE OR MAINTENANCE THEREOF, OR ANY REPAIRS, SERVICING OR
ADJUSTMENTS THERETO, OR ANY INTERRUPTION OR LOSS OF SERVICE OR USE THEREOF, OR
ANY LOSS OF BUSINESS BY CHARTERER, OR ANY OTHER CONSEQUENTIAL DAMAGES EXCEPT TO
THE EXTENT THE SAME IS ATTRIBUTABLE TO A BREACH OF THE REPRESENTATION IN SECTION
7.2
6.3 If Charterer shall pay the charter hire and other amounts payable
by Charterer hereunder as and when the same become due and payable and shall
perform and comply with all of the other terms and conditions hereof, Owner and
persons claiming by, through or under Owner will not interfere with the peaceful
and quiet use and enjoyment of the Vessel by Charterer, provided that Owner and
its authorized representative may, on reasonable notice, inspect the Vessel as
provided in Section 18 hereof.
SECTION 7
REPRESENTATIONS WARRANTIES AND COVENANTS
7.1 Charterer represents, warrants and covenants with respect to this
Charter Party that:
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(a) Charterer is a limited liability company duly organized,
validly existing and in good standing under the law of the State of Colorado,
and is duly qualified and authorized to do business wherever the nature of its
activities or properties require such qualification and authorization.
(b) Charterer has the full power, authority and legal right to
execute, deliver and perform all the terms of this Charter Party. This Charter
Party has been duly authorized by all necessary actions of the Directors of
Charterer and constitutes a valid and binding obligation of Charterer
enforceable in accordance with its terms.
(c) There is no law and no charter, by-law or preference share
provision of Charter and no provision in any existing mortgage, indenture,
contract or agreement binding on Charter which would be contravened by the
execution, delivery or performance by Charterer of the terms of this Charter
Party.
(d) No consent of the holder of any indebtedness of Charterer
is or will be required as a condition to the validity of this Charter Party or,
if required, all such consents have been obtained.
(e) Neither the execution or delivery of this Charter Party
nor fulfillment of or compliance with the terms and provisions hereof will
contravene any provision of law, including, without limitation thereto, any
statute, rule, regulation, judgment, decree, order, franchise or permit
applicable to Charterer or any agreements or instrument to which Charterer is
now a party.
(f) Charterer represents that is now is and covenants
throughout the term of this Charter Party that it will continue to be a citizen
of the United States qualified to engage in the coastwise trade within the
meaning of Section 2 of the Shipping Act, 1916, as amended (46 USC Section 302,
as amended). Charterer further covenants that it will not cause or permit the
Vessel to be operated in any manner contrary to the law and the Charterer will
not engage in any unlawful trade or violate any law or carry any cargo that will
expose the Vessel to penalty, forfeiture or capture, and will not do or suffer
or permit to be done (other than to suffer or permit anything done by the
Owner), anything which can or may injuriously effect the documentation of the
Vessel under the laws and regulations of the United States and will at all times
keep the Vessel duly documented thereunder.
7.2 Owner represents, warrants and covenants with respect to this
Charter Party that:
(a) Owner is a corporation duly organized, validly existing
and in good standing under the laws of the state of Georgia and is duly
qualified and authorized to do business wherever the nature of its activities or
properties require such qualification and authorization.
(b) Owner has the full power, authority and legal right to
execute, deliver and perform the terms of this Charter Party. This Charter Party
had been duly
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<PAGE> 6
authorized by all necessary corporate action of Owner and constitutes a valid
and binding obligation of Owner enforceable in accordance with its terms.
(c) There is no law and no charter, by-law or preference share
provision of Owner and no provision in any existing mortgage, indenture,
contract or agreement binding on Owner which would be contravened by the
execution, delivery or performance by Owner of the terms of this Charter Party.
(d) No consent of the holder of any indebtedness of Owner or
of any mortgagee of the Vessel is or will be required as a condition to the
validity of this Charter Party or, if required, all such consents have been
obtained.
(e) Neither the execution or delivery of this Charter Party
nor fulfillment of or compliance with the terms and provisions hereof will
contravene any provision of law, including, without limitation thereon, any
statute, rule, regulation, judgment, decree, order, franchise or permit
applicable to Owner or any agreements of instrument to which Owner is now a
party.
(f) Owner has good and marketable title to the Vessel, free
and clear of all liens, except as set forth on Schedule I annexed hereto. There
is no action or proceeding pending or, insofar as Owner knows, threatened
against Owner before any court or administrative agency which in its opinion
might result in any material adverse effect on the business or conditions or
operations of Owner or Owner's good and marketable title to the Vessel.
(g) Owner represents that it now is and covenants throughout
the terms of this Charter Party that it will continue to be a citizen of the
United States qualified to engage in the coastwise trade within the meaning of
Section 2 of the Shipping Act, 1916, as amended (46 USC Section 302, as
amended). that the Vessel is duly documented to engage in the coastwise trade,
has a valid and current (without benefit of any grace period) Certificate of
Inspection and is suitable to be operated as an offshore casino gaming vessel.
(h) Charterer acknowledges, understands and agrees that
Charterer is taking delivery "AS IS" and "WHERE IS" and Owner does not and shall
not be deemed to make any warranty or representation either express or implied
as to the Vessel, or as to the design, condition, merchantability or
seaworthiness of, or as to the quality of material or workmanship in, or as to
the fitness of the Vessel for any particular purpose or trade.
SECTION 8
POSSESSION AND USE OF VESSEL
8.1 Charterer shall man, fuel, insure, maintain, navigate, operate and
supply the Vessel as its sole cost and expense and shall pay all charges and
expenses of every kind and penalties levied against the Vessel and arising on or
after the Delivery Date, it being
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understood that Owner retains no dominion, control, possession or command during
the term of this Charter Party but that Charterer shall have exclusive use,
dominion, control, possession and command of said Vessel during the term of this
Charter Party.
Owner shall, throughout the charter period, maintain the documentation
of the Vessel of the Owner's name under the laws of the United States of America
at the Owner's expense. Charterer will execute such documents and furnish such
information as Owner may reasonably require to enable Owner to maintain such
documentation. Neither Owner nor Charterer shall not suffer or permit anything
to be done which can or might injuriously affect the documentation of the Vessel
under the laws and regulations of the United States of America. Charterer shall
not engage in any unlawful trade or violate any law recognized as valid the
United States of America or carry any cargo that will expose the Vessel to
penalty, forfeiture or capture.
8.2 Charterer shall not sell, assign or transfer to, directly or
indirectly, create or incur or suffer to be created or incurred or to exist any
mortgage (other that any mortgage granted by Owner), lien, charge or encumbrance
of any kind, except for longshoreman's or crew's wages or salvage, or any of its
rights under this Charter Party or on the Vessel, and if any such mortgage,
lien, charge or encumbrance does exist. Charterer, at its sole cost and expense,
shall promptly remove same. Charterer will at all times keep a true copy of this
Charter Party on board the Vessel with its papers and exhibit the same on
request and Charterer agrees to notify any person furnishing repairs, supplies,
or other necessaries to the Vessel that neither Charterer not the Master of the
Vessel not any person has any right or power to create, incur or permit to be
imposed upon the Vessel any liens whatsoever, except longshoreman's or crew's
wages or salvage, and will keep permanently displayed on the Vessel a notice
which shall read as follows:
"NOTICE OF BAREBOAT CHARTER PARTY
"This Vessel is the property of Florida Casino Cruises, Inc.
It is under charter to Leisure Express Cruises, L.L.C. and, by the
terms of the Bareboat Charter Party, neither the Charterer, the Master
of this Vessel nor any other person has the right, power, or authority
to create, incur or permit to be imposed on the Vessel any liens
whatsoever, except for the longshoreman's or crew's wages or salvage."
Notwithstanding anything contained herein to the contrary, Charterer
shall have the right to create, incur or permit to be placed or imposed upon the
Vessel usual and customary operating liens which are to be discharged within the
normal course of business and shall have the rights to allow financing for
furniture, fixtures and equipment, including gaming equipment, of the Charterer
used in its ordinary course of business (hereinafter called "FF&E"), so long as
the grantee of such security rights expressly waives any liens or security right
against the Vessel or its equipment.
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8.3 Subject to the right of Charterer to deliver possession of the
Vessel to any organization for overhauling, service, repair or maintenance work
on the Vessel, Charterer shall not transfer possession of or the sub-lease the
Vessel.
SECTION 2
MAINTENANCE AND OPERATION OF VESSEL
9.1 Charterer at its own cost and expense shall maintain and preserve
the Vessel in good running order and repair, so that the Vessel, insofar as due
diligence can take her so, is tight, staunch, strong, and well and sufficiently
tackled, apparelled, furnished, and equipped.
9.2 Charterer covenants that the Vessel will at all times comply with
applicable laws, treaties, convention rules and regulations issued thereunder,
and will keep on board, when required thereby, valid certificates showing
compliance therewith.
9.3 Charterer will not cause or permit the Vessel to be operated in any
manner contrary to applicable laws, treaties, conventions or rules and
regulations and undertakes to do all such things, without expense to Owner, as
shall be necessary to comply with all requirements to permit lawful operation of
the Vessel; provided, however, that Charterer may in good faith contest the
validity and application of any such law or rule in any reasonable manner which
does not adversely affect the property or rights of Owner hereunder, and no
mechanical or nonsubstantial noncompliance with the provision of this Section
9.5 shall be deemed a material breach if Charterer shall have obtained in
writing, from the appropriate authorities permissions, extensions or continuance
to perform any act required of Charterer hereunder, provided Charterer shall
perform any and all requirements or conditions set forth in such permissions,
extensions or continuances.
9.4 Charterer shall not detach or remove from, or permit or suffer to
be detached or removed from the Vessel any equipment, accessories, or parts on
board the Vessel at the commencement of the term of this Charter Party or
considered to be a part thereof in accordance with the definition continued in
Section 1 hereof, unless any detachment or removal shall be incident to any
replacement permitted under Section 10 hereof.
9.5 Owner shall have the right at any time and at its expense, on
reasonable notice, to inspect the Vessel in order to ascertain whether the
Vessel is being properly repaired and maintained and the Charterer shall cause
to be made all such repairs, without expense to Owner, as such inspection or
survey may show to be required. The Charterer will also permit the Owner to
inspect the Vessel's logs whenever required, on reasonable notice, and shall
furnish the Owner with full information regarding any material casualties or
other accidents or damage to the Vessel.
9.6 If a complaint be filed against the Vessel or the Vessel be
otherwise attached, arrested, levied upon or taken into custody under process or
color of legal authority or any cause whatsoever, the Charterer will promptly
notify Owner by facsimile
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or by telephone that is confirmed in writing, at the address specified in
Section 22.1 of this Charter Party, and unless such liens were created solely by
any act or inaction of the Owner, within 15 days from the time of such
complaint, attachment, arrest or seizure will cause the Vessel to be released
and all Liens thereon to be discharged and will promptly and will promptly
notify the Owner in the manner aforesaid.
If the Charterer shall fail or neglect to furnish proper security or
otherwise release the Vessel from complaint, arrest, levy, seizure, or
attachments, the Owner or any person acting on behalf of the Owner may furnish
security to release the Vessel and by so doing shall not be deemed to cure the
default of the Charterer.
9.7 Charterer acknowledges that this is a Bareboat Charter Party only
and that Charterer has not acquired and shall not acquire during the term of
this Charter Party any right, title or interest in and to the Vessel, which are
and shall at all times remain the property of the Owner.
SECTION 10
REPLACEMENT AND ADDITIONS TO THE VESSEL
10.1 Charterer will not make, or permit to be made, any substantial
change in the structure, type or speed of the Vessel or change in her rig,
without first having obtained the written approval of the Owner. Charterer may
replace any accessory, equipment, part or item appurtenant to the Vessel or any
of its equipment where necessary in the normal course of Charterer's
maintenance, provided such replacement is of new manufacture or warranted as
rebuilt or reconditioned by Charterer or a manufacturer and in good operating
order, and is of at least equivalent value and condition as the accessory,
equipment part, item or equipment replaced. Any accessories, parts or items
installed on incorporated in or attached in the Vessel by Charterer in
replacement of existing accessories, equipment, parts, or items, and any
accessories, and which are essential to the operation of the Vessel, will be
considered to be accessions (hereinafter called "Accessions") to the Vessel and,
title to such Accessions will be immediately vested in Owner without cost or
expense to Owner upon such installation, incorporation or attachment, and such
accession will become subject to all of the terms and provisions of this Charter
Party as completely and to the same extent as if they had been components of the
Vessel at the time it originally became subject to this Charter Party, and title
to the accessories, equipment, party, or items which are replaced by the
Accessions shall be vested in Charterer when such replacement has been
completed. Any accessories, equipment, parts or items that are installed on,
incorporated in or attached to the Vessel by Charterer and which are in addition
to, but not in replacement of, existing accessories, equipment, parts or items,
but are not essential to the operation of the Vessel will not be considered
Accessions, but rather will be considered non-essential additions (hereinafter
called "non-essential additions") to the Vessel if, and only if, such
non-essential additions to the Vessel are not affixed or attached to the Vessel
to such an extent that their removal could involve considerable expense or might
result in damage to the Vessel, and title to such non-essential additions as
well as title to any Charterer-supplied gaming equipment, machinery or
accessories related to gaming operations and other furniture and equipment
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owned by Charterer and used in its ordinary course of business, shall remain
with Charterer. Charterer's FF&E shall be absolutely removable, provided
Charterer repairs all damages resulting from such removal.
SECTION 11
ALTERATIONS
11.1 Owner shall bear no liability whatsoever for the cost of any
replacements or additions to accessories, equipment, parts or other items to the
Vessel or for alterations or modifications to the Vessel made by Charterer
during the term hereof, including, without limitation, modifications required by
authority or by changes to laws or regulations.
SECTION 12
INSURANCE
Charterer shall, at its own expense, carry the following minimum
insurance coverages through the term of this Charter Party, including any
extensions hereof, or such increased coverages as may be considered necessary or
advisable for the protection of Owner:
12.1 (a) (i) Unless such types of insurance are no longer commercially
available, the Charterer will at all times and at its own cost and expense cause
to be carried and maintained in respect of the Vessel insurance payable in
United States Dollars in such amounts, against such risks (including navigating
risk and marine hull and machinery (including excess value) insurance, marine
protection and indemnity insurance and public liability insurance) and in such
form (including, without limitation, the form of the loss payable clause and the
designation of namable assureds) as provided in Section II.
(ii) In the case of all marine hull and machinery policies,
the Charterer, will cause, within 30 days after the Closing Date, Owner to be
named as a co-insured and will (and cause its insurance broker to ) cause the
insurers under such policies to waive any liability of Owner for premiums
payable under such policies. In the case of all protection and indemnity
insurance, if obtainable, the Shipowner will cause the Owner, within 30 days
after the Closing Date, to be named as an additional insured unless it cannot be
provided that Owner shall no be liable under such policies for payment of any
premium, club call, assessment or advance. Notwithstanding the foregoing, at no
time shall there be recourse Owner under such policies for payment of any
premium, club call, assessment, advance or commission.
(iii) The Charterer will cause the firm of insurance brokers
referenced in Section 12.1 (a)(iv) of this Charter Party to agree to advise
Owner forthwith by telecopier, to their addresses of any lapse of any such
insurance by expiration, termination, failure to renew or otherwise and of any
default in payment of any premium and of any other act of or omission on the
part of the Charterer of which such brokers have knowledge and which might
invalidate or render unenforceable, in whole or in part, any insurance on the
Vessel. Absent actual knowledge, Owner shall be deemed not to have knowledge of
any such lapse of insurance in the absence of receipt of notice from
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such brokers. Promptly after the Closing Date, the Charterer will also cause
such brokers to agree to mark their records and to advise Owner, by telecopier,
addressed as provided above in this subsection, at least five (5) business days
prior to the expiration date of any insurance carried pursuant to this Charter
Party, that such insurance has been removed or replaced with new insurance which
complies with the provision of this Section 12. In addition, the Charterers will
use its best efforts to cause such insurance company, underwriter, club or fund
(or any authorized agent thereof) with respect to all insurance required hereby
to agree in writing for the benefit of Owner that each policy or contract issued
by such insurance company, underwriter, club or fund shall not lapse, expire,
terminate or be canceled for any reason whatsoever without at least ten days'
prior notice to Owner by telecopier or cable addressed as provided above in the
subsection (iii).
(iv) Charterer, at its own expense, shall furnish to Owner
simultaneously with the execution and delivery thereof, a report, in form and
substance satisfactory to Owner (which shall set forth, without limitation, with
respect to each type of insurance coverage, each policy or certificate of entry,
in form, the number, or amount each direct or indirect or participating insurer
or underwriter, the type of risk covered and the expiration date), signed by a
firm of independent insurance brokers appointed by the Charterer and acceptable
to Owner, with respect to the insurance carried and maintained in respect of the
Vessel.
(b) For the purposes of insurance against total loss, the Vessel,
its equipment, appurtenances, etc., shall be insured for and valued at an amount
at least equal to the fair market value thereof. Protection and indemnity
insurance in respect of the Vessel shall be in the highest amount from time to
time commercially reasonable for vessels of the same type, age and flag the
Vessel, but in any event shall be in an amount for each occurrence of not less
than the declared value of Vessel under its hull and machinery insurances.
(c) (i) Owner consents to insurance payments being made directly to
Charterer as long as Owner is not personally liable for any payment to the
injured person; the amount of damages claimed by such injured person have been
liquidated as to amount (whether by settlement or non-appealable judicial
decree) and such agreed upon damages have been paid in full by Charterer; and
such insurance payments are merely reimbursement for damage payments actually
made by Charterer to such injured person.
(ii) Unless otherwise required by Owner by notice to the
underwriters, although the following insurance is payable to Owner, under any
insurance with respect to the Vessel involving any damage to the Vessel, the
underwriters may pay directly for the repair, salvage or other charges involved
or, if the Charterer shall have first fully repaired the damage or paid all of
the salvage or other charges, will pay the Charterer as reimbursement therefor.
(d) In the event of an actual, constructive or compromised total
loss of the Vessel, all insurance provided for herein or other payments for such
loss shall be paid to the Owner. Under such an event, this Charter Party shall
then terminate as of the date
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payment of the insurance is made to the Owner, and, in addition, Charterer shall
be required to pay to Owner the sum of the charter hire due and payable as to
the Vessel to the date of the loss. Nothing herein shall prevent Charterer from
obtaining business interruption insurance or insurance on FF&E, the proceeds of
which, if any, shall be payable to the Charterer or its assigns.
(e) The Charterer will cause all policies and certificates of entry
with respect to insurance required hereby to contain a loss payable clause which
shall (i) in the case of protection and indemnity insurance and public liability
insurance, provide for payment to the Charterer or its order unless and until
the underwriters or association receive notice from the Owner that there has
occurred and in continuing an Event of Default hereunder, in which event all
payments shall be made to the Owner and (ii) in the case of all other insurance,
provide for payment in accordance with the terms of subsection (c) and (d) of
this Section 12.1. In addition (unless all or substantially all of the insurance
required by this Section 12.1 is placed in the United States market), the
Charterer will, at its own cost and expense, assign to Owner as it's interest
may appear all of the Charterer's rights, title and interest in and to each
policy and contract of insurance (including all entries in protection and
indemnity associations) with respect to the insurance required hereby and
furnish, or cause its brokers to furnish, written notice of such assignment to
all insurers, underwriters, clubs and associations with respect to such
insurance.
(f) In the event that any claim or lien is asserted against the
Vessel for loss, damage or expense which is covered by insurance required
hereunder, and it is necessary for the Charterer to obtain a bond or supply
other security to prevent arrest of the Vessel or to release the Vessel from
arrest on account of such claim or lien, Owner, at request of the Charterer or
its agent, may assign to any person, firm or corporation executing a surety or
guarantee bond or other agreement to save or release the Vessel from such
arrest, all right, title and interest of Owner in and to said insurance covering
said loss, damage, or expense, or collateral security in indemnity against
liability under said bond or other agreement.
(g) The Charterer will deliver to Owner copies of all cover notes,
binders, policies, and certificate of entry in protection and indemnity
associations, and all endorsements and riders amendatory thereof, in respect of
insurance maintained in connection with the Vessel.
(h) The Charterer agrees this will not do or permit or willingly
allow to be done any act by which any insurance required by the terms of this
Charter may be suspended, impaired or canceled, and that it will not permit or
allow the Vessel to undertake any voyage or run any risk or transport any cargo
which may not be permitted by the policies in force, without having previously
insured the Vessel by additional coverage to extend to such voyages, risks or
cargoes.
12.2 Without limiting the foregoing, it is hereby agreed that Owner
may, at Owner's expense, insure the Vessel against loss under Charterer's then
current policies,
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and the full amount of any proceeds or award in respect of such additional
insurance shall be paid to Owner. Charterer agrees that it will cooperate with
Owner in any reasonable manner to enable Owner to obtain additional insurance.
SECTION 13
SEIZURE OF VESSEL
13.1 In the event that there should be a condemnation, seizure or other
taking of the Vessel by governmental authority, whether under the power of
eminent domain or otherwise, if lasting for a period of more than thirty (30)
days, then Owner and Charterer shall have the same rights, duties and
responsibilities with reference to the Vessel so condemned, seized or taken, as
they would under the provisions of Section 12.1(d) hereof, with the result that
this Charter Party shall then terminate as of the date payment of insurance is
made to the Owner and, in addition, Charterer shall be required to pay to Owner
the charter hire due and payable as to the Vessel to the date of condemnation or
taking. The sum shall be due to Owner no later than sixty (60) days following
the date of such condemnation, seizure or taking.
SECTION 14
INDEMNIFICATION AND WAIVER
14.1 Charterer hereby agrees to indemnify, defend, reimburse and hold
Owner harmless from and against any and all claims (by whomsoever made and
whether groundless or not), losses, liabilities, but not limited to, any claim
or liability for strict liability in tort, demands, notes, judgments or causes
of action and all legal proceedings, whether civil or criminal, penalties, fines
and other sanctions and any costs and expenses in connection therewith which may
result from or grow or arise in any manner out of the management, control,
chartering, encumbering, condition, repair, use or operation of the Vessel
during the term hereof.
SECTION 15
OWNER'S REMEDIES UPON DEFAULT
15.1 If during the continuance of this Charter Party one or more of the
following events (herein called Events of Default) shall occur.
(a) default shall be made by Charterer in the making of any payments
of charter hire to Owner when due under this Charter Party, and, as to any other
payments due under this Charter Party when not made within ten (10) days after
the written notice specifying the default and demanding the same to be remedied;
(b) default shall be made by Charterer at any time in the
procurement or maintenance of any insurance coverage prescribed herein;
(c) default shall be made in the observance or performance of any
other of the covenants, representations conditions, agreements, or warranties on
the part of
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<PAGE> 14
Charterer obtained herein, and such default shall continue for fifteen (15) days
after written notice from Owner to Charterer specifying the default and
demanding the same to be remedied;
(d) if any representation or warranty of Charterer contained in this
Charter Party shall prove to have been untrue or incorrect in any material
respect when made, and not remedied within fifteen (15) days after discovery or
written notice thereof;
(e) Charterer shall consent to the appointment of a receiver,
trustee or liquidator of itself or of a substantial part of its property, or
Charterer shall admit, in writing, its insolvency or bankruptcy or its inability
to pay its debts generally as they come due, or shall make a general assignment
for the benefit of creditors, or shall file a petition in bankruptcy or a
petition or any answer seeking reorganization in a proceeding under any
bankruptcy laws (as now or hereafter in effect), or a readjustment of its
indebtedness, or an answer admitting the material allegations of a petition
filed against the Charterer in any such proceeding, or Charterer shall by
petition, answer or consent seek relief under the provisions of any other now
existing or future bankruptcy or other similar law providing for the
reorganization or winding up of corporations, or Charterer shall make an
agreement, composition, extension or adjustment with it creditors;
(f) an order, judgment or decree shall be entered by any court of
competent jurisdiction appointing a receiver, trustee or liquidator of Charterer
or any substantial part of the property of the Charterer without its consent, or
if any substantial part of the property of the Charterer shall be sequestered
and remain in force undismissed, unstayed or unvacated for a period of fifteen
(15) days after the date of entry thereof;
(g) a petition against Charterer is a proceeding under the
bankruptcy laws or other insolvency laws (as now or hereafter in effect) shall
be filed and any decree or other order adjudging Charterer a bankrupt or
insolvent in such proceeding shall remain in force undismissed or unstayed for a
period of thirty (30) days after such adjudication (whether or not consecutive),
or in case the approval of such petition by a court of competent jurisdiction is
required, the petition is filed or amended shall be approved by such a court as
properly filed, and such approval shall not be withdrawn or the proceeding
dismissed within thirty (30) days thereafter, or if under the provisions of any
law providing for reorganization or winding-up of corporations which may apply
to Charterer, any court of competent jurisdiction shall assume jurisdiction,
custody or control of Charterer or of any substantial part of its property, and
each jurisdiction, custody or control shall remain in force unrelinquished,
unstayed or unterminated for a period of thirty (30) days; provided, however, in
the event such default cannot be cured within the periods specified above, the
"cure" period shall be extended as long as Charterer has commenced and is
diligently proceeding to correct any such default condition.
After the occurrence of such Event of Default and while such Event of
Default shall be continuing after the running of any applicable cure period,
Owner, at its option, may:
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<PAGE> 15
(i) Proceed by appropriate court action or actions either at
law, admiralty or in equity to enforce performance by Charterer of the
applicable covenants and terms of this Charter Party or to recover from
Charterer any and all damages or expenses, including reasonable attorneys' fees,
which Owner shall have sustained by reason of Charterer's default in any
covenant or covenants of this Charter Party or on account of Owner's enforcement
of its remedies hereunder, and/or
(ii) give notice in writing to Charterer specifying the
occurrence giving rise to such Event of Default and stating that this Charter
Party shall expire and terminate on the date specified in each notice, which
shall be at least ten (10) days after the giving of such notice (hereinafter
called "Date of Termination"), and upon the date so specified (unless such Event
of Default or Events of Default have been cured), this Charter Party shall
expire and terminate, whereupon all rights of Charterer to or in the use of the
Vessel shall absolutely cease and determine as though this Charter Party had
never been made, but Charterer shall remain liable as hereinafter provided and
thereupon Charterer shall deliver possession of the Vessel to Owner in
accordance with Section 16 hereof. Owner by itself or by its agents, without
further notice may, but shall be under no obligation to, retake the Vessel
wherever found, whether upon the high seas or at any port, harbor or other place
and irrespective of whether Charterer, any subcharterer or any other person,
corporation, partnership or any other entity may be in possession of the Vessel,
all without prior demand and without legal process, and for that purpose Owner
or its agents may enter upon any dock, pier or other premises where the Vessel
may be and may take possession thereof. Thenceforth Owner may hold, possess and
enjoy the Vessel free from any right of the Charterer or its successors or
assigns, to hold, use or sell the Vessel for any purpose whatsoever and Owner
shall have a right to recover from Charterer any all amounts which under the
terms of this Charter Party may be then due.
15.2 In accordance with Section 15.1(ii) and without limiting the
generality thereof, Owner or it agents may sell the Vessel at public or
commercially reasonable private sale, with notice to Charterer, as Owner may
determine or otherwise may dispose of, hold, use, operate, charter (whether for
a period greater or less than the balance of what would have been the term of
this Charter Party in the absence of the termination of Charterer's rights to
the Vessel) to others, all on such terms and conditions and at such place or
places as Owner may determine.
15.3 If on the Date of Termination the Vessel is lost, destroyed,
requisitioned, forfeited, seized or captured, Charterer's liability hereunder
shall be determined by Section 13 hereof.
15.4 No right or remedy conferred upon or reserved to Owner by this
Charter Party shall be exclusive of any other rights to remedy herein or by law
provided; all rights and remedies of Owner conferred upon Owner by this Charter
Party or by law shall be cumulative and in addition to every other right and
remedy available to Owner.
15.5 Owner, at its election, may waive any Event of Default and its
consequences and rescind and annul such notice of termination by notice to
Charterer, in
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<PAGE> 16
writing, to that effect and thereupon the respective rights of the parties shall
be as they could have been if no Event of Default had occurred and no such
notice had been given. Notwithstanding the provisions of this Section 15.5, it
is expressly understood and agreed by Charterer that time is of the essence of
this Charter Party and that no such waiver, rescission or annulment shall extend
to or affect any other or subsequent default or impair any right or remedies of
Owner consequent thereon.
15.6 To the extent that the provisions of Section 1110(a) of the
Bankruptcy Code (11 U.S.C. Sections 362, 363), or any corresponding provisions
of subsequent law at any time may be applicable hereto, the title of Owner to
the Vessel and any right of Owner to take possession of the Vessel in compliance
with the provisions hereof shall not be affected by any power of the court to
enjoin the taking of such possession, or by Sections 362 and 363 of the
Bankruptcy Code (11 U.S.C. Sections 362, 363) as that Code may be amended from
time to time, or by corresponding provisions of subsequent law.
SECTION 16
RETURN OF VESSEL AND ITS EQUIPMENT UPON DEFAULT
16.1 If this Charter Party shall terminate pursuant to Section 15
hereof, Charterer shall forthwith deliver possession of the Vessel to Owner.
For the purpose of delivering possession of the Vessel to Owner as
above required, Charterer shall at its own cost, expense and risk forthwith
place the Vessel safely afloat and securely moored or anchored at Harbortowne
Marina, Dania, FL or to such other location as Owner and Charterer shall agree.
16.2 Charterer shall also deliver to Owner with the Vessel, the
Vessel's log books, if any, and all classification, inspection, modification and
overhaul records applicable to the Vessel.
16.3 In the event that within five (5) days after such termination
pursuant to Section 15 of this Charter Party shall fail to deliver the Vessel to
Owner as required by Section 16.1 of this Charter Party, Owner shall be entitled
to take (or cause to be taken by its agent or agents) immediate possession of
the Vessel as the same may be found together with their records, and to
transport, berth and store the Vessel at Charterers' expense in the manner, at
the place referred to in Section 16.1 of this Charter Party.
Without in any way limiting the obligation of Charterer under the
foregoing provisions of this Section 16, Charterer hereby irrevocably appoint
Owner as the agent and attorney of Charterer, with full power and authority, at
any time while Charterer is obligated to deliver possession of the Vessel to
Owner, to demand and take possession of the Vessel and their records in the name
and on behalf of the Charterer from whomsoever shall be at the time in
possession of the Vessel.
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<PAGE> 17
SECTION 17
RETURN OF THE VESSEL UPON EXPIRATION OF TERM
17.1 At the expiration of the term or upon sooner termination of this
Charter Party, Charterer shall return the Vessel to Owner free of all liens and
encumbrances other than any created by Owner, by its agents or assigns, and in
the same operating order, repair, condition and appearance as when received by
Charterer, excepting only for (i) reasonable wear and tear, and (ii) changes or
alterations properly made by Charterer as permitted in Section 10 hereof.
Charterer shall pay for any and all repairs necessary to restore the Vessel to
its original condition except as aforesaid.
17.2 Charterer shall also deliver to Owner with the Vessel the Vessel's
log books, if any, all classification, inspection, modification and overhaul
records as applicable to the Vessel.
17.3 The Charterer shall return the Vessel to its Owner, safely afloat
and securely moored or anchored at Harbortowne Marina, Dania, FL or to such
other location as Owner and Charterer shall agree.
SECTION 18
INSPECTION
18.1 During the term of this Charter Party, Charterer shall furnish to
Owner such information concerning the location, condition, use and operation of
the Vessel as Owner may reasonably request and Charterer, on reasonable notice,
shall permit any person designated by Owner in writing, at Owner's expense, to
visit and inspect the Vessel and the records maintained in connection therewith.
Owner agrees to use all reasonable efforts to minimize any interference with
Charterers' operations with respect any inspection pursuant to this Section 18
or otherwise contained in this Charter Party .
SECTION 19
ASSIGNMENT BY CHARTERER
19.1 No assignment, subcharter or sublease of this Charter Party or of
any right or obligation hereunder whatsoever may be made by Charterer without
the prior written consent of Owner. In the event of any such assignment or
subcharter or sublease, Charterer shall continue to remain liable hereunder
notwithstanding such assignment or subcharter or sublease, although Owner may
have consented thereto.
SECTION 20
FURTHER ASSURANCES
20.1 Charterer and Owner shall from time to time do and perform such
other and further acts and execute and deliver any and all such other and
further instruments as
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<PAGE> 18
may be required by law or reasonably requested by the other to establish,
maintain and protect the respective rights and remedies of the other and to
carry out and effect the intents and purposes of this Charter Party.
SECTION 21
EXTENSION NOT A WAIVER
21.1 No delay or omission in the exercise of any power or remedy herein
provided or otherwise available to the Owner shall impair or affect Owner's
right thereafter to exercise the same. Any extension of time for payment or
other indulgence granted to Charterer shall not otherwise alter or affect the
obligations of Charterer or Owner's rights hereunder with respect to any
subsequent payments or default hereunder.
SECTION 22
NOTICES
22.1 All demands, notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when personally delivered
or when deposited in the mail first class postage prepaid or delivered to a
telegraph office charges prepaid addressed as follows:
To Owner:
Florida Casino Cruises, Inc.
Attn.: Mr. Craig Goeckel
Manley Farms
2017 Pine Ridge Road
Naples, FL 34109
Phone: 1-941-597-6416
Fax: 1-941-597-4338
To Charterer:
Leisure Express Cruise, L.L.C.
Attn.: Mr. Al Johnson
1284 Miller Road
Avon, OH 44011
Phone: _________________
Fax: ___________________
SECTION 23
SUCCESSORS AND ASSIGNS
23.1 Subject to the provisions of Sections 8 and 21 hereof, this
Charter Party shall be binding upon and shall insure to the benefit of Charterer
and their respective successors and assigns provide that any assignment or
sublease shall be made in
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<PAGE> 19
accordance with the terms hereof and no other persons shall have or acquire any
tight under or by virtue of this Charter Party.
SECTION 24
EXECUTION OF CHARTER PARTY
24.1 Three (3) or more counterparts of this Charter Party have been
executed by the parties hereto. One (1) counterpart has been prominently marked
"OWNER'S COPY". Only the counterpart marked "OWNER'S COPY" shall evidence a
monetary obligation of Charterer.
SECTION 25
APPLICABLE LAW
25.1 The provisions of this Charter Party and all rights and
obligations hereunder shall be governed by and construed in accordance with the
maritime law of the United States and, where silent, the laws of the State of
Florida. Any provision hereof prohibited by or unlawful or unenforceable under
any applicable law of any jurisdiction shall as to such jurisdiction be
ineffective without modifying the remaining provisions of this Charter Party.
Where, however, the provisions of any such applicable law may be waived, they
are hereby waived by Charterer and Owner to the full extent permitted by law to
the end that this Charter Party shall be deemed to be a valid binding agreement
enforceable in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this Charter Party
to be executed this 22 day of January, 1999, in their respective corporate names
by their respective representatives hereunto duly authorized.
FLORIDA CASINO CRUISES, INC. LEISURE EXPRESS CRUISE, L.L.C.
Owner Charterer
By: /s/ By: /s/
-------------------------------- ---------------------------------------
J. Kent Manley, Elden W. Rance,
President Executive Vice President
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<PAGE> 20
ACCEPTANCE SUPPLEMENT
VEGAS EXPRESS
(Official No. 594643)
Florida Casino Cruises, Inc. ("Owner") hereby delivers to Leisure
Express Cruise, L.L.C. ("Charterer") and Charterer does hereby accept and
acknowledge sole care, custody and control and receipt in accordance with a
certain Bareboat Charter Party, dated as of January 22, 1999, of the captioned
vessel safely afloat at Gloucester, Massachusetts.
IN WITNESS WHEREOF, Owner and Charterer have hereunto caused their
respective names to be signed by their proper representative, duly authorized to
do so, on this 22 day of January, 1999 at Gloucester, Massachusetts.
LEISURE EXPRESS CRUISE, L.L.C.
By: /s/
---------------------------------
Its: President
FLORIDA CASINO CRUISES, INC.
By: /s/
---------------------------------
Its: President
<PAGE> 21
SCHEDULE 1
1. HULL AND MACHINERY COVERAGE:
American Institute Hull Clauses (June 2, 1977)
Institute S.R. & C.C. Clauses
Insured for and Valued at $6,500,000.00
2. PROTECTION & INDEMNITY:
Form SP-23
$1,000.000.00 per occurrence, $5,000.00 deductible,
each occurrence
3. POLLUTION:
WQIS Form
$5,000,000
4. BUMBERSHOOT LIABILITY:
$10,000,000.00 excess of $1,000,000.00 primary limits
<PAGE> 1
EXHIBIT 10.37
PURCHASE OPTION AGREEMENT
This PURCHASE OPTION AGREEMENT is dated as of the 22nd day of January,
1999 by and between FLORIDA CASINO CRUISES, INC., a Georgia corporation, (the
"Owner" or "FCCI") and LEISURE EXPRESS CRUISE, LLC, a Colorado limited liability
company ("Charterer").
WHEREAS, Owner and Charterer have entered into a BAREBOAT CHARTER PARTY
AGREEMENT of even date herewith (the "Charter") concerning the charter of the
Vessel as defined therein (the "Vessel");
WHEREAS, the Charter requires that this Agreement be entered into in
connection therewith;
WHEREAS, the parties acknowledge the Vessel is presently encumbered by
two ship's mortgages, being a first mortgage in favor of Brownsville Bank (the
"First Mortgage" or the "Brownsville Bank Mortgage") and a second mortgage in
favor of Branch Mahaffey (the "Second Mortgage" or the "Mahaffey Mortgage")
which are recorded at the U.S. Coast Guard National Vessel Documentation Center,
and a third mortgage in favor of Kent Manley (the "Third Mortgage" or the
"Manley Mortgage") and a fourth mortgage in favor of LEISURE TIME CASINOS AND
RESORTS, INC. (the "Fourth Mortgage" or the "Leisure Time Mortgage")
NOW, THEREFORE, in consideration of the premises and the sum of TEN AND
NO/100 DOLLARS ($10.00) and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged by each of the parties hereto,
it is hereby agreed as follows:
1. Provided that the Charter is in full force and effect and there has
not occurred and is continuing an Event of Default thereunder, Charterer shall
have the option to purchase the Vessel (OR, at Charterer's election, all of the
outstanding stock of FLORIDA CASINO CRUISES, INC., a Georgia corporation) prior
to the expiration of the Charter on April 30, 1999.
2. The aforesaid purchase option shall be exercised, if at all, by
written notice from the Charterer to the Owner not less than TEN (10) days prior
to the proposed closing date (the "Closing Date") of the closing (the "Closing")
of said purchase which Closing Date shall not be earlier than April 21, 1999,
nor later than April 30, 1999. In the event Charterer fails to give notice of
its election to purchase by April 30,1999, Owner will use best efforts to give
written notice to Charterer inquiring as to Charterer's intent. Charterer's
notice to exercise the option shall set forth the Closing Date and whether
Charterer has elected to purchase the Vessel or the stock of FCCI.
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<PAGE> 2
3. Prior to the Closing Date, Owner shall cause the Mahaffey Mortgage
to be paid in full and satisfied.
4. The purchase price of the vessel shall be equal to the sum of the
outstanding balance of: (i) the Brownsville Bank Mortgage at the date of
Closing; PLUS (ii) Charterer's assumption of the Third Mortgage in favor of J.
KENT MANLEY, his successors and/or assigns in the principal amount of TWO
MILLION EIGHT HUNDRED FIFTY THOUSAND AND NO/l00 DOLLARS ($2,850,000.00); PLUS
(iii) Charterer's assumption of the Leisure Time Mortgage (as hereinafter
defined) in the amount of ONE MILLION SEVEN HUNDRED THOUSAND AND NO/100 DOLLARS
($1,700,000.00).
5. From and after the Closing date, the indebtedness secured by the
Manley Mortgage shall bear interest at the rate of TEN PERCENT (10%) per annum,
shall be fully amortized over a SEVENTY-TWO (72) month period and shall be due
and payable in equal monthly installment payments of FIFTY-TWO THOUSAND SEVEN
HUNDRED NINETY-EIGHT AND 64/100 DOLLARS ($52,798.64) per month commencing on the
date ONE (1) month after the Date of Closing and continuing on the same date of
each and every month thereafter until paid in full.
6. In addition, during the term of the Charter Party, Owner agrees to
place additional ship's mortgage on the Vessel (which shall be subordinate and
inferior to the Brownsville Bank, Mahaffey and Manley Mortgages) in the amount
of ONE MILLION SEVEN HUNDRED THOUSAND AND NO/100 DOLLARS ($1,700,000.00) and
shall be in favor of LEISURE TIME CASINOS AND RESORTS, INC., a Colorado
corporation (the "Leisure Time Mortgage"). The Leisure Time Mortgage shall be
without interest, shall be non-recourse (i.e., the holder agrees to look solely
to the Vessel as collateral security for repayment of such mortgage and neither
J. Kent Manley nor Florida Casino Cruises, Inc. shall have any personal
liability for its payment) and shall be due and payable in a single balloon
payment on the earlier to occur of (i) closing of the sale of the Vessel, or
(ii) on December 31, 2001.
7. From and after the date hereof, as between Owner and Charterer,
Owner shall have no further personal obligation for payment of any accounts
payable with respect to the Vessel (the "Disclosed Accounts Payable") whether
such liability accrued prior to or after the date the Charter. During the term
of the Charter, Charterer shall have the right but not the obligation, to settle
any and all Disclosed Accounts Payable (on behalf of Owner and not on
Charterer's own account) on such terms and condition: as Charterer shall deem
appropriate. In the event Owner has failed to disclose a particular account
payable or other claim as of the date hereof (an "Undisclosed Account Payable")
and prior to the Closing Date the Charterer discovers that the total outstanding
balance of the Disclosed and Undisclosed Accounts Payable is in excess of ONE
MILLION FOUR HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($1,450,000.00) (the
"Maximum Accounts Payable Amount") Owner shall be responsible to discharge
Undisclosed Accounts Payable in excess of the Maximum Accounts Payable Amount in
a
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<PAGE> 3
manner such that any Undisclosed Amount Payable does not become a lien, charge
or obligation against either the Vessel or FCCI, it being the intent of the
parties that at the time of the closing of the option, Owner is able to convey
"free and clear" title to the Vessel or FCCI stock as applicable except for the
above described ship's mortgages and outstanding Disclosed Accounts Payable not
yet settled.
8. Asset or Stock Election Provisions. Owner and Charterer agree that
Charterer shall have right to elect either to purchase the Vessel as an
asset-type purchase, or to purchase all of the stock in the Vessel's owner,
Florida Casino Cruises, Inc., a Georgia corporation ("FCCI"). In the event
Charterer elects to purchase the Vessel rather than the stock of FCCI, the
Purchase Price of the Vessel shall be as set forth hereinabove in paragraph 4
PLUS the $50,000.00 cash payment set forth in paragraph 9 iv) hereinbelow and
title to the Vessel shall be conveyed by Owner to the Charterer subject to the
three outstanding ship mortgages (which Charterer agrees to assume and to pay)
and the balance of Disclosed Accounts Payable not yet settled by Charterer.
Further, in the Charterer elects to purchase the Vessel and not the stock of
FCCI, Charterer agrees to pay to FCCI, a sum equal the incremental Federal
income tax difference between the sale of the stock and the sale of assets for
gain realized by J. Kent Manley on his Federal income tax return (together with
the amount of additional tax due as a result of the incremental payment)
(collectively, the "Tax Payment Amount") which Tax Payment Amount shall be due
and payable by Charterer not later than December 10, 2000. In addition,
Charterer agrees to execute a ship's mortgage in favor of FCCI in the principal
amount of the Tax Payment Amount (the "Manley Tax Payment Mortgage") which
mortgage shall be subordinate solely to the Brownsville Bank first ship's
mortgage and the Manley second ship's mortgage. In the event the Leisure Time
Mortgage is not satisfied at closing, Charterer cause the then holder of the
Leisure Time Mortgage to execute a subordination of its mortgage to the lien of
the Manley Tax Payment Mortgage so that title to the Vessel will be conveyed by
Owner to Charterer subject to the following liabilities (for which Charterer
shall be primarily liable):
i) The Brownsville Bank Mortgage;
ii) The Manley Mortgage (in favor of J. Kent Manley
personally);
iii) The Manley Tax Payment Mortgage (in favor of FCCI);
iv) The Leisure Time Mortgage, if applicable; and
v) The balance of any remaining unsettled Disclosed
Accounts Payable.
In the event Charterer elects to purchase the outstanding stock of FCCI
rather than the Vessel, the Purchase Price of the stock shall be TWO MILLION
EIGHT HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($2,850,000.00) which sum shall
be due and payable by Charterer to J. Kent Manley and shall be evidenced by
Charterer's promissory note in the amount of TWO MILLION EIGHT HUNDRED FIFTY
THOUSAND AND NO/100 DOLLARS ($2,850,000.00) and secured by ship's mortgage
subordinate and inferior solely to the Brownsville Bank first ship's mortgage
(the Manley Purchase Money Second Mortgage') PLUS the $50,000.00 cash payment
set forth in
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<PAGE> 4
paragraph 9.iv) hereinbelow. The note secured by the Manley Purchase Money
Second Mortgage shall bear interest at the rate of TEN PERCENT (10%) per annum
shall be fully amortized over a SEVENTY-TWO (72) month period and shall be due
and payable monthly installment payments of FIFTY-TWO THOUSAND SEVEN HUNDRED
NINETY-EIGHT AND 64/100 DOLLARS ($52,798.64) per month commencing on the date
ONE (1) month after the date. of Closing and continuing on the same date on the
same date of each and every month thereafter until paid in full. Similar to the
asset election scenario, in the event the Leisure Time Mortgage is not satisfied
at the stock purchase Closing, Charterer shell cause the then holder of the
Leisure Time Mortgage to execute a subordination of its Mortgage to the lien of
the Manley Purchase Money Second Mortgage so that title to the Vessel will be
conveyed by Owner to Charterer subject to the following liabilities:
i) The Brownsville Bank Mortgage;
ii) The Manley Purchase Money Second Mortgage (in favor
of J. Kent Manley personally);
iii) The Leisure Time Mortgage, if applicable; and
iv) The balance of any remaining unsettled Disclosed
Accounts Payable.
Regardless of whether Charterer elects to purchase the Vessel or the
stock of FCCI, from and after the Closing Date, all remaining Outstanding
Disclosed Accounts Payable shall be the responsibility of Charterer and
Charterer shall indemnify and hold FCCI and J. Kent Manley harmless from any and
all personal liability for payment of same.
9. During the term of the Charter, in addition to the charter hire
payments due to Owner under the Bareboat Chatter Party, Charterer shall also
make:
(i) all lease payments due under the Harbortowne Marina
Lease with respect to dockage rights in Dania Florida
for which Charterer shall enjoy the benefit of all
marina use and dockage rights in favor of the Vessel
under such dock lease and
ii) the sum of FIFTY THOUSAND AND NO/100 DOLLARS
($50,000.00) payable to J. Kent Manley at the time of
the Closing hereunder which payment shall be in
addition to the Purchase Price of the stock or
Vessel, as applicable.
10. Any default by a party hereunder shall be a default by such party
under the Bareboat Charter Party Agreement and any default by a party under the
Bareboat Charter Party Agreement shall be a default by such party hereunder.
(The balance of this page is intentionally left blank)
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<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed as of the day and year first above written.
Signed, Sealed and delivered CHARTERER
in the presence of:
LEISURE EXPRESS CRUISE, L.L.C.
a Colorado Limited liability company
By: /s/
- --------------------------------- -------------------------------------
Elden W. Rance
Executive Vice-President
- --------------------------------
Signed, Sealed and delivered CHARTERER
in the presence of:
FLORIDA CASINO CRUISES, INC.
a Georgia corporation
By: /s/
- --------------------------------- -------------------------------------
J. Kent Manley
President
- --------------------------------
-5-
<PAGE> 1
EXHIBIT 10.38
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is dated as of February 1,
1999 (the "Effective Date"), by and between KENT MANLEY, an individual resident
of the State of ______________ (hereinafter referred to as the "Consultant") and
LEISURE TIME CRUISE CORPORATION, a Colorado corporation (hereinafter referred to
as the "Company").
1. Services. Subject to the terms and conditions of this Agreement, the
Company hereby engages Consultant to perform advisory or consultative services
relating to the marketing and operation of offshore gaming vessels owned or
chartered by the Company, and to advise and counsel the officers and directors
of the Company with respect to the Company's "Cruise-to-Nowhere" business (the
"Business"). During the term hereof, Consultant shall devote his business
efforts during such period to performing consulting services relating to the
Business as required from time to time by the Company.
2. Terms and Termination. The term of this Agreement is from the
Effective Date until April 30, 1999. The Company may terminate this Agreement
prior to April 30, 1999 for any of the following reasons immediately upon
written notice to Consultant: (i) material breach by Consultant of Consultant's
obligations hereunder, (ii) Consultant's nonperformance of any of Consultant's
duties and responsibilities hereunder, or (iii) gross incompetence in the
performance of Consultant's duties hereunder. Upon termination or expiration of
this Agreement at any time and for any reason, Consultant shall be entitled to
receive only such compensation earned with respect to services rendered prior to
the date of such termination of expiration.
3. Prior to____________________. In consideration of the services
rendered by Consultant hereunder, _____ such full month in which Consultant
provides services to the Company hereunder, the Company will pay Consultant a
consulting fee of $35,000 per month paid on the first day of each month. As an
independent consultant and not an employee, Consultant acknowledges and agrees
that the Company is not required to withhold any taxes from any compensation
paid Consultant hereunder, or to otherwise comply with laws concerning the
collection of income taxes or other employment related taxes in the course of
payment of wages. Consultant releases the Company from any liability arising
from the Company's failure to withhold such taxes, and Consultant shall
indemnify and hold the Company harmless from all liability the Company may incur
as a result of any such failure. Consultant assumes full responsibility for the
payment of all such taxes including assessments imposed or required under
unemployment insurance, workers' compensation, social security and income tax
laws with respect to Consultant's performance of the Agreement.
4. ___________________. Consultant acknowledges that the services
Consultant is to perform pursuant to this Agreement are ___________ in nature
and may not be designated or delegated by Consultant without the prior written
consent of the Company, and that Consultant's rights to any monies due or to
become due in accordance with the terms hereof ________________________ without
the prior written consent of the Company.
<PAGE> 2
5. Restrictions and Limitations. Consultant is retained and engaged by
the Company only for the purposes and to the extent set forth in this Agreement,
and during the period Consultant renders services hereunder, Consultant's
relationship to the Company shall be that of an independent contractor,
Consultant shall not be considered by reason of this Agreement or otherwise as
having an employment relationship with the Company or as being ___________ to
participate in any employment benefits enjoyed by the Company's employees. In
addition, and without limiting the foregoing, Consultant shall not for any
reason be or be deemed an officer, agent, shareholder, partner, joint venturer
or legal representative of the Company for any purpose. Consultant shall have no
authority to bind the Company by any promise or representations, whether written
or oral, express or implied, made by Consultant. Consultant shall not have the
right to make or enter into any contracts or agreements of any nature whatever
for or on behalf of the Company.
6. Governing Law. This Agreement is entered into and in all respects
shall be interpreted, empowered and governed by and in accordance with the laws
of the State of Georgia without regard to principles or conflicts of laws.
7. Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach or termination thereof shall be settled by
arbitration to be held in Atlanta, Georgia, in accordance with and through the
Commercial Arbitration Rules of the American Arbitration Association ("AAA").
The arbitration shall be conducted by a single arbitrator to be selected by the
AAA. All expenses of the arbitration, including reasonable attorneys' fees,
shall be borne by the losing party to the arbitration or, as the case may be,
shall be ________________ to properly reflect any partial prevailing or losing
of the parties to the arbitration as determined by the arbitrator.
8. Miscellaneous. This Agreement embodies the entire Agreement of the
parties hereto relating to the subject matter hereof and supersedes all prior
agreements and understandings relating to the subject matter hereof, which are
hereby cancelled and terminated. No amendment or modification of this Agreement
shall be valid or binding unless it is in writing and signed by the parties
hereto. The waiver by either party of a breach of any provision of this
Agreement by the other shall not operate or be construed as a waiver of any
subsequent breach of the same or any other provision by the breaching party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
THE COMPANY
LEISURE TIME CRUISE CORPORATION
By: /s/
------------------------------------------
Title:
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2
<PAGE> 3
CONSULTANT:
KENT MANLEY
/s/
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3
<PAGE> 1
EXHIBIT 10.39
TABLE OF CONTENTS
Section 1 Reference Data
Section 1.1 Reference Information
Section 1.2 Exhibits
Section 2 Premises and Term
Section 2.1 Premises
Section 2.2 Term
Section 2.3 Option to Extend Term
Section 2.4 Other Maritime Uses
Section 2.5 Construction on Facility
Section 3 Improvements
Section 3.1 Condition of Premises
Section 3.2 General Provisions Applicable to Construction
Section 3.3 Representatives
Section 4 Annual Rent
Section 4.1 The Annual Rent
Section 4.2 Extension Rent
Section 5 Additional Rent
Section 5.1 Real Estate Taxes
Section 5.2 Direct Expenses
Section 6 Insurance
Section 6.1 Tenant's Insurance
Section 6.2 Landlord's Insurance
Section 6.3 Tenant Reimbursement of Certain Insurance Costs
Section 6.4 Requirements Applicable to Insurance Policies
Section 6.5 Waiver of Subrogation
Section 7 Landlord's Covenants
Section 7.1 Quiet Enjoyment
Section 7.2 Exterior Common Areas and Facilities
Section 7.3 Electricity
Section 7.4 Interruptions
Section 7.5 Electricity
Section 8 Tenant's Covenants
Section 8.1 Use
Section 8.2 Repair and Maintenance
Section 8.3 Compliance with Law and Insurance Requirements
Section 8.4 Tenant's Work
Section 8.5 Indemnity
Section 8.6 Landlord's Right to Enter
Section 8.7 Personal Property at Tenant's Risk
Section 8.8 Payment of Landlord's Cost of Enforcement
Section 8.9 Yield up
Section 8.10 Estoppel Certificate
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Section 8.11 Landlord's Expenses Re Consents
Section 8.12 Rules and Regulations
Section 8.13 Holding over
Section 8.14 Assignment and Subletting
Section 8.15 Overloading and Nuisance
Section 8.16 Indemnification
Section 8.17 Signage
Section 9 Casualty or Taking
Section 9.1 Termination
Section 9.2 Restoration
Section 9.3 Award
Section 10 Default
Section 10.1 Events of Default
Section 10.2 Remedies
Section 10.3 Remedies Cumulative
Section 10.4 Landlord's Right to Cure Defaults
Section 10.5 Effect of Waivers of Default
Section 10.6 No Accord and Satisfaction
Section 10.7 Interest on Overdue Sums
Section 11 Mortgages
Section 11.1 Subordination
Section 12 Miscellaneous Provisions
Section 12.1 Notices from One Party to the Other
Section 12.2 Quiet Enjoyment
Section 12.3 Lease Not to Be Recorded; Notice of Lease
Section 12.4 Bind and Inure; Limitation of Landlord's Liability
Section 12.5 Acts of God
Section 12.6 Landlord's Default
Section 12.7 Indemnification by Landlord
Section 12.8 Brokerage Section 12.8 Miscellaneous
<PAGE> 3
DOCKAGE AGREEMENT AND LEASE
SECTION 1
Reference Data
Section 1.1. Reference Information. Reference in this Dockage Agreement and
Lease ("Lease") to any of the following shall have the meaning set forth below:
Date of This Lease: June 1, 1998
Facility: The maritime/commercial real property located at Six Rowe
Square, Gloucester, MA described in Exhibit A
Premises: Those portions of the Facility described and/or shown in
Exhibit B
Landlord: Rowe Square Corporation, ("RSC")
Address of Landlord: Six Rowe Square, Gloucester, MA 01930
Tenant: Leisure Express Cruise, LLC.
Address of Tenant: 1284 Miller Road, Avon, Ohio 44011 and
4258 Communications Drive, Norcross, GA 30093
Vessel: the 195-foot passenger vessel "Vegas Express"
Berth: that portion of the Premises designated for the Vessel in
Exhibit A.
Landlord's Representative: Francis J. Elliott, Jr.
Tenant's Representative: Bernard Johnson
Term Commencement Date: June 1, 1998
Extension Term: one five-year extension
Permitted Uses: the Premises are to be used for the purpose of berthing
the Vessel for port to port and excursion cruises and ancillary activities and
for no other use or purpose.
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Section 1.2. Exhibits. The following Exhibits are attached to and
incorporated in this Lease
Exhibit A Facility Description
Exhibit B Premises Description
Exhibit C Rent
SECTION 2
Premises and Term
Section 2.1. Premises. Landlord hereby leases and demises the Premises
to Tenant and Tenant hereby leases the Premises from Landlord, subject to any
and all existing encumbrances and other matters of record and subject to the
terms and provisions of this Lease.
Section 2.2. Term. TO HAVE AND TO HOLD for a term beginning on the
"Term Commencement Date", and continuing until December 31,2000, unless sooner
terminated as herein provided.
Section 2.3. Option to Extend Term. Tenant shall have the option to
extend the term of this Lease for the Extension Term, provided (i) no material
default in the obligations of Tenant under this Lease shall exist at the time
such option is exercised and (ii) Tenant shall give written notice to Landlord
of its exercise of such option by October 1, 2000. All of the terms and
provisions of this Lease shall be applicable during the Extension Term except
that (a) Tenant shall have no option to extend the term of the Lease beyond the
Extension Term and (b) Annual Rent for the Extension Term shall be Extension
Rent, as defined in Section 4.2, as of the first day of the Extension Term but
in no event less than the Annual Rent in effect in the last year of the original
term.
Section 2.4. Other Maritime Uses. Tenant acknowledges that other
maritime/commercial uses are and will be made of the Facility. Tenant's use
shall not unreasonably interfere with such other activities, including but not
limited to the berthing and unloading of fishing and other vessels and the bait
business carried on at the Facility. Such other activities shall be carried on
in a manner so as not to unreasonably interfere with Tenant's use. At times when
the Vessel is not at the Berth, Landlord may make reasonable use of the Berth
and wharf adjacent thereto for other maritime activities, coordinated so as not
to unreasonably interfere with Tenant's operations.
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Section 2.5. Construction on the Facility. Tenant acknowledges that
Landlord has plans to demolish the existing buildings located on the Facility,
construct a new building or buildings, make repairs to and/or reconstruct the
wharf, upgrade and pave the open areas and add additional parking on the site.
Landlord and Tenant agree to act cooperatively so that Landlord's planned
construction and Tenant's operations may be carried on with minimal
interference.
SECTION 3
Improvements
Section 3.1. Condition of Premises. Tenant agrees to accept the
Premises in its present "as is" condition. Landlord shall have no obligation to
perform any work or construction. If Tenant shall desire to perform any work or
construction, the same shall be done only in accordance with this Lease.
Section 3.2. General Provisions Applicable to Construction. All
construction work required or permitted by this Lease, whether performed by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws, ordinances, regulations, codes and orders
of any governmental authority. Either party may inspect the work of the other at
reasonable times and shall give notice of observed defects.
Section 3.3. Representatives. Each party authorizes the other to rely
in connection with plans and construction upon written approval and other
actions on the party's behalf by any Representative of the party named in
Section 1. 1 or any person hereafter designated in substitution or addition by
written notice to the party relying.
SECTION 4
Annual Rent
Section 4.1. The Annual Rent. Tenant shall pay rent to Landlord at the
Address of Landlord or at such other place or to such other person or entity as
Landlord may by written notice to Tenant from time to time direct, as set forth
in Exhibit C.
Section 4.2. Extension Rent. "Extension Rent" shall be computed as of
the date of the commencement of the extension term at the then current rents
being charged to new or renewal tenants for comparable dockage and related
facilities located in the vicinity of the Facility, taking into account and
giving effect to, in determining comparability, without limitation, such
considerations as size, location and lease term. Landlord shall initially
designate Extension Rent and shall furnish data in support of such designation
by November 1, 2000. If Tenant disagrees with Landlord's designation
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of Extension Rent, then Tenant shall have the right, by written notice given
within twenty-one (21) days after Tenant has been notified of Landlord's
designation, to either notify Landlord of its decision not to exercise its
option to extend or to submit such Extension Rent to arbitration as follows.
Extension Rent shall be determined by arbitrators, one to be chosen by Tenant,
one to be chosen by Landlord and a third to be selected, if necessary, as below
provided. If within twenty (20) days after Tenant's notice, the parties agree
upon a single arbitrator, Extension Rent shall be determined by such arbitrator.
Otherwise, the unanimous written decision of the two first chosen without the
selection and participation of a third arbitrator, or otherwise the written
decision of a majority of the three arbitrators chosen and selected as provided
herein, shall be conclusive and binding upon Landlord and Tenant. Landlord and
Tenant shall each notify the other of its chosen arbitrator within twenty-one
(21) days following the call for arbitration and, unless such two arbitrators
shall have reached a unanimous decision within thirty (30) days after their
designation, then they shall so notify the then President of the Massachusetts
Bar Association and request him to select an impartial third arbitrator, who
shall be a real estate professional doing business in Gloucester and dealing
with like types of properties, to determine Extension Rent as herein defined.
Such third arbitrator and the first two chosen shall hear the parties and their
evidence and render their decision within thirty (30) days following the
conclusion of such hearing and notify Landlord and Tenant thereof. Landlord and
Tenant shall bear the expense of the third arbitrator (if any) equally. If the
dispute between the parties as to Extension Rent has not been resolved before
the commencement of Tenant's obligation to pay rent based upon Extension Rent,
then Tenant shall pay rent in respect of the premises based upon the Extension
Rent designated by Landlord added to the January 1, 2000 to December 31, 2000
Annual Fixed Rental divided by two, until either the agreement of the parties as
to the Extension Rent or the decision of the arbitrators, as the case may be, at
which time Tenant shall pay any underpayment of rent to Landlord, or Landlord
shall refund any overpayment of rent to Tenant.
SECTION 5
Additional Rent
Section 5.1. Real Estate Taxes. At such time as the Landlord shall have
completed the construction of improvements and/or a building at the Facility,
Tenant shall pay as Additional Rent, in the years following the inclusion of the
building and/or improvements in the Landlord's real estate taxes, an amount to
be negotiated relating to any increase in taxes from such base year for Tenant's
proportionate share of the Facility. The term "real estate taxes" as used herein
shall mean all taxes, assessments (special, betterment or otherwise), levies,
fees, water and sewer rents and charges, and all other government levies and
charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, which are allocable to the term hereof and imposed or levied upon or
assessed against the Facility or Premises or any rent or
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<PAGE> 7
other sums payable by any tenants or occupants thereof. Real estate taxes shall
not include any income taxes, excess profits taxes, excise taxes, franchise
taxes, estate, succession, inheritance or transfer taxes, provided, however,
that if at any time during the term the present system of ad valorem taxation of
real property shall be changed so that in lieu of the whole or any part of the
ad valorem tax on real property, or in lieu of increases therein, there shall be
assessed on Landlord a capital levy or other tax on the gross rents received
with respect to the Facility or Premises or a federal, state, county, municipal,
or other local income, franchise, excise or similar tax, assessment, levy or
charge (distinct from any now in effect) measured by or based, in whole or in
part, upon gross rents, then any and all of such taxes, assessments, levies or
charges, to the extent so measured or based ("Substitute Taxes"), shall be
included as real estate taxes hereunder, provided, however, that Substitute
Taxes shall be limited to the amount thereof as computed at the rates that would
be payable if the Facility or Premises were the only property of Landlord.
Notwithstanding any other provision of this Section 5. 1, if the Term
shall expire or shall terminate as of a date other than the last day of a
calendar year, then for such fraction of a calendar year at the end of the Term,
Tenant's last payment to Landlord under this Section 5.1 shall be made on the
basis of Landlord's best estimate of such amounts and shall be made on or before
the later of (a) ten (10) days after Landlord delivers such estimate to Tenant
or (b) the last day of the Term, with an appropriate payment or refund to be
made upon Landlord's submission of a statement of actual amounts.
Section 5.2. Direct Expenses. (a) Tenant shall provide its own security
for the Vessel and its operations. Tenant shall pay an equitable portion of
security costs for the Facility; (b) Tenant shall pay all utility charges
related to its operations, including electricity, phone and water.
SECTION 6
Insurance
Section 6.1. Tenant's Insurance. Tenant shall, as Additional Rent,
maintain throughout the Term the following insurance:
(a) Comprehensive General Liability insurance for any injury or damage
to a person or property occurring on the Premises, naming as an Additional
Insured the Landlord and such persons as Landlord shall designate from time to
time, in amounts which shall, at the beginning of the Term, be at least equal to
$10,000,000 per occurrence, and, from time to time during the term, shall be for
such higher limits as are reasonably required by Landlord; and
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(b) Workers' Compensation Insurance (including Employer's liability and
USL& H) with statutory limits covering all of Tenant's employees working at the
Premises; and
(c) Vessel Pollution Liability coverage (purchased from the Water
Quality Insurance Syndicate or its equivalent) in an amount not less than
$10,000,000; and
(d) Protection & Indemnity coverage for the vessel, crew and passengers
naming as an additional insured the Landlord and such persons or entities as
Landlord shall designate from time to time, in amounts which shall, at the
beginning of the term, be at least $10,000,000 per occurrence and, from time to
time during the term, shall be fur such higher limits as are reasonably required
by Landlord; and
(e) Auto Liability coverage for vehicles owned or leased by the Tenant
naming as an additional insured the Landlord and such persons or entities as
Landlord shall designate from time to time, in amounts which shall at the
beginning of the term be at least $10,000,000 CSL per occurrence and, from time
to time during the term, shall be for such higher limits as are reasonably
required by Landlord.
Section 6.2. Landlord's Insurance. Landlord shall maintain throughout
the Term the following insurance:
(a) Comprehensive General Liability insurance for any injury to person
or property occurring in the common areas of the Facility or Premises, in such
amounts and with such deductibles as Landlord may consider appropriate;
(b) All Risk Building insurance on a replacement cost basis, and, if
Landlord so elects, flood coverage to the extent that same is available,
insuring the Facility, with such deductibles, if any, as Landlord shall consider
appropriate; and
Section 6.3. Tenant Reimbursement of Certain Insurance Costs. Tenant
shall reimburse Landlord for all of Landlord's costs incurred in providing such
insurance to the extent attributable to any special endorsement or increase in
premium resulting from the business or operations of Tenant or any special or
extraordinary hazards resulting therefrom, provided that Landlord shall give
written notice to Tenant of such potential costs and Tenant shall have 20 days
to obtain or otherwise provide for such coverage to Landlord's satisfaction.
Section 6.4. Requirements Applicable to Insurance Policies. All
policies for insurance required under the provisions of Section 6.1 shall be
obtained from responsible companies qualified to do business in the Commonwealth
of Massachusetts and in good standing therein, which companies and the amount of
insurance allocated thereto shall be subject to Landlord's approval. Tenant
agrees to furnish Landlord with Certificates of Insurance for all such insurance
required by
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section 6.1 and copies of the policies therefor prior to the beginning of the
Term hereof and of each renewal policy at least thirty (30) days prior to the
expiration of the policy. Each such policy shall be noncancellable with respect
to the interest of Landlord and such mortgagees without at least sixty (60)
days' prior written notice thereto.
Section 6.5. Waiver of Subrogation. All insurance which is carried by
either party with respect to the Premises or to furniture, furnishings, fixtures
or equipment therein or alterations or improvements thereto, whether or not
required hereunder, shall include provisions which either designate the other
party as one of the insureds or deny to the insurer acquisition by subrogation
of rights of recovery against the other party to the extent such rights have
been waived by the insured party prior to occurrence of loss or injury, insofar
as and to the extent that such provisions may be effective without making it
impossible to obtain insurance coverage from responsible companies qualified to
do business in the Commonwealth of Massachusetts (even though extra premium may
result therefrom) and without voiding the insurance coverage in force between
the insurer and the insured party. On reasonable request, each party shall be
entitled to have duplicates of Certificates of insurance containing such
provisions. Each party hereby waives all rights of recovery against the other
for loss or injury against which the waiving party is protected by insurance
containing such provisions, reserving, however, any rights with respect to any
excess of loss or injury over the amount recovered by such insurance.
SECTION 7
Landlord's Covenants
Section 7.1. Quiet Enjoyment. Tenant, on paying the rent and performing
its obligations hereunder, shall peacefully and quietly have, hold and enjoy the
Premises throughout the Term without any manner of hindrance or molestation from
Landlord or anyone claiming under Landlord, subject, however, to all the terms
and provisions hereof.
Section 7.2. Exterior Common Areas and Facilities. Tenant shall
promptly remove all refuse or waste resulting from its operations. Landlord
shall clean, maintain and provide snowplowing for all parking areas, walks and
driveways on the Facility, subject to the provisions of Section 9.
Section 7.3. Electricity. Electricity furnished to the Tenant shall be
separably metered and all charges for electricity consumed on the Premises will
be billed directly to, and paid by, Tenant. The cost of any such electric meter
and the cost of installation, repair and replacement thereof shall be borne by
Tenant who shall pay such cost directly or reimburse Landlord for the cost
thereof within thirty (30) days after receipt of a statement therefor. Landlord
shall not in any way be liable or responsible to Tenant
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<PAGE> 10
for any loss, damage or expense which Tenant may sustain or incur if the
quantity, character, or supply of electricity is changed or is no longer
available or suitable for Tenant's requirements.
Section 7.4. Interruptions. Landlord shall not be liable to Tenant for
any compensation or reduction of rent by reason of inconvenience or annoyance or
for loss of business arising from power losses or shortages or from the
necessity of Landlord's entering the Premises for any of the purposes authorized
by this Lease or for repairing constructing, reconstructing, demolishing or
other activities on the Premises or any portion of the Facility. In case
Landlord is reasonably prevented or delayed from making any repairs, alterations
or improvements, or furnishing any service or performing any other obligation to
be performed on Landlord's part, Landlord shall not be liable to Tenant
therefor, nor shall Tenant be entitled to any abatement or reduction of rent by
reason thereof, nor shall the same give rise to any claim by Tenant that such
failure constitutes actual or constructive, total or partial, eviction from the
Premises.
Landlord reserves the right to stop any service or utility system when
necessary by reason of accident or emergency or until necessary repairs have
been completed. Except in case of emergency repairs, Landlord will give Tenant
reasonable advance notice of any contemplated stoppage and will use reasonable
efforts to avoid unnecessary inconvenience to Tenant by reason thereof.
Landlord also reserves the right to institute such policies, programs
and measures as may be necessary or required to comply with applicable codes,
rules, regulations or standards. In so doing, Landlord shall make reasonable
efforts to avoid unnecessary inconvenience to Tenant by reason thereof.
Section 7.5. Exclusivity. During the term of this Lease, Landlord shall
not lease a berth at the Facility to any other vessel engaged in the same
business as the Vessel.
SECTION 8
Tenant's Covenants
Section 8.1. Use. Tenant shall use the Premises only for the Permitted
Uses and only for the Vessel and shall from time to time procure all licenses
and permits necessary therefor at Tenant's sole expense. Tenant shall not at any
time, allow any other vessel to make use of the Facility or to tie alongside or
otherwise raft, unload, load, embark or disembark passengers at the Facility or
to the Vessel. Tenant shall not at any time allow any supplier, vendor,
subcontractor or other person or entity providing goods or services to the
Vessel ( including but not limited to fuel suppliers) to enter upon or make use
of the Premises or Facility without such person or entity first having made
suitable contractual arrangements with Landlord and provided certificates of
insurance in amounts and coverages acceptable to Landlord.
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Section 8.2. Repair and Maintenance. Except as otherwise provided in
Sections 7 and 9, Tenant shall keep the Premises, in good order, condition and
repair and in at least as good order, condition and repair as they are in on the
Commencement Date or may be put in during the term, reasonable use and wear only
excepted. Tenant shall make all repairs and replacements and do all other work
necessary for the foregoing purposes whether the same may be ordinary or
extraordinary, foreseen or unforeseen. Tenant shall keep in a safe, secure and
sanitary condition all trash and rubbish temporarily stored at the Premises.
Section 8.3. Compliance with Law and Insurance Requirements. Tenant
shall be solely responsible for compliance with all applicable law, whether
Federal, State or municipal, in connection with its business and with its use of
the Facility and Berth and any installation Tenant may make of floats or ramps.
Landlord shall cooperate with Tenant in local licensing applications and issues.
Tenant shall make all repairs, alterations, additions or replacements to the
Premises required by any law or ordinance or any order or regulation of any
public authority arising from Tenant's use of the Premises and shall keep the
Premises equipped with all safety appliances so required. Tenant shall not dump,
flush, or in any way introduce any hazardous substances or any other toxic
substances into the septic, sewage or other waste disposal system serving the
Premises, or generate, store or dispose of hazardous substances in or on the
Premises or dispose of hazardous substances from the Premises to any other
location without the prior written consent of Landlord and then only in
compliance with the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
ss.6901 et seq., the Massachusetts Hazardous Waste Management Act, M.G.L. c.21
C, the Massachusetts Oil and Hazardous Material Release Prevention and Response
Act, M.G.L. c.21 E, and all other applicable codes, regulations, ordinances and
laws. Tenant shall notify Landlord of any incident which would require the
filing of a notice under Chapter 232 of the Acts of 1982 and shall comply with
the orders and regulations of all governmental authorities with respect to
zoning, building, fire, health and other codes, regulations, ordinances or laws
applicable to the Premises. "Hazardous substances" as used in this Section shall
mean "hazardous substances" as defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. ss.9601 et seq. and
regulations adopted pursuant to such Act.
Landlord may, if it so elects, make any of the repairs, alterations,
additions or replacements referred to in this Section and Tenant shall reimburse
Landlord for the cost thereof on demand.
Tenant will provide Landlord, from time to time upon Landlord's request,
with all records and information regarding any hazardous substance maintained on
the Premises by Tenant.
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Landlord shall have the right to make such inspections as Landlord
shall reasonably elect from time to time to determine if
Tenant is complying with this Section Tenant shall comply promptly with
the reasonable recommendations of any insurer, foreseen or unforeseen, ordinary
as well as extraordinary, which may be applicable to the Premises by reason of
Tenant's use thereof. In no event shall any activity be conducted by Tenant on
the Premises which may give rise to any cancellation of any insurance policy or
make any insurance unobtainable. Tenant shall have the right to contest any such
recommendation at Tenant's sole cost and risk.
Section 8.4. Tenant's Work. Tenant shall not make any installations,
alterations, additions or improvements in or to the Premises without on each
occasion obtaining the prior written consent of Landlord, not to be unreasonably
withheld. Any such work so consented to by Landlord shall be performed only in
accordance with plans and specifications therefor approved by Landlord. Tenant
shall procure at Tenant's sole expense all necessary permits and licenses before
undertaking any work on the Premises and shall perform all such work in a good
and workmanlike manner employing materials of good quality and so as to conform
with all applicable zoning, building, fire, health and other codes, regulations,
ordinances and laws and with all applicable insurance requirements. If requested
by Landlord, Tenant shall furnish to Landlord prior to the commencement of any
such work a bond or other security acceptable to Landlord assuring that any work
by Tenant will be completed in accordance with the approved plans and
specifications. Tenant shall keep the Premises at all times free of liens for
labor and materials. Tenant shall employ for such work only contractors approved
by Landlord and shall require all contractors employed by Tenant to carry
workers' compensation insurance in accordance with statutory requirements and
comprehensive general liability insurance covering such contractors, and naming
Landlord and Tenant as additional insureds, on or about the Premises in amounts
at least equal to the limits set forth in Section I and to submit certificates
evidencing such coverage to Landlord prior to the commencement of such work.
Tenant shall save Landlord harmless and indemnified from all injury, loss,
claims or damage to any person or property occasioned by or growing out of such
work. Landlord may inspect the work of Tenant at reasonable times and give
notice of observed defects.
Section 8.5. Indemnity. Tenant shall defend, with counsel approved by
Landlord all actions against Landlord, any partner, trustee, stockholder,
officer, director, employee or beneficiary of Landlord, holders of mortgages
secured by the Facility and any other party having an interest in the Premises
("Indemnified Parties") with respect to, and shall pay, protect, indemnity and
save harmless, to the extent permitted by law, all Indemnified Parties from and
against, any and all liabilities, losses, damages, costs, expenses (including
reasonable attorneys'fees and expenses), causes of action, suits, claims,
demands or judgments of any nature arising from (a) injury to or death of any
person, or damage to or loss of property, occurring in the Premises or connected
with
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the use, condition or occupancy of any thereof unless caused by the negligence
of Landlord or its servants or agents, (b) violation of this Lease by Tenant or
(c) any act fault, omission, or other misconduct of Tenant or its agents,
contractors, licensees, sublessees or invitees.
Section 8.6. Landlord's Right to Enter. Tenant shall permit Landlord
and its agents to enter into the Premises at reasonable times and upon
reasonable notice (except that in emergencies no notice shall be required) to
examine the Premises, make such repairs, replacements or construction as
Landlord may elect, without however any obligation to do so, or show the
Premises to prospective purchasers and lenders, and, during the last year of the
term, to show the Premises to prospective tenants and to keep affixed in
suitable places notices of availability of the Premises.
Section 8.7. Personal Property at Tenant's Risk. The Vessel and all
furnishings, fixtures, equipment, effects and property of every kind of Tenant
and of all persons claiming by, through or under Tenant which may be on the
Premises or the Vessel shall be at the sole risk and hazard of Tenant and if the
whole or any part thereof shall be destroyed or damaged by fire, water or
otherwise, by theft or from any other cause, no part of such loss or damage
shall be charged to or to be borne by Landlord, except that Landlord shall in no
event be indemnified or held harmless or exonerated from any liability to Tenant
for any injury, loss, damage or liability not covered by Tenant's insurance to
the extent prohibited by law. Tenant shall insure Tenant's personal property.
Section 8.8. Payment of Landlord's Cost of Enforcement. Tenant shall
pay, on demand, Landlord's expenses, including reasonable attorneys' fees,
incurred in the successful enforcement of any obligation of Tenant under this
Lease or in curing any default by Tenant under this Lease as provided in Section
10.4.
Section 8.9. Yield up. At the expiration of the term or earlier
termination of this Lease, Tenant shall surrender all keys to the Premises,
remove all of its trade fixtures and personal property in the Premises, remove
such installations and improvements made by Tenant as Landlord may request and
all Tenant's signs wherever located, repair all damage caused by such removal
and yield up the Premises (including all installations and improvements made by
Tenant which Landlord shall not request Tenant to remove) broom-clean and in the
same good order and repair in which Tenant is obliged to keep and maintain the
Premises under this Lease. Any property not so removed shall be deemed abandoned
and may be removed and disposed of by Landlord in such manner as Landlord shall
determine, and Tenant shall pay Landlord the entire cost and expense incurred by
it in effecting such removal and disposition and in making any incidental
repairs and replacements to the Premises and for use and occupancy during the
period after the expiration of the term and prior to Tenant's performance of its
obligations under this Section 8.9.
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Section 8.10. Estoppel Certificate. Upon not less than fifteen (15)
business days' prior notice by Landlord, Tenant shall execute, acknowledge and
deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect and that, except as stated therein,
Tenant has no knowledge of any defenses, offsets or counterclaims against its
obligations to pay the Annual Rent and Additional Rent and any other charges and
to perform its other covenants under this Lease (or, if there have been any
modifications that the same is in full force and effect as modified and stating
the modifications and, if there are any defenses, offsets or counterclaims,
setting them forth in reasonable detail), the dates to which the Annual Rent and
Additional Rent and other charges have been paid and a statement that Landlord
is not in default hereunder (or if in default, the nature of such default, in
reasonable detail). Any such statement delivered pursuant to this Section 8.10
may be relied upon by any prospective purchaser or mortgagee of the Facility.
Section 8.11. Landlord's Expenses Re Consents. Tenant shall reimburse
Landlord promptly on demand for all reasonable legal and other expenses incurred
by Landlord in connection with all requests by Tenant for consent or approval
hereunder.
Section 8.12. Rules and Regulations. Tenant shall comply with such
reasonable Rules and Regulations as may be adopted from time to time by
Landlord.
Section 8.13. Holding over. Tenant shall vacate the Premises
immediately upon the expiration or sooner termination of this Lease. If Tenant
shall retain possession of the Premises or any part thereof after the
termination of the term without Landlord's express consent, Tenant shall pay
Landlord rent at triple the monthly rate specified in Section I for the time
Tenant so remains in possession and, in addition thereto, shall pay Landlord for
all damages, consequential as well as direct, sustained by reason of Tenant's
retention of possession. The provisions of this Section shall not exclude
Landlord's rights of reentry or any other right hereunder, including, without
limitation, the right to remove Tenant through summary proceedings for holding
over beyond the expiration of the term of this Lease.
Section 8.14. Assignment and Subletting. Tenant shall not assign,
transfer, mortgage or pledge this Lease or grant a security interest in Tenant's
rights hereunder or sublease (which term shall be deemed to include the granting
of concessions and licenses and the like) all or any part of the Premises or
suffer or permit this Lease or the leasehold estate hereby created or any other
rights arising under this Lease to be assigned, transferred or encumbered, in
whole or in part, whether voluntarily, involuntarily or by operation of law, or
permit the occupancy of the Premises by anyone other than Tenant. Any attempted
assignment, transfer, mortgage, pledge, grant of security interest, sublease or
other encumbrance, except with the prior consent thereto by Landlord, which in
the case of an affiliate of Tenant shall not be unreasonably withheld, shall be
void. No assignment, transfer, mortgage, grant of security interest,
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sublease or other encumbrance, whether or not consented to, and no indulgence
granted by Landlord to any assignee or sublessee, shall in any way impair the
continuing primary liability (which after an assignment shall be joint and
several with the assignee) of Tenant hereunder, and no consent in a particular
instance shall be deemed to be a waiver of the obligation to obtain Landlord's
consent in any other case.
If for any assignment or sublease Tenant shall receive rent or other
consideration, either initially or over the term of the assignment or sublease,
in excess of the rent called for hereunder (or in the case of the sublease of
part, in excess of such rent allocable to the part) after appropriate
adjustments to assure that all other payments called for hereunder are taken
into account, Tenant shall pay to Landlord, as Additional Rent, fifty percent
(50%) of such excess of such payment of rent or other consideration received by
Tenant, promptly after its receipt.
Section 8.15. Overloading and Nuisance. Tenant shall not injure,
overload, deface or otherwise harm the Premises, commit any nuisance, permit the
emission of any objectionable noise, vibration or odor, not in the ordinary
course of business, make, allow or suffer any waste or make any use of the
Premises which is improper, offensive or contrary to any law or ordinance or
which will invalidate any of Landlord's insurance.
Section 8.16. Indemnification, Environmental Liability. Notwithstanding
the existence of any insurance provided for in this Agreement, and without
regard to the policy limits of any such insurance, Tenant will protect,
indemnify, save harmless and defend RSC (with counsel acceptable to RSC) from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable
attorneys'fees and expenses), to the extent permitted by law, imposed upon or
incurred by or asserted against RSC by reason of (a) any accident, injury to or
death of persons or loss of or damage to property occurring on or about the
Premises or the Vessel for which Landlord is not at fault, (b) any use, misuse,
nonuse, condition, maintenance or repair by Tenant of the Premises and (c) any
failure on the part of Tenant to perform or comply with any of the terms of this
Agreement. Any amounts which become payable by Tenant under this Paragraph shall
be paid within thirty (30) days after liability therefor on the part of RSC is
determined by litigation or otherwise. Tenant, at its expense, shall contest,
resist and defend any such claim, action or proceeding asserted or instituted
against RSC or may compromise or otherwise dispose of the same as Tenant sees
fit. Nothing herein shall be construed as indemnifying RSC against its own
negligence or willful misconduct.
Tenant represents and warrants to RSC, the same to be true as of the
date hereof and throughout the Term of this Agreement, that (a) no Hazardous
Substances have been or are being generated, stored, utilized, heated, released,
transported, or otherwise managed or disposed of on, under or from the Premises
by Tenant (whether or not in reportable quantities), (b) Tenant has not received
any notice from the
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Massachusetts Department of Environmental Protection, the United States
Environmental Protection Agency or any other federal, state or local
governmental agency or authority claiming that (i) the Premises or any use
thereof violates or (ii) Tenant has violated any environmental law, (c) Tenant
has not incurred any liability to the Commonwealth of Massachusetts, the United
States of America or any other federal, state and/or local governmental agency
or authority under any environmental law, and (d) no lien on the Premises has
arisen under any environmental law.
Tenant further covenants that Tenant (a) shall not release, or permit
any release or threat of release, of any Hazardous Substances on the Premises,
(b) shall not generate or permit any Hazardous Substances to be generated on the
Premises, (c) shall not store or utilize or permit any Hazardous Substances to
be stored or utilized on the Premises, (d) shall not dispose of or permit any
Hazardous Substances to be disposed of on the Premises, (e) shall not permit any
lien under any environmental law to attach to the Premises and (vi) shall use
the Premises and/or shall cause the Premises to be used in accordance with the
environmental laws and all other legal requirements.
Without limiting any other indemnification agreement contained in this
Agreement or any other documents between the parties, Tenant shall and hereby
agrees to indemnity, exonerate, defend (with counsel acceptable to RSC) and hold
RSC harmless from and against any claim, liability, loss, cost, damage or
expense, including, without limitation, environmental consultants' fees and
expenses and attorneys'fees and expenses, arising out of any breach of any of
the representations, warranties, conditions and covenants of this paragraph
(whether before or after foreclosure proceedings are commenced or entry for the
purpose of foreclosure is made) and in connection with the enforcement of the
aforesaid indemnification agreement. Notwithstanding the foregoing, RSC shall
have the option of conducting its defense with counsel of RSC's choice.
So long as this Agreement shall remain in force and effect, RSC shall
have the right, but not the obligation, to enter upon the Premises, to expend
funds to perform environmental testing and to cure any breach by Tenant of the
representations, warranties, conditions and covenants of this Paragraph, and any
amounts paid or advanced by RSC and all costs and expenses incurred in
connection therewith (including, without limitation, environmental consultants'
fees and expenses and attorneys'fees and expenses), with interest thereon at the
Wall Street Journal Prime Rate, shall be a demand obligation of Tenant to RSC,
to the extent permitted by law.
Tenant shall provide RSC with prompt written notice (a) upon Tenant's
becoming aware of any release or threat of release of any Hazardous Substances
upon, under or from the Premises (whether or not caused by Tenant), (b) upon
Tenant's receipt of any notice, including, without limitation, any notice of
violation, from any federal, state,
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municipal or other governmental agency or authority pursuant to the provisions
of any environmental law and (c) upon Tenant's obtaining knowledge of any
incurrence of any expense by any governmental authority in connection with the
assessment, containment or removal of any Hazardous Substances (i) located upon
or under the Premises, (ii) emanating from the Premises or (iii) improperly
stored, transported, disposed of or released by Tenant (whether or not on, from
or about the Premises).
RSC shall indemnity, save harmless and defend Tenant from and against
all liabilities, obligations, claims, damages, penalties, causes of action,
costs and expenses imposed upon or incurred by or asserted against Tenant as a
result of the negligence or willful misconduct of RSC. Tenant's or RSC's
liability under the provisions of this Paragraph arising during the Term hereof
shall survive any termination of this Agreement. Tenant shall have no
responsibility or liability for any conditions existing at the Facility at the
Term Commencement Date or which do not arise out of Tenant's conduct. Section
8.17. Signage. Tenant shall have the right subject to the approval of the City
of Gloucester and Landlord to construct at Tenant's cost and expense mutually
acceptable signage at the Facility.
SECTION 9
Casualty or Taking
Section 9.1. Termination. In the event that greater than twenty-five
percent (25%) of the Premises shall be taken by any public authority or for any
public use or destroyed by the action of any public authority (a "Taking") then
this Lease may be terminated by either Landlord or Tenant effective on the
effective date of the Taking. In the event that the Premises shall be destroyed
or damaged by fire or casualty (a "Casualty") and if Landlord's architect,
engineer or contractor shall determine that it will require in excess of one
hundred eighty (180) days from the date of the Casualty to restore the Premises,
this Lease may be terminated by either Landlord or Tenant by notice to the other
within thirty (30) days after the casualty. In the case of a Taking, such
election, which may be made notwithstanding the fact that Landlord's entire
interest may have been divested, shall be made by the giving of notice by
Landlord or Tenant to the other within thirty (30) days after Landlord or
Tenant, as the case may be, shall receive notice of the Taking.
Section 9.2. Restoration. In the event of a Taking or a Casualty,
unless Landlord or Tenant shall exercise an election to terminate provided in
Section 9. 1, this Lease shall continue in force and a just proportion of the
Annual Rent and other charges hereunder, according to the nature and extent of
the damages sustained by the
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Premises, shall be abated until the Premises, or what may remain thereof, shall
be put by Landlord in proper condition for use subject to zoning and building
laws or ordinances then in existence, which, unless Landlord or Tenant has
exercised its option to terminate pursuant to Section 9. 1, Landlord covenants
to do with reasonable diligence at Landlord's expense. Landlord's obligations
with respect to restoration shall not require Landlord to expend more than the
net proceeds of insurance recovered or damages awarded for such Casualty or
Taking and made available for restoration by Landlord's mortgagees. "Net
proceeds of insurance recovered or damages awarded" refers to the gross amount
of such insurance or damages less the reasonable expenses of Landlord in
connection with the collection of the same, including, without limitation, fees
and expenses for legal and appraisal services.
Section 9.3. Award. Irrespective of the form in which recovery may be
had by law, all rights to damages or compensation shall belong to Landlord in
all cases. Tenant hereby grants to Landlord all of Tenant's rights to such
damages and compensation and covenants to deliver such further assignments
thereof as Landlord may from time to time request. Nothing contained herein
shall be construed to prevent Tenant from prosecuting a claim for the value of
any of Tenant's fixtures or personal property and for relocation expenses.
SECTION 10
Default
Section 10. 1. Events of Default. If
(a) Tenant shall default in the performance of any of its obligations to pay the
Annual Rent, Additional Rent or any other sum payable hereunder and if such
default shall continue for five (5) days after written notice from Landlord
designating such default;
(b) within ten (10) days after written notice from Landlord to Tenant specifying
any other default or defaults Tenant has not commenced diligently to correct the
default or defaults so specified or has not thereafter diligently pursued such
correction to completion;
(c) any assignment for the benefit of creditors shall be made by Tenant;
(d) Tenant's leasehold interest shall be taken on execution or other process of
law in any action against Tenant;
(e) a lien or other involuntary encumbrance is filed against Tenant's leasehold
interest and is not discharged or efforts undertaken and diligently pursued,
within ten (10) days
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thereafter:
(f) a petition is filed by Tenant for liquidation, or for reorganization or an
arrangement or any other relief under any provision of the Bankruptcy Code as
then in force and effect; or
(g) an involuntary petition under any of the provisions of said Bankruptcy Code
is filed against Tenant and such involuntary petition is not dismissed within
thirty (30) days thereafter; or
(h) Tenant shall abandon the berth or vacate the berth for more than twenty (20)
days without prior written notice to Landlord other than for winter layup or
winter use elsewhere;
then, and in any of such cases, Landlord and the agents and servants of Landlord
lawfully may, in addition to and not in derogation of any remedies for any
preceding breach of covenant, immediately or at any time thereafter and without
demand or notice and with or without process of law (forcibly, if necessary)
enter into and upon the Premises or any part thereof in the name of the whole,
or mail a notice of termination addressed to Tenant, and repossess the same as
of Landlord's former estate and expel Tenant and those claiming through or under
Tenant and remove its and their effects without being deemed guilty of any
manner of trespass and without prejudice to any remedies which might otherwise
be used for arrears of rent or prior breach of covenant, and upon such entry or
mailing as aforesaid this Lease shall terminate, Tenant hereby waiving all
statutory rights (including, without limitation, rights of redemption, if any)
to the extent such rights may be lawfully waived. Landlord, without notice to
Tenant, may store Tenant's effects, and those of any person claiming through or
under Tenant at the expense and risk of Tenant, and, if Landlord so elects, may
sell such effects at public auction or private sale and apply the net proceeds
to the payment of all sums due to Landlord from Tenant, if any, and pay over the
balance, if any, to Tenant.
Section 10.2. Remedies. In the event that this Lease is terminated
under any of the provisions contained in Section 10. 1, Tenant shall pay
forthwith to Landlord, as compensation, the excess of the total rent reserved
for the residue of the Term over the fair market rental value of the Premises
for the residue of the term. In calculating the rent reserved there shall be
included, in addition to the Annual Rent and Additional Rent, the value of all
other considerations agreed to be paid or performed by Tenant during the
residue. As additional and cumulative obligations after any such termination,
Tenant shall also pay punctually to Landlord all the sums and shall perform all
the obligations which Tenant covenants in this Lease to pay and to perform in
the same manner and to the same extent and at the same time as if this Lease had
not been terminated. In calculating the amounts to be paid by Tenant pursuant to
the preceding sentence, Tenant shall be credited with any amount paid to
Landlord pursuant to the
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first sentence of this Section 10.2 and also with the net proceeds of any rent
obtained by Landlord by reletting the Premises, after deducting all Landlord's
reasonable expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage commissions, fees for legal
services and expenses of preparing the Premises for such reletting, it being
agreed by Tenant that Landlord may (i) relet the Premises or any part or parts
thereof for a term or terms which may at Landlord's option be equal to or less
than or exceed the period which would otherwise have constituted the balance of
the term hereof and may grant such concessions as Landlord in its reasonable
judgment considers advisable or necessary to relet the same and (ii) make such
alterations and repairs as Landlord in its reasonable judgment considers
advisable or necessary to relet the same, and no action of Landlord in
accordance with the foregoing or failure to relet or to collect rent under
reletting shall operate or be construed to release or reduce Tenant's liability
as aforesaid.
Section 10.3. Remedies Cumulative. Except as otherwise expressly
provided herein, any and all rights and remedies which Landlord may have under
this Lease and at law and equity shall be cumulative and shall not be deemed
inconsistent with each other, and any two or more of all such rights and
remedies may be exercised at the same time to the greatest extent permitted by
law.
Section 10.4. Landlord's Right to Cure Defaults. At any time following
ten (110) days' prior written notice to Tenant (except in cases of emergency
when no notice shall be required), Landlord may (but shall not be obligated to)
cure any default by Tenant under this Lease, and whenever Landlord so elects,
all costs and expenses incurred by Landlord, including reasonable
attorneys'fees, in curing a default shall be paid by Tenant to Landlord as
Additional Rent on demand, together with interest thereon at the rate provided
in Section 10.7 from the date incurred by Landlord to the date of payment by
Tenant.
Section 10.5. Effect of Waivers of Default. Any consent or permission
by Landlord to any act or omission which otherwise would be a breach of any
covenant or condition herein, or any waiver by Landlord of the breach of any
covenant or condition herein, shall not in any way be held or construed (unless
expressly so declared) to operate so as to impair the continuing obligation of
any covenant or condition herein, or otherwise operate to permit the same or
similar acts or omissions except as to the specific instance. The failure of
Landlord to seek redress for violation of, or to insist upon the strict
performance of, any covenant or condition of this Lease shall not be deemed a
waiver of such violation nor prevent a subsequent act, which would have
originally constituted a violation, from having all the force and effect of an
original violation. The receipt by Landlord of rent with knowledge of the breach
of any covenant of this Lease shall not be deemed to have been a waiver of such
breach by Landlord or of any of Landlord's remedies on account thereof,
including its right of termination for such default.
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Section 10.6. No Accord and Satisfaction. No acceptance by Landlord of
a lesser sum than the Annual Rent, Additional Rent or any other sum then due
shall be deemed to be other than on account of the earliest installment of such
rent or charge due, unless Landlord elects by notice to Tenant to credit such
sum against the most recent installment due. Any endorsement or statement on any
check or any letter accompanying any check or payment as rent or other charge
shall not be deemed an accord and satisfaction, and Landlord may accept such
check or payment without prejudice to Landlord's right to recover the balance of
such installment or pursue any other remedy under this Lease or otherwise.
Section 10.7. Interest on Overdue Sums. If Tenant shall fail to pay
Annual Rent, Additional Rent or other sums payable by Tenant to Landlord by the
due date thereof (i.e., the due date disregarding any requirement of notice from
Landlord or any period of grace allowed to Tenant), the amount so unpaid shall
bear interest at a variable rate (the "Delinquency Rate") equal to four percent
(4%) in excess of the base rate (prime rate) of Gloucester Bank & Trust Company
from time to time in effect commencing with the due date and continuing through
the day on which payment of such delinquent payment with interest thereon is
paid. If such rate is in excess of any maximum interest rate permissible under
applicable law, the Delinquency Rate shall be the maximum interest rate
permissible under applicable law.
SECTION 11
Mortgages
Section 11.1. Subordination. Unless the holder of any such mortgage
otherwise elects at any time, this Lease is subject and subordinate to any
mortgages and to all renewals, modifications, consolidations, replacements and
extensions of any of the foregoing or of substitutions therefor or any other
forms or methods of financing or refinancing which may now or hereafter affect
the Facility whether now in use or not and any instruments executed for such
purposes or hereafter executed by the owners of the Facility. Tenant agrees upon
demand to execute, acknowledge and deliver to the owners of the Facility,
without expense to them, any instruments that may be necessary or proper to
confirm this subordination of this Lease and of all of the rights herein
contained to the lien or liens created by any such instruments. If Tenant shall
fail at any time to execute and deliver any such subordination instruments upon
request, the mortgagors in any such new mortgage or mortgages or the obligors in
any form of refinancing as provided above, in addition to any other remedies
available to them in consequence of such default, may execute, acknowledge, and
deliver such subordination instruments as the attorney-in-fact of Tenant and in
Tenant's name, place and stead, and Tenant hereby makes, constitutes and
irrevocably appoints such mortgagors; or obligors as its attorney-in-fact for
that purpose. Any secured lender as aforesaid may, at its option, elect to make
this Lease superior to its mortgage or other instrument referred to herein,
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by written notice thereof to Tenant. No such subordination provided for herein
shall be valid without the consent of all prior lien owners, if there be any.
Upon request of Tenant, Landlord agrees to request of any mortgagee that it
enter into a Subordination, Nondisturbance and Attornment Agreement with Tenant.
Tenant agrees to execute such agreement in the customary form required by such
mortgagee.
SECTION 12
Miscellaneous Provisions
Section 12. 1. Notices from One Party to the Other. All notices
required or permitted hereunder shall be in writing and addressed, if to Tenant,
at the Address of Tenant or such other address as Tenant shall have last
designated by notice in writing to Landlord and, if to Landlord, at the Address
of Landlord or such other address as Landlord shall have last designated by
notice in writing to Tenant. Any notice shall be deemed duly given when mailed,
by registered or certified mail, postage and registration or certification
charges prepaid, addressed as above.
Section 12.2. Quiet Enjoyment. Landlord agrees that upon Tenant's
paying the rent and performing and observing the terms, covenants, conditions
and provisions on its part to be performed and observed, Tenant shall and may
peaceably and quietly have, hold and enjoy the Premises during the term without
any manner of hindrance or molestation from Landlord or anyone claiming under
Landlord, subject, however, to the terms of this Lease.
Section 12.3. Lease Not to Be Recorded; Notice of Lease. Tenant agrees
that it will not record this Lease. If the Term of this Lease, including
options, exceeds seven (7) years, Landlord and Tenant agree that, on the request
of either, they will execute and record a notice of lease in form reasonably
acceptable to Landlord.
Section 12.4. Bind and Inure; Limitation of Landlord's Liability. The
obligations of this Lease shall run with the land, and this Lease shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. No owner of the Premises shall be liable under this
Lease except for breaches of Landlord's obligations occurring while owner of the
Premises. The obligations of Landlord shall be binding upon the assets of
Landlord which comprise the Premises but not upon other assets of Landlord. No
individual partner, trustee, stockholder, officer, director, employee or
beneficiary of Landlord shall be personally liable under this Lease and Tenant
shall look solely to Landlord's interest in the Premises in pursuit of its
remedies upon an event of default hereunder, and the general assets of Landlord
and its partners, trustees, stockholders, officers, employees or beneficiaries
of Landlord shall not be subject to levy, execution or other enforcement
procedure for the satisfaction of the remedies of Tenant.
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Section 12.5. Acts of God. In any case where either party hereto is
required to do any act, delays caused by or resulting from acts of God, war,
civil commotion, fire, flood or other casualty, labor difficulties, shortages of
labor, materials or equipment, government regulations, unusually severe weather,
or other causes beyond such party's reasonable control shall not be counted in
determining the time during which work shall be completed, whether such time be
designated by a fixed date, a fixed time or a "reasonable time," and such time
shall be deemed to be extended by the period of such delay.
Section 12.6. Landlord's Default. Landlord shall not be deemed to be in
default in the performance of any of its obligations hereunder unless it shall
fail to perform such obligations and unless within thirty (30) days after notice
from Tenant to Landlord specifying such default Landlord has not commenced
diligently to correct the default so specified or has not thereafter diligently
pursued such correction to completion. Tenant shall have no right, for any
default by Landlord, to offset or counterclaim against any rent due hereunder.
Section 12.7. Indemnification by Landlord. Landlord agrees to indemnity
and hold Tenant harmless from and against, and to reimburse Tenant with respect
to, any and all claims, demands, causes of action, losses, damages, liabilities,
costs, and expenses (including reasonable attorneys' fees and court costs)
asserted against or incurred by Tenant by reason of or arising out of (a) the
failure of Landlord to perform any material obligation required by this Lease to
be performed by Landlord or (c) any liability to any third party arising from
the act or neglect of Landlord.
Section 12.8. Brokerage. Tenant warrants and represents to Landlord
that it has had no dealings with any broker or agent in connection with this
Lease other than the Broker(s)'set forth in Section I and covenants to defend
with counsel approved by Landlord, hold harmless and indemnity Landlord from and
against any and all costs, expenses (including attorneys' fees) or liability
arising from any compensation, commissions and charges claimed by any broker or
agent other than the Broker(s) set forth in Section 1.
Section 12.9. Miscellaneous. This Lease shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts.
There are no prior oral or written agreements between Landlord and Tenant
affecting this Lease.
WITNESS the execution hereof under seal as of the day and year first
above written
LANDLORD:
Rowe Square Corporation
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By /s/ [ILLEGIBLE]
-----------------------------
TENANT
Leisure Express Cruise, LLC
By /s/ [ILLEGIBLE]
-----------------------------
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<PAGE> 25
Exhibit A FACILITY Description
The real property with building(s) thereon located at Six Rowe Square,
Gloucester, MA as more particularly described in a deed recorded with the Essex
South District Registry of Deeds in Book 14257, Page 343, subject to any and all
encumbrances and other matters of record and the rights of others entitled
thereto. See also plan recorded in Plan Book 315 as Plan 1 in said Registry.
-23-
<PAGE> 26
Exhibit B Premises Description
The Premises consist of the right to berth the Vessel alongside the easterly
face of the existing wharf, southerly of the slip (Berth). A portion of the
wharf and/or upland in the vicinity of the loading ramp for the Vessel is to be
available for staging, ticketing, boarding and operations. The open area at the
Facility adjacent to the wharf is available for commercially reasonable use for
parking (including stacked parking) in common with other users of the Facility.
It is intended that parking for at least 1 00 vehicles be provided, subject to
the limitations of the site.
Other maritime commercial uses are and will be made of the Facility. Tenant's
use shall not unreasonably interfere with such other activities, including but
not limited to the berthing and unloading of fishing vessels and the bait
business carried on at the Facility. At times when the Vessel is not at the
Berth, Landlord may make reasonable use of the Berth and wharf adjacent thereto
for other maritime activities, coordinated so as not to unreasonably interfere
with Tenant's operations.
Tenant acknowledges that Landlord has plans to demolish the existing buildings
located on the Facility, construct a new building, make repairs to or
reconstruct the wharf, upgrade and pave the open areas and develop parking on
the site. Landlord and Tenant agree to act cooperatively so that Landlord's
planned construction and Tenant's operations may be carried on with minimal
interference.
-24-
<PAGE> 27
Exhibit C Rent
The Annual Fixed Rental Rate shall BE:
$120,000-00 for the period from June 1, 1998 to December 31, 1998
payable as follows: $12,000.00 have been paid on June 1, 1998;
$12,000.00 have been paid on July 1, 1998; $19,200.00 are to be paid on
the first day of August, September, October, November and December,
1998.
$123,600.00 FOR the period from JANUARY 1, 1999 TO DECEMBER 31, 1999,
PAYABLE in EQUAL MONTHLY installments, in ADVANCE, ON THE FIRST OF EACH
month in THE amount OF $10,300.00.
$127,300.00 for the period from January 1, 2000 to December 31, 2000,
payable in equal monthly installments, in advance, on the first of each
month in the amount OF $10,608.83.
-25-
<PAGE> 28
Guaranty
The undersigned hereby requests Landlord to enter into the foregoing
Lease, and as an inducement to Landlord to do so and additional consideration
therefor, the undersigned hereby
(a) guarantees unconditionally to Landlord the full, faithful and
punctual performance, fulfillment and observance of all of the obligations and
liabilities of Tenant under the Lease;
(b) waives notice of and consents to any and all amendments, extensions
or renewals of the Lease, any and all assignments, subleases and other action
that may be permitted thereunder by Landlord, any and all advances, extensions,
settlements, compromises, favors and indulgences, any and all receipts,
substitutions, additions, exchanges and releases of collateral, any and all
additions and releases of persons primarily or secondarily liable, and any and
all acceptances by Landlord of negotiable instruments, commercial paper and
other property, and agrees that none of the foregoing, should there be any,
shall discharge or affect in any way the liability of the undersigned hereunder;
(c) agrees that all rights and remedies of Landlord hereunder shall
survive any discharge, moratorium or other relief granted any person primarily
or secondarily liable in any proceeding under federal or state law relating to
bankruptcy, insolvency or the relief or rehabilitation of debtors, and any
consent by Landlord to or participation by Landlord in the proceeds of, any
assignment, trust or mortgage for the benefit of creditors, or any composition
or arrangement of debts, may be made without the undersigned being discharged or
affected in any way thereby;
(d) waives any right to require marshalling, or exhaustion of any right
or remedy against any person, collateral or other property; and
(e) waives presentment, demand, protest and notice of default,
nonpayment and protest and all demands, notices and suretyship defenses
generally.
WITNESS the execution hereof as an instrument under seal this
day of August, 1998.
Leisure Time Cruise Corp.
By /s/ [ILLEGIBLE]
---------------------------------
-----------------------------------
-26-
<PAGE> 1
EXHIBIT 10.40
DISTRIBUTION AGREEMENT
This Distribution Agreement ("Agreement") is made and entered into on
this 23 day of January, 1998, between Leisure Time Technology (the "Company"), a
Georgia corporation, 5825-B Peachtree Corners East, Norcross, Georgia 30092, and
Sao Paulo Games Comercial LTDA (the "Distributor"), a Limited corporation, in
Brazil.
Recitals
(A) The Company develops, manufactures, assembles, produces, markets,
sells and distributes lines of gaming and amusement machines and related
software, accessory, repair and replacement parts and other products under the
name of Pot-O-Gold Multi-Game (collectively, the "POG Multi-Game Products"),
Charity Gold, Lucky Leprechaun and Champion.
(B) The Distributor is an experienced distributor of gaming devices,
video games and related products to its customers in the Country of Brazil (the
"Territory").
NOW, THEREFORE, in consideration of the foregoing recitals, the
mutuality of this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE l--Appointment; Limitations; Competing Products
(1.1) Subject to all of the terms and provisions hereof, the Company
hereby appoints the Distributor as a exclusive distributor of the POG Multi-Game
Products throughout the Territory. The Distributor agrees not to sell, lease or
otherwise distribute POG Multi-Game Products to customers located outside the
Territory and further agrees not to sell POG Multi-Game Products to customers in
the Territory for use or subsequent resale, lease or distribution outside the
Territory.
(1.2) The Distributor acknowledges that it is an independent contractor
hereunder and further acknowledges that neither the Distributor nor the Company
shall be the agent, legal representative, joint venturer or partner of the other
for any purpose whatsoever. Distributor shall hold itself out to its customers
and the general public solely as an independent contractor in exercising its
rights and performing its obligations under this Agreement.
(1.3) The Distributor shall be solely responsible for all federal,
state and local income taxes, unemployment taxes, Social Security contributions,
Worker's Compensation premiums, import duties and all similar taxes and payments
concerning the Distributor and its employees. None of its employees shall be
eligible for any of the Company's employee benefit programs, nor shall any of
them have any claim against the Company for sick leave, retirement benefits,
Social Security, Worker's Compensation, disability or unemployment benefits. The
Company shall not be liable for the payment of any of such taxes or payments to
any federal, state or municipal government or
<PAGE> 2
2
agency, nor shall the Company be liable for any injury or damage to any person
or property whatsoever by reason of, or in any manner growing out of, any of the
Distributor's acts or failures to act hereunder.
(1.4) The Distributor shall also be solely responsible for all expenses
and liabilities it incurs or accrues in the performance of its obligations
hereunder. Without limiting the generality of the preceding sentence, the
Distributor shall pay all sales, income, excise and other taxes payable to all
taxing authorities and jurisdictions in connection with the Distributor's sales
of any of the POG Multi-Game Products to its customers pursuant hereto and the
operation of its business.
(1.5) The Distributor agrees to indemnify, defend and hold the Company
harmless from and against any and all suits, claims, actions, demands,
liabilities, expenses and losses, including legal fees, incurred or accrued by
the Company at any time or from time to time resulting directly or indirectly
from the Distributor's breach or failure to perform or pay any of its
obligations or liabilities under Sections 1.2, 1.3 or 1.4 of this Agreement.
Upon the Company's request, the Distributor shall furnish the Company with
documentation reasonably sufficient to evidence its performance and payment of
all of its obligations and liabilities under Sections 1.2, 1.3 and 1.4 hereof.
(1.6) At all times during the term of this Agreement, the Distributor
shall use its best efforts to sell and to promote the sale of the POG Multi-Game
Products in the Territory. The Distributor shall obtain the Company's prior
approval of the truth and accuracy of all representations, claims and selling
statements concerning the POG Multi-Game Products contained in all promotional
or sales literature it develops at any time related to the POG Multi-Game
Products.
(1.7) NOT APPLICABLE. See Addendum 2
ARTICLE II--Minimum Purchases; Distributor's Discounts; Promotion
(2.1) The Distributor shall be required to purchase from the Company
the minimum purchases of the multi-game machines of the POG Multi-Game Products
(the "POG Machines") or POG Multi-Game Products set forth opposite each of the
following quarterly periods:
<TABLE>
<CAPTION>
Period Minimum Purchases
------ -----------------
<S> <C>
January 1, 1998 to 140 POG Machines or
December 31, 1998 $840,000 of POG Multi-Game
Products per quarterly period
January 1, 1999 to 250 POG Machines or
December 31, 1999 $1,400,000 of POG Multi-Game
Products per quarterly period
January 1, 2000 to 250 POG Machines or
December 31, 2000 $1,400,000 of POG Multi-Game
Products per quarterly period
</TABLE>
<PAGE> 3
3
(2.2) The Distributor's failure to purchase from the Company in any
quarterly period the minimum purchases of POG Machines or POG Multi-Game
Products required for such quarterly period shall entitle the Company to
terminate this Agreement; provided, however, the amounts of actual purchases of
POG Multi-Game Products by the Distributor in any one quarterly period in excess
of required minimum purchases for such quarterly period shall be carried
forward, to the end of contract.
(2.3) The Company will sell the POG Machines to the Distributor at a
distributor's discounted price, as per Addendum 1.
(2.4) The Company will sell all other POG Multi-Game Product to the
Distributor at distributor's discounts below the Company's suggested retail
prices, the amount of which distributor's discounts shall be determined from
time to time by the Company.
(2.5) The Distributor acknowledges the Company has furnished it with a
schedule of its suggested retail prices for the POG Multi-Game Products in
effect on the date of this Agreement. The Company shall be entitled to change
its suggested retail prices for the POG Multi-Game Products as of the first day
of each January, April, July and October during the term hereof. No increase in
the Company's suggested retail prices shall be binding upon the Distributor
until the Company shall have given the Distributor at least thirty (30) days
prior written notice of such increase.
(2.6) If the Company makes available, at any time or from time to time
during the term of this Agreement, any discounts, incentives or promotions to
any of its distributors in the Territory with respect to their purchases of POG
Machines or POG Multi-Game Products from the Company, the application of which
discount, incentive or promotion would reduce the purchase price otherwise
payable by the Distributor under Section 2.3 or 2.4, the Company agrees to make
each such discount, incentive or promotion available to the Distributor on the
most favorable terms and conditions the Company makes it available to any of its
other distributors.
ARTICLE III--Orders and Deliveries
(3.1) All of the Distributor's orders for purchases of POG Multi-Game
Products shall be made upon the Company's standard terms and in accordance with
the terms and provisions of this Agreement. The Distributor acknowledges the
Company has furnished it with a copy of the form of purchase order in effect on
the date of this Agreement. Such purchase order contains the Company's standard
terms. In no event will the use by the Distributor of its own purchase order, or
the use by the Company of any form of acknowledgment or shipping document, be
effective to vary, alter or modify the terms and provisions of the Company's
standard terms or this Agreement; nor will such use have the effect of
substituting the provisions set forth on such form for the provisions contained
in the Company's standard terms or this Agreement.
(3.2) All purchase orders placed by the Distributor shall be promptly
acknowledged in writing by the Company. By this acknowledgment, or by another
communication, the Company shall notify the Distributor of the anticipated dates
of deliveries of POG Multi-Game Products
<PAGE> 4
4
covered by the purchase order. The Company shall exercise due diligence to
deliver POG Multi-Game Products in the quantities and on the dates specified by
the Distributor in its purchase orders, subject to delays as identified in
Sections 3.3 and 8.1 hereof.
(3.3) The Company shall give careful consideration to the Distributor's
purchase orders for purchase of POG Multi-Game Products. All such orders shall
be subject to the Company's acceptance. All accepted orders, regardless of
whether delivery dates are specified therein, shall be subject to delays or
failures in manufacture or in delivery due to any cause or event.
(3.4) Not Applicable. See Addendum 2.
(3.5) If any purchase order for POG Multi-Game Products is requested by
the Distributor to be increased at any time after it has been acknowledged by
the Company, the Company shall be entitled to charge the Distributor an
expediting fee with respect to the increased portion of the purchase order to
compensate it for additional costs and expenses it incurs or accrues in
producing such increased portion.
(3.6) Not later than thirty (30) days after the execution of this
Agreement, the Distributor shall deliver to the Company its forecast for
purchases of POG Multi-Game Products from the Company during the first six (6)
months of the first year of the term hereof. After the first six (6) months, the
Company and the Distributor shall cooperate to develop an estimate in writing of
the Distributor's requirements for each calendar quarter of the subsequent
eighteen (18) months. Thereafter, if the term of this Agreement is extended, the
Distributor shall furnish the Company with its further estimates of requirements
for an additional calendar quarter, so that the estimate is at all times
reflecting estimated requirements of POG Multi-Game Products for six (6)
calendar quarters.
(3.7) The Company hereby warrants that for ninety (90) days following
Installation of POG Multi-Game Products, it will replace any POG Multi-Game
Products that are defective in material or workmanship.
THE WARRANTY SET FORTH HEREIN IS IN LIEU OF ANY AND ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY, FITNESS, FITNESS FOR A PARTICULAR
PURPOSE, TITLE AND NON-INFRINGEMENT, WHICH ARE EXPRESSLY DISCLAIMED BY
THE COMPANY.
THE DISTRIBUTOR'S EXCLUSIVE REMEDY FOR DAMAGES ARISING OUT OF BREACH OF
WARRANTY WILL BE LIMITED TO REPAIR OR REPLACEMENT. IN NO EVENT SHALL
THE COMPANY BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES OF ANY KIND, INCLUDING, BUT NOT LIMITED TO, ANY LOSS OF
BUSINESS OR OTHER LOSS RESULTING FROM USE OR MISUSE OF ANY POG
MULTI-GAME PRODUCTS.
<PAGE> 5
5
ARTICLE IV-Service, Maintenance, Repair and Upgrade
At all times during the term hereof, the Distributor shall, in addition
to its other duties and responsibilities under this Agreement, use its best
efforts to service, maintain, repair and upgrade and to promote the servicing,
maintenance, repair and upgrading of all of the Company's products sold, leased
or distributed by it throughout the Territory whether before or during the term
hereof. In this regard, the Distributor agrees (i) to maintain an inventory of
spare and replacement parts and (ii) to employ service, repair and maintenance
personnel, in each case, at all times adequate to perform its obligations
specified in the preceding sentence.
ARTICLE V--Representations; Covenants; Indemnification
(5.1) The Distributor hereby represents and warrants to the Company
that it has obtained and holds all licenses, permits, certificates, applications
or other documentation necessary to permit it to perform its duties hereunder
and is duly qualified to transact all business contemplated hereunder in the
Territory. The Distributor further represents and warrants that its performance
and observance of this Agreement will not violate any applicable law and will
not violate any agreement to which the Distributor is a party.
(5.2) The Distributor hereby covenants and agrees that it shall comply,
at all times, with all applicable laws and regulations of all governmental
jurisdictions and agencies governing its performance and observance of this
Agreement. Without limiting the generality of the preceding sentence,
Distributor shall be responsible for and shall pay all taxes and other amounts
payable at any time in respect of the POG Multi-Game Products and POG Machines
imposed or assessed by any governmental jurisdiction or agency and agrees to
furnish to the Company, upon request, reasonable evidence of its continuing
compliance with the provisions hereof.
(5.3) The Distributor hereby agrees to indemnify, defend and hold the
Company harmless from and against any and all suits, claims, actions, demands,
liabilities, expenses and losses, including legal fees, incurred or accrued by
the Company at any time or from time to time resulting directly or indirectly
from the distributor's performance hereunder, including, without limitation,
packaging, handling, storage or selling of the POG Machines or POG Multi-Game
Products.
ARTICLE VI--Term; Renewal; Termination
(6.1) The term of this Agreement shall commence on the date hereof and
shall expire on December 31, 2000.
(6.2) The term of this Agreement shall automatically be renewed for two
successive terms of one (1) year each unless either party shall give written
notice to the other of its decision not to renew at least 120 days prior to
December 31,2000.
(6.3) In the event that any of the terms or provisions hereof are
incurably breached by the Distributor, the Company may immediately terminate
this Agreement by written notice. In the event of any other breach, including
the failure to meet the minimum requirements set forth in
<PAGE> 6
5
Section 2.1, the Company may, subject to Section 2.2, terminate this Agreement
by the giving of written notice to the Distributor that the Agreement will
terminate on the thirtieth (30th) day from notice unless cure is sooner
effected. For purposes of this Agreement, an "incurable" breach shall be
committed when (i) the Distributor is dissolved, liquidated, discontinued,
becomes insolvent, or when any proceeding is filed against the Distributor or
commenced by the Distributor under any bankruptcy, insolvency or debtor relief
laws; or (ii) the Distributor shall commit any act of fraud, dishonesty,
unethical conduct, moral turpitude or similar act of misconduct injurious to the
business interests of the Company.
(6.4) In the event of termination for any reason, the rights of the
Distributor to sell POG Multi-Game Products with respect to POG Multi-Game
Products already sold or delivered to the Distributor shall remain unprejudiced
and the Distributor may complete the sales of such POG Multi-Game Products. Upon
termination of this Agreement for any reason, the Company shall be required to
deliver and the Distributor shall be required to accept only the orders of POG
Multi-Game Products already ordered from the Company as the Distributor shall
then be under an obligation to sell or deliver.
ARTICLE VII--Marks
The Distributor is hereby granted a non-exclusive, non-transferable
license to use the trademarks of the Company listed on Exhibit A, as the same
may be amended, supplemented or otherwise modified from time to time (the
"Marks"). Such Marks are licensed to the Distributor by the Company for use
solely in connection with the marketing, advertising and promoting of POG
Multi-Game Products in the Territory. The Distributor shall use the Marks only
in accordance with the policies of the Company recording the use of trademarks
as established by the Company from time to time. All rights of the Distributor
to use the Marks shall cease immediately upon expiration or earlier termination
of this Agreement for any reason whatsoever. The Marks shall remain the sole and
exclusive property of the Company at all times and the Distributor agrees that
it will not challenge the Company's ownership of the Marks at any time. The
Distributor shall observe the same quality control standards as are generally
specified by the Company for observance by its other distributors and actual
practice by such other distributors and the Company shall have the right to
monitor the Distributor's compliance with such quality control standards.
ARTICLE VIII--Miscellaneous
(8.1) Neither party shall be liable for nonperformance or delay in
performance due to any act of God; act, regulation or law of any government;
war; riot; civil commotion; destruction of production facilities or materials by
fire, earthquake or storm; strike; labor disturbances; epidemic; failure of
public utilities or common carriers; or any limitation, requirement or
prohibition imposed or required by any governmental agency having jurisdiction
over the subject matter of this Agreement.
(8.2) This Agreement represents the entire agreement between the
parties concerning the subject matter hereof and supersedes all prior and
contemporaneous negotiations, discussions and
<PAGE> 7
7
other agreements. No delay on the part of the Company or the Distributor in
exercising any of their respective rights hereunder or failure to exercise the
same shall be deemed to operate as a waiver of such rights except in the
specific instance in which given. None of the terms or provisions of this
Agreement shall be held to have been waived by any act or knowledge of the
Company or the Distributor, their agents or employees, and the terms and
provisions of this Agreement may be changed, waived or varied only by a
statement in writing signed by all parties hereto.
(8.3) (A) Any notice, consent, authorization, communication or approval
required to be given hereunder shall be effected by: (i) depositing it in
writing in Registered or Certified Mail, or express courier with the requisite
postage affixed, addressed to the party notified, or (ii) personally delivering
it in writing to the party notified, at the address of such party herein below
set forth or at such other latest address as may hereafter be given by such
party in writing to the other for notice:
To: Leisure Time Technology, Inc.
5825-B Peachtree Corners East
Norcross, Georgia 30092
Attention: Mr. Alan N. Johnson
President
To:
[Distributor]
Sao Paulo Games Comercial LTDA
Rua Joaquim Floriano, 733 4o Ander Conj 4A
Bairro Itaim BIBI CEP 04534-012
Attention: Fernand Mendes Dais
President
(B) Unless otherwise specified in this Agreement, the date of
such deposit delivery, respectively, shall be the date of such notice, consent,
authorization, communication or approval.
(8.4) While the limitations and restrictions imposed by the parties
herein are considered by the parties to be reasonable in all the circumstances,
it is recognized that restrictions of the nature in question may fail for
technical reasons unforeseen, and, accordingly, if any of such restrictions
shall be adjudged to be void, but would be valid if part of the wording thereof
were deleted or the period, if any, thereof reduced or the range of activities
or area dealt with thereby reduced in scope, said restriction shall apply with
such modifications as may be necessary to make it valid and effective, provided,
however, that this Agreement is not hereby rendered fundamentally different in
its content or effect.
(8.5) The Distributor shall not assign or transfer, partially or
entirely, any of its rights or interest or obligations under this Agreement,
including through the sale of the Distributor's business or a sale of the
majority of the stock of the Distributor, without the prior written consent of
the Company, which consent shall not be unreasonably withheld.
(8.6) This Agreement shall be governed by and interpreted in accordance
with the laws of
<PAGE> 8
8
the State of Georgia.
(8.7) The headings for the Articles of this Agreement are to facilitate
reference only, do not form a part of this Agreement and shall not in any way
affect the interpretation hereof.
(8.8) Upon execution of this Agreement, neither party shall give any
public notice or make any press announcement regarding this Agreement except
such notice or press announcement as has been jointly developed and agreed upon
by the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
LEISURE TIME TECHNOLOGY, INC.
-----------------------------------------
By: /s/
------------------------------- -----------------------------------------
Title:
---------------------------- -----------------------------------------
Date:
----------------------------- -----------------------------------------
Sao Paulo Gamers Comercial LTDA:
By: /s/
----------------------------------------------------------------------------
Fernando Mendes Dais, President
Dated:
-------------------------------------------------------------------------
By: /s/
----------------------------------------------------------------------------
Jose Paulo Teixeira Cruz Figueiredo, Director
Dated:
-------------------------------------------------------------------------
By: /s/
----------------------------------------------------------------------------
Artur Jose Valente De Oliveira Caio, Director
Dated:
-------------------------------------------------------------------------
<PAGE> 9
9
i cXo s
HG*ee s Addendum 1. Distribution Agreement between Sao
Paulol!Comercial, LTDA and Leisure Time Technology, Inc.
1.) Price: $5,300.00 per machine FOB, best port of call east coast USA. Includes
the Cash Code model Amazing Brazil plus bill exceptor, Azkoyen model #60k Coin
exceptor, Coin head with plunger, LCD progressive display and Asashi Seiko coin
hopper. 2.) Price: $300.00 per Round top accessory, includes glass, inside
assembly and necessary mounting brackets.
m WITNESS WHEREOF, the parties hereto have executed this Addendum as of the date
written herein.
Date: St3/o/ / fig--
Sao Paulo Games ComerciLpA:
By ~(L)~tt
Fer~iando Mw 5,~, Preslde e
Date:( / /
By: tj
Jose Paulo eixe Ira Cruz Figueiredo, Director
Date: A 9 - >
' ~ose va ente 1 b ( )liveira Caio, Director
oZ e} 3~
b. .9 o
Date: j
AMENDED AND RESTATED
ASSET PURClIASE AGREEMENT
THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT ("Agreement") dated
as of January 31, 1997 is between LEISURE TIME CASINOS & RESORTS, INC., a
Colorado corporation ("Buyer"), and STAR OF CINCINNATI, INC., formerly known as
STAR CRUISES OF CINCINNATI, INC., an Ohio corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Buyer and Seller are parties to the Asset Purchase Agreement
dated as of January 25, 1996 (including all amendments, supplements or other
modifications thereto whether
<PAGE> 10
10
verbal or in writing at any time made prior to the date of this Agreement, the
"Asset Purchase Agreement"); and
WHEREAS, Buyer and Seller desire to enter into this Agreement for the
purpose of amending and restating the Asset Purchase Agreement.
NOW THEREFORE, in consideration of the foregoing recitals, the
mutuality of the terms, covenants and conditions of this Agreement and other
good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties agree to amend and restate the Asset Purchase
Agreement to read and provide as follows:
1. Purchase and Sale. Buyer agrees to purchase from Seller, and Seller
agrees to sell, transfer, convey, assign and deliver to Buyer at the Closing (as
such term is defined below), all of the following assets (the "Assets"):
1.1 The whole of the M/V "Star of Cincinnati", f/k/a "Star of Detroit",
United States Coast Guard ("USCG") Official No. 671576, together with all of her
tackle, apparel, furniture, fittings, tools, spare parts, supplies, equipment,
boats, engines, machinery, anchors, chains, electronics and all other
appurtenances and accessories thereunto appertaining and belonging (the
"Vessel").
1.2 The whole of the "Star Landing", f/k/a "Lively Lady", Ohio No.
230102, together with all of her tackle, apparel, furniture, fittings, tools,
spare parts, supplies, equipment, boats, machinery, anchors, chains, electronics
and all other appurtenances and accessories thereunto appertaining and belonging
(the "Star Landing").
1.3 All right, title and interest of Seller in and to "Star of
Cincinnati", "Star Landing" and all other trade names and trademarks used by
Seller in its former river/oat
ff~
C,,
excursion dining cruise business headquartered in Cincinnati, Ohio and the right
to use the name "Star" and all derivatives thereof.
1.4 All plans, logs, reports, data, notes, instruction books and other
information pertaining to the Vessel or the Star Landing.
1.5 Any other tangible and intangible assets pertaining to the Vessel
or the Star Landing, including, without limitation, all licenses, permits,
approvals, consents and certifications .
2. Purchase Price. In consideration of the sale, transfer, conveyance,
and assignment of the Assets to Buyer, Buyer shall pay to Seller at the Closing
the sum of $2,550,000 in cash (the "Purchase Price") by wire transfer of
immediately available funds.
3. No Mortgages. Liens. Rights or Encumbrances. The Assets are being
sold by Seller and being purchased by Buyer free and clear of all mortgages,
liens, rights and other encumbrances and Buyer is not assuming and shall not
otherwise be liable, directly or indirectly, for any of
<PAGE> 11
11
Seller's contracts, agreements, leases, debts, obligations or liabilities
whatsoever in respect of the Assets.
4. Closing.
4.1 The closing of Buyer's purchase of the Assets contemplated by this
Agreement (the "Closing") shall take place at the offices of Keating, Muething &
Klekarnp, P.L.L., 1800 Provident Tower, One East Fourth Street, Cincinnati,
Ohio, commencing at 10:00 a.m. local time on a date mutually agreeable to the
parties on or before February 3, 1997 or at such later time and date as the
parties shall hereafter agree upon (the "Closing Date").
4.2 Seller shall deliver possession of (i) the Vessel to Buyer at its
current location in Panama City, Florida and (ii) the Star Landing to Buyer at
its current location in Dayton, Kentucky, each safely afloat. Possession of the
other Assets shall be delivered by Seller to Buyer at Cincinnati, Ohio or such
other location mutually agreeable to the parties, immediately after the
consummation of the Closing.
4.3 Except for Seller completing repairs to the Vessel's propellers,
starboard shaft and gears attributable to the Vessel having struck a submerged
object on or about February 3, 1996, the Vessel shall, upon Closing, be sold "AS
IS, WHERE IS" without drydocking. If all of such repairs to the Vessel shall not
have been completed before the Closing Date, the Closing will still occur and an
escrow will be established at the Closing with a portion of the Purchase Price
to cover the cost of the uncompleted repairs. The Star Landing shall, upon
Closing, be sold "AS IS, WHERE IS" without drydocking.
5. Seller's Warranties and Representations. Seller hereby represents
and warrants to Buyer (which representations and warranties shall survive the
Closing) as follows:
5.1 Corporate Status of Seller. Seller is a corporation duly organized
and validly existing in good standing under the laws of Ohio and has the
corporate power and authority to sell the Assets under this Agreement. Seller
was formerly known as Star Cruises of Cincinnati, Inc.
5.2 Authorization of Transaction. The execution, delivery, and
performance of this Agreement by Seller has been duly and validly authorized by
its board of directors and the shareholders of Seller and Seller has taken all
necessary corporate action required for the authorization and approval of this
Agreement. This Agreement is binding upon and enforceable against Seller in
accordance with its terms.
5.3 Performance of Agreement. The execution and delivery of this
Agreement by Seller and the consummation of the transactions contemplated herein
will not result in the breach of any of the terms, covenants or conditions of,
or constitute a default with respect to, the Articles of Incorporation or the
ByLaws/Regulations of Seller or any contract, agreement, indenture, note,
<PAGE> 12
12
bond, license or other instrument or obligation to which the Seller is now a
party or by which the Seller or any of its property or assets, including the
Assets, may be bound or affected or, to Seller's knowledge, violate any law or
any rule or regulation of any administrative agency or governmental body or any
order, writ, injunction or decree of any court, administrative body or
governmental body applicable to Seller or the Assets.
5.4 Title to Assets. Seller is the true and lawful owner of all of the
Assets. On the Closing Date, title to and ownership of the Assets shall be
transferred to Buyer free and clear of all mortgages, liens, rights and other
encumbrances, including all indebtedness and other amounts owed to Comerica
Bank, Detroit, Michigan, and all maritime and tax liens, or any other debts,
obligations or liabilities, including, without limitation, the claims of
customers, vendors or governmental authorities whatsoever relating to the
Assets.
5.5 Litigation. Except for the litigation now pending in the United
States District Court for the Northern District of Florida, Panarna City
Division, entitled Comerica Bank v. M/V Star of Cincinnati, being Case No.
5:96CV212/RV, which litigation shall be settled or otherwise dismissed with
prejudice on or before the Closing, there is no existing or, to the best of
Seller's knowledge, threatened action, suit or proceeding, either legal,
fsLuitable
- -4
or administrative, affecting the Assets or any part thereof in any court or by
any federal, state, county or municipal department, commission, board, bureau,
agency or other governmental authority.
5.6 Violation of Laws. The Seller is not in violation of any law, rule,
regulation or court or administrative orders or processes applicable to it or
the Assets.
5.7 Solvency of Seller. The Seller is not insolvent and will not be
rendered insolvent as a result of the consummation of the transactions
contemplated by this Agreement.
5.8 Broker. At the Closing, Seller agrees to pay to Coastal Marine the
full amount of any and all fees, commissions and other amounts due and payable
to Coastal Marine as a result of the consummation of the transactions provided
for in this Agreement. Buyer shall have no liability or obligation to pay any
fees, commissions or other amounts due or payable to any broker, finder or
agent, including, without limitation, Coastal Marine, with respect to this
Agreement or the transactions contemplated hereby.
5.9 Environmental Matters. (a) Except for fuel and other petrochemical
products used or useful in the operation or maintenance of the Vessel or the
Star Landing, the Assets are, as of the date of this Agreement, and will be, as
of the Closing Date, free and clear of any and all Hazardous Materials (as such
term is defined below).
(b) Except for the flooding of the Star Landing on or about May 13,
1996 and the Release of Hazardous Materials in the environment as a result of
such flooding (the "May 1996 Release"), Seller has not caused or suffered to
occur any Release (as such term is defined below) of any Hazardous Materials
with respect to the Assets at any time prior to the date hereof.
<PAGE> 13
13
(c) The term "Hazardous Materials" as used in this Agreement shall mean
(i) any substance, material or waste, the generation, handling, storage,
treatment or disposal of which is regulated by any federal, state or other
governmental authority in any jurisdiction in which Seller owned, leased or
operated any of the Assets or forms the basis of liability under any federal,
state or other environmental law, rule or regulation, including any material or
substance which is either (A) defined as, (B) included in the definition,
listing or identification of, or (C) otherwise regulated as, a "solid waste,"
"hazardous waste," "hazardous material," "hazardous substance," "extremely
hazardous waste" or "restricted hazardous waste" or other similar term or phrase
under any environmental laws, or (ii) petroleum or any fraction or by-product
thereof, asbestos, polychlorinated biphenyls, or radioactive substances.
(d) The term "Release" as used in this Agreement shall mean any
release, spill, emission, leaking, pumping, pouring, emptying, discharging,
injecting, escaping, dumping, disposing, leaching or migration of Hazardous
Materials in the indoor or outdoor environment by Seller (or by a person under
Seller's direction or control), including the movement of a Hazardous Material
through or in the air, soil, surface water, ground water or property.
(e) The May 1996 Release was cleaned up by Heritage Environmental
Services, Inc. on behalf of Seller in accordance with the requirements of the
United States Coast Guard. Seller shall cause Heritage Environmental Services,
Inc. to deliver to Buyer a certificate to such effect at or prior to the
Closing. Such certificate shall be in form and substance reasonably acceptable
to Buyer.
6. Representations and Warranties of Buver. Buyer represents and
warrants to Seller (which representations and warranties shall survive the
Closing) as follows:
6.1 Corporate Status of Buver. Buyer is a corporation duly organized
and validly existing and in good standing under the laws of the State of
Colorado and has the corporate power and authority to purchase the Assets under
this Agreement.
6.2 Authorization of Transaction. The execution, delivery and
performance of this Agreement by Buyer has been duly and validly authorized by
its board of directors and Buyer has taken all necessary corporate action
required for the authorization and approval of this Agreement. This Agreement is
binding upon and enforceable against Buyer in accordance with its terms.
6.3 Performance of Agreement. The execution and delivery of this
Agreement by Buyer and the consummation of the transactions contemplated herein
will not result in the breach of any of the terms, covenants or conditions of,
or constitute a default with respect to, the Articles of Incorporation or the
Bylaws/Regulations of Buyer or any contract, agreement, indenture, note, bond,
license or other instrument or obligation to which Buyer is now a party or by
which Buyer or any of its property or assets may be bound or affected or, to
Buyer's knowledge, violate any law or any rule or regulation of any
administrative agency or governmental body or any order, writ, injunction or
decree of any court, administrative body or governmental body applicable to
Buyer.
<PAGE> 14
14
7. Tax Matters. Buyer shall be responsible for the payment of any and
all sales, use, transfer or delivery taxes, assessments, fees or duties of any
kind arising out of the sale, transfer or delivery of the Assets levied or
imposed by any federal, state or local government or taxing authority. If the
levy or imposition of any such tax, assessment, fee or duty shall be made upon
the Seller, Buyer shall pay such amount to Seller upon demand of the amount
thereof. Seller shall promptly notify Buyer thereof and Buyer shall have the
right to contest any such tax, assessment, charge, fee or duty.
8. Bulk Sales. Buyer and Seller agree that the bulk sales laws are
inapplicable to the transactions contemplated by this Agreement.
9. Risk of Loss. The risk of loss to any of the Assets being purchased
shall remain with Seller until Closing pursuant to Section 4.2. If any Asset
sold hereunder shall be substantially damaged or destroyed by fire, casualty or
other cause prior to the Closing, Seller shall immediately notify Buyer thereof
and furnish to Buyer a written statement of the amount of the insurance, if any,
payable on account thereof. For purposes of this Agreement, Assets shall be
deemed to be substantially damaged if the cost of replacement or repair of all
damages prior to completion of this transaction will exceed $200,000. Within 10
days after receipt of notice of any such damage or destruction, Buyer may
terminate this Agreement. If any Asset is not substantially damaged, it shall
be promptly repaired or replaced at Seller's expense prior to the Closing and
the Closing Date shall be extended, if necessary, for a reasonable period in
order to permit such repairs or replacement.
10. Conditions to Obligations of Buyer to Close. The obligation of
Buyer to consummate this Agreement shall be subject to the following conditions,
any one or more of which may be waived by Buyer:
10.1 Seller shall have delivered a Bill or Bills of Sale for the
Assets, in form and substance satisfactory to Buyer, free and clear from all
liens, charges and encumbrances whatsoever.
10.2 Seller shall have obtained an Abstract of Title from the United
States Coast Guard covering the Vessel. The Abstract of Title shall be dated as
of a recent date prior to the Closing Date reasonably accepted to Buyer. Seller
shall have delivered the original Abstract of Title and Certificate of
Documentation for the Vessel to Buyer.
10.3 Seller shall have delivered to Buyer or shall have caused to be
delivered to Buyer documentation in form and substance reasonably acceptable to
Buyer and its legal counsel evidencing and providing for the satisfaction,
termination, release and discharge of all mortgages, liens, claims and other
encumbrances on, to or in the Assets except for the Preferred Mortgages dated
May 28, 1992 granted by Seller to Henry E. Davis, Trustee, securing indebtedness
in the aggregate amount of $3,000,000 (the "Davis Mortgages").
<PAGE> 15
15
10.4 Seller and Buyer shall have entered into an agreement (the "Davis
Agreement") with Henry E. Davis, Trustee, whereby in consideration of Buyer's
issuance to Henry E. Davis, Trustee, of 150,000 unregistered shares of Buyer's
Common Stock, Henry E. Davis, Trustee, shall execute and deliver to Buyer
documentation in form and substance reasonably acceptable to Buyer and its legal
counsel evidencing and providing for the satisfaction, termination, release and
discharge of (a) the Davis Mortgages referred to in Section 10.3 and described
in the Abstract of Title for the M/V Star of Cincinnati referred to in Section
10.2 and (b) all indebtedness secured by the Davis Mortgages. The Davis
Agreement shall be in form and substance reasonably acceptable to Seller and its
legal counsel and also to Buyer and its legal counsel. The transactions and
deliveries of documentation and shares of Buyer's Cornmon Stock under the Davis
Agreement shall close and occur simultaneously with the closing of this
Agreement.
10.5 Prior to the Closing of this Agreement, Seller shall have assigned
to Buyer and Seller shall have caused Comerica Bank to have assigned to Buyer
all of their respective rights, as insureds, loss payees or otherwise, in and to
all insurance proceeds due or to become due with respect to claims for known or
unknown damages that are allocable to insurance policies covering the Vessel
and the Star Landing. The form and substance of each such assignment shall be
reasonably acceptable to Buyer and its legal counsel. The assignment from
Comerica Bank shall be effective immediately upon full payment to Comerica Bank
of all amounts payable to it by Seller secured by the Assets.
10.6 Seller shall have conducted searches of the necessary offices
where uniform commercial code filings are made and shall have determined that
the Assets are free and clear of all mortgages, liens, claims and other
encumbrances.
10.7 Seller shall have caused Heritage Environmental Services, Inc. to
have delivered to Buyer the certificate referred to in Section 5.9(e).
10.8 The representations and warranties made by Seller herein shall be
deemed to be repeated on the Closing Date with the same force and effect as if
made on such date and shall be true and correct in all respects as though made
on and as of the Closing Date.
10.9 Each and all of the covenants and agreements of Seller to be
performed or complied with prior to or on the Closing Date shall have been duly
performed or complied with by Seller. - 8
10.10 All necessary corporate action shall have been taken by Seller's
board of directors and shareholders to authorize the execution, delivery and
performance of this Agreement.
<PAGE> 16
16
10.11 The Assets shall be in as good a condition as they were on the
date of execution of this Agreement, reasonable wear and tear excepted, subject
only to the provisions of Section 4.3.
10.12 Seller shall have delivered such resolutions, certificates and
other documents reasonably requested by Buyer or Buyer's counsel.
11. Conditions to Obligations of Seller to Close. The obligation of
Seller to consummate this Agreement shall be subject to the following
conditions, any one or more which may be waived by Seller:
11.1 The representations and warranties made by Buyer herein shall be
deemed to be repeated on the Closing Date with the same force and effect as if
made on such date, and shall be true and correct in all respects as though made
on and as of the Closing Date.
11.2 All necessary corporate action shall have been taken by Buyer's
board of directors to authorize the execution, delivery and performance of this
Agreement.
11.3 Buyer shall have delivered such resolutions, certificates and
other documents reasonably requested by Seller or Seller's counsel.
12. Indemnification: Setoff and Noncompetition.
12.1 Buyer shall indemnify and hold Seller, Charles W. Henne and R.
Dudley Webb harmless from and against any cost or expense, including attorneys'
fees and expenses, arising out of or relating to:
(a) all debts, liabilities and obligations of Buyer of any nature
arising from Buyer's ownership or use of the Assets after the Closing Date; and
(b) any liability, loss, claim, damage or deficiency resulting directly
or indirectly from any misrepresentation, breach of warranty or nonfulfillment
of any term, covenant or condition on the part of Buyer under this Agreement or
from any misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished by Buyer hereunder.
~,
- - 9
12.2 Seller shall indemnify and hold Buyer harmless from and against
any cost and expense, including attorneys' fees and expenses, arising out of or
relating to:
(a) all debts, liabilities and obligations of Seller of any nature
arising from the Assets, whether known or unknown, incurred on or prior to the
Closing Date; and
(b) any liability, loss, claim, damage or deficiency resulting directly
or indirectly from any misrepresentation, breach of warranty or nonfulfillment
of any term, covenant or condition on the part of Seller under this Agreement or
from any misrepresentation in or omission from any
<PAGE> 17
17
certificate or other instrument furnished or to be furnished by Buyer hereunder.
12.3 If either party shall suffer or incur any liability, loss, claim,
damage or deficiency resulting directly or indirectly from any
misrepresentation, breach of warranty or nonfulfillment of any term, covenant or
condition on the part of the other party under this Agreement or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished by the other party, then, in each such case, such
party shall, in addition to the exercise of all of its other rights and remedies
under applicable law, be entitled, with or without notice to the other party, to
setoff against all amounts then or thereafter owed by it to the other party the
full and absolute amount of all such liabilities, losses, claims, damages or
deficiencies suffered or incurred by it.
12.4 (a) Seller agrees that, for a period of five (5) years following
the Closing Date, neither Seller or any corporation, partnership or other entity
which is affiliated with Seller nor Charles W. Henne or R. Dudley Webb or any
corporation, partnership or other entity which is controlled by Charles W. Henne
or R. Dudley Webb (collectively, the "Non-Compete Parties") shall engage in the
excursion dining and/or gaming cruise business in direct competition with
Buyer's operation of the Vessel in the excursion dining and/or gaming cruise
business, except for the excursion dining and/or gaming cruise business as
operated by R. Dudley Webb in Key West, Florida on the date of this Agreement
(the foregoing covenant is hereinafter referred to as the "Non-Compete
Covenant").
(b) Buyer acknowledges and agrees that the ownership, operation and/or
management of marinas and/or marina facilities by any of the Non-Compete Parties
shall not constitute direct competition in breach of the Non-Compete Covenant
even if a vessel ("Competing Vessel") engaged in direct competition with Buyer's
operation of the Vessel in the excursion dining and/or gaming cruise business is
docked or moored at/in any marina or marina facility owned, operated or managed
by any of the Non-Compete Parties so long as none of the Non-Compete Parties
directly or indirectly owns (through equity ownership or otherwise), operates or
manages the Competing Vessel.
(c) Buyer further acknowledges and agrees that the ownership, operation
and/or management of hotels, motels, restaurants, casinos and other hospitality,
dining and gambling facilities by any of the Non-Compete Parties shall not
constitute direct competition in breach of the Non-Compete Covenant so long as
any such facility engaged in direct competition with Buyer's operation of the
Vessel in the excursion dining and/or gaming cruise business is located on land
and permanently affixed to land.
(d) In furtherance of compliance with the Non-Compete Covenant by the
NonCompete Parties, Buyer shall notify Seller in writing as to the location of
the Vessel's dockage or moorage at the time Buyer first places the Vessel in the
excursion dining and/or gaming cruise business and on each subsequent occasion,
if any, thereafter Buyer moves the Vessel to a different place of dockage or
moorage and each such notification shall be deemed to constitute notice thereof
to all of the
<PAGE> 18
18
Non-Compete Parties; provided, however, Buyer's failure to so notify Seller at
any time shall not relieve any of the Non-Compete Parties from their obligation
to comply with the Non-Compete Covenant if, at any time during which direct
competition in breach of the Non-Compete Covenant shall occur, the breaching
Non-Compete Party or Parties shall otherwise have actual knowledge of the
location of the dockage or moorage of the Vessel.
(e) Notwithstanding the foregoing provisions of this Section 12.4, if,
at the time Buyer first places the Vessel in business and on each subsequent
occasion, if any, thereafter Buyer moves the Vessel to a different place of
dockage or moorage, any of the Non-Compete Parties are already engaged in a
business at such location ("Pre-Existing Business") that would constitute a
breach of the Non-Compete Covenant after Buyer places the Vessel in business at
such location, the Pre-Existing Business shall not be deemed to constitute a
breach of the NonCompete Covenant and the Non-Compete Parties shall thereafter
be entitled to engage in such business at such location and shall not be limited
or restricted by the Non-Compete Covenant.
13. Termination. The transactions contemplated by this Agreement may be
terminated on or before the Closing Date as follows: (a) by mutual written
agreement of each of the parties hereto; (b) by Buyer or Seller if any
representation or warranty made herein by the other was untrue or false in any
material respect as of the date given or made, (c) by Buyer or Seller if any
condition precedent to its obligation to close has not occurred and cannot be
satisfied within a reasonable period of time. In the event this Agreement is
terminated pursuant to any of the foregoing provisions, except as set forth
below, this Agreement shall forthwith become wholly void and of no force or
effect and there shall be no liability on the part of the parties hereto. If for
any reason on the Closing Date there has been non-fulfillment of any undertaking
by or
,
_ _ o /
, Ct,
- - ll
condition precedent for any party not waived in writing by the party in whose
favor such undertaking or condition runs, the party in whose favor such
undertaking or condition runs may refuse to consummate the transactions
contemplated by this Agreement without any liability or obligation on its part
whatsoever. In the event of any non-fulfillment of an undertaking by Buyer or by
Seller, the refusal by Buyer or by Seller to consummate the transactions hereby
contemplated because of non-fulfillment by the other party shall not constitute
an election of remedies by Buyer or by Seller and Buyer or Seller may pursue
whatever legal rights and remedies they may have at law or in equity by reason
of such non-fulfillment or failure by Buyer or Seller.
14. Expenses. Buyer and Seller shall each bear their own legal,
accounting, appraisal, and other expenses in connection with the negotiation,
preparation and consummation of this Agreement and transactions contemplated
hereunder.
15. Covenants Pending Closing. Seller agrees to cooperate with Buyer so
as to insure a smooth and orderly transition of the transfer of the Assets to
Buyer. Seller shall insure that Buyer
<PAGE> 19
19
has access to the Vessel and the Star Landing, including ingress and egress
rights. Between the date of this Agreement and the Closing Date, Seller shall
not, without the prior written consent of Buyer, (a) enter into any other
agreement or incur any other obligation with respect to the Assets; or (b) sell,
abandon or otherwise dispose of or pledge, mortgage or encumber any of the
Assets.
16. Further Assurances. From time to time after the date hereof, at
Buyer's request and without further consideration, Seller shall execute and
deliver such instruments of conveyance, assignment and transfer and take such
other actions as Buyer may reasonably require to enable Seller to more
effectively transfer to Buyer and to put Buyer in possession of the Assets.
17. Survival of Representations and Warranties. The representations and
warranties set forth herein shall survive the Closing.
18. Notices. Whenever it is provided in this Agreement that any notice
or other communication shall or may be given to or served upon a party by the
other party, or whenever a party desires to give or serve upon the other party
any communication with respect to this Agreement, each such notice or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt or three days
after deposit in the United States Mail, registered or certified mail, return
receipt requested, with proper postage prepaid, (b) upon transmission, when sent
by telecopy or other similar facsimile transmission (with such telecopy or
facsimile confirmed by telecopy answerback) or by delivery of a copy by personal
delivery, (c) one (1) business day after deposit with a reputable overnight
courier with all charges prepaid or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number as follows:
If to Seller at:
With a copy to:
If to Buyer at:
With a copy to:
Star of Cincinnati, Inc.
10555 Montgomery Road
Cincinnati, Ohio 45242
Attention: Charles W. Henne
Facsimile No. (513) 794-9229
Webb, Hoskins, Glover & Strafford, P.S.C.
3010 Lexington Financial Center
<PAGE> 20
20
250 West Main Street
Lexington, Kentucky 40507
Attention: R. Dudley Webb, Esq.
Facsimile No. (606) 281-5644
Leisure Time Casinos & Resorts, Inc.
1284 Miller Road
Avon, Ohio 44011
Attention: Alan N. Johnson
Facsimile No. (216) 934-1027
Keating, Muething & Klekamp, P.L.L.
1800 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
Attention: James R. Whitaker
Facsimile No. (513) 579-6956
19. Amendment. This Agreement may not be amended or terminated orally,
but may only be amended by an agreement in writing signed by the party against
whom enforcement of any waiver, amendment, modification, extension, discharge or
termination is sought.
20. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
Closing, will supersede and replace all prior agreements, understandings and
negotiations, oral and written, between the parties hereto with respect to the
subject matter hereof, including, without limitation, (i) the
. ,.
- - 13
Asset Purchase Agreement, (ii) the letter agreement dated January 25, 1996 from
Alan N. Johnson on behalf of Buyer to Charles W. Henne on behalf of Seller (the
"1/25/96 Letter Agreement"), and (iii) the agreement entitled "REVISED AGREEMENT
FOR PURCHASE OF THE STAR OF CINCINNATI AND STAR LANDING" dated December 21, 1996
between the parties (the "12/21/96 Terms Agreement").
Effective upon Closing, each of the parties hereby forever waives,
releases and discharges and agrees to hold the other party and each of its
shareholders, directors, officers, employees, agents and independent contractors
(the "Released Parties") harmless from and against any and all claims, rights,
suits or liabilities arising directly or indirectly from or by reason of the
Asset Purchase Agreement, the 1/25/96 Letter Agreement and the 12/21/96 Terms
Agreement, whether known or unknown as of the date hereof. Effective upon
Closing, each of the parties hereby covenants and agrees not to sue any of the
Released Parties with respect to any of such matters.
Effective upon Closing, each of the parties hereby further covenants
and agrees that it shall be solely responsible for and shall bear all of its
legal, accounting, appraisal and other expenses
<PAGE> 21
21
paid, incurred or accrued by it under or as a result of the Asset Purchase
Agreement, the 1/25/96 Letter Agreement and the 12/21/96 Terms Agreement.
21. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one -and the same instrument.
22. Assignability, Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by any party hereto without the prior
written consent of the other party hereto, except that Buyer shall be entitled
to assign its rights hereunder to any wholly-owned subsidiary of Buyer and
Seller shall be entitled to assign or transfer the Purchase Price or the Stock
Consideration to any of its shareholders ("Permitted Transfers"). If any
Permitted Transfer shall occur, the assigning or transferring party shall give
written notice thereof to the other party.
23. Governing Law. This Agreement and the performance hereunder shall
be governed by and construed in accordance with the laws of the State of Ohio.
24. Waiver. Any consent by any party, or waiver of, any breach of any
provision of this Agreement by the other, whether express or implied, shall not
constitute a consent, waiver of, or excuse for any breach of any other provision
or subsequent breach of this - 14
provision. Any waiver of any terms of this Agreement shall be in a writing
executed by the waiving party.
25. Construction. The parties acknowledge that this Agreement was
initially prepared by legal counsel for Buyer and that both parties and their
respective legal counsel have read and negotiated the language used herein. The
parties agree that because both parties participated in negotiating and drafting
this Agreement, no rule of construction shall apply to this Agreement which
construes ambiguous language in favor of or against any party by reason of the
party's role in drafting this Agreement.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Amended and Restated Asset Purchase Agreement on the date first above written.
STAR OF CINCINNATI, INC.
B>g 4~/>9
Name: /CAfARl(pound)S ~, AESSE
Title C*ZA{RRAU
.
LEISURE TIME CASINOS & RESORTS, INC. _
( Name:; <gaw C
<PAGE> 22
22
330818.10
ACCORD AND SATISFACTION AND RELEASE OF MORTGAGES AGREEMENT
This Accord and Satisfaction and Release of Mortgages Agreement
("Agreement") dated as of February 3, 1997 by LEISURE TIME CASINOS AND RESORTS,
INC., a Colorado corporation ("Leisure Time"), STAR OF CINCINNATI, INC., an Ohio
corporation ("Star") and HENRY E. DAVIS, TRUSTEE ("Trustee").
WITNESSETH:
WHEREAS, Star on May 28, 1992, granted to Trustee a mortgage recorded
with the United States Coast Guard, St. Louis, Missouri at Book PM-139, Page
225, in the amount of $2,300,000, and a mortgage recorded with the United States
Coast Guard, St. Louis, Missouri at Book PM-130, Page 225, in the amount of
$700,000, securing indebtedness in the aggregate amount of $3,000,000 (together,
the "Davis Mortgages");
WHEREAS, Star and Leisure Time are parties to an Amended and Restated
Asset Purchase Agreement ("Asset Purchase Agreement") dated as of January 31,
1997 which provides that as a condition to the closing of Leisure Time's
obligations under the Asset Purchase Agreement, Star, Leisure Time and Trustee
shall have entered into an agreement whereby in consideration of Leisure Time's
issuance to Trustee of 150,000 unregistered shares of Leisure Time's cornmon
stock, Trustee shall execute and deliver to Leisure Time documentation
evidencing and providing for the satisfaction, termination, release and
discharge of the Davis Mortgages and the payment in full of all indebtedness
secured by the Davis Mortgages.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutuality of this Agreement, the parties agree as follows:
1. Capitalized Terms. Capitalized terms not defined herein shall have
the meanings assigned to them in the Asset Purchase Agreement.
2. Issuance of Shares. Leisure Time shall issue to Trustee 150,000
shares of its Common Stock ("Shares"). The Shares will not be registered under
the Securities Act of 1933 (the "Act") or under the laws of any state and in
accepting delivery of the Shares, the Trustee shall thereby acknowledge Leisure
Time is not obliged to so register any of the Shares at any time in the future.
The certificate or certificates representing the Shares shall include a
customary legend to the effect that the Shares may not be transferred by the
holder thereof in the absence of (a) an effective registration statement for the
shares under the Act and applicable state laws or (b) an opinion of counsel for
Leisure Time that such registration is not required. Leisure Time shall deliver
a certificate representing the Shares to the Trustee as soon as practicable
after the date of this Agreement.
3. Satisfaction of Davis Mortgages and Indebtedness. In consideration
of the issuance of the Shares, the Trustee hereby satisfies, terminates,
releases and discharges the Davis Mortgages and all indebtedness secured by the
Davis Mortgages is hereby deemed to be paid in full.
<PAGE> 23
23
4. Release and Discharge. Trustee does hereby release and discharge
Star and Leisure Time from and against any and all claims, causes of action,
liabilities and demands of any nature,
- -2
kind or description whatsoever relating, directly or indirectly, to the Davis
Mortgages or any indebtedness secured by the Davis Mortgages.
5. Further Assurances. Trustee further agrees to execute and deliver,
at any time and from time to time after the date hereof, such satisfactions of
mortgage, releases, termination statements and other documents and instruments
as Leisure Time may reasonably request in connection with the foregoing
provisions of the this Agreement.
6. Put Option. In the event Leisure Time's initial public offering of
its Common Stock shall not have been closed on or before February 3, 2000,
Trustee shall be entitled, during the period beginning on February 3, 2000 and
ending on May 3, 2000, but only during such period, to sell to Leisure Time,
upon 30 days' prior written notice to Leisure Time, all or any portion of the
Shares for a price of $7.50 per share. Leisure Time shall pay Trustee the
aggregate price for all Shares so sold, without interest, at the rate of 10% per
month for 10 consecutive months with the first such payment due on the closing
date of Trustee's sale of the Shares to Leisure Time and each subsequent monthly
payment due on the same day in each consecutive month thereafter until such
aggregate price shall have been paid in full. The certificate or certificates
representing the Shares shall also include a legend to the effect of the
foregoing provisions of this Section 6.
7. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Ohio and all of its
terms and conditions shall be binding upon and shall inure to the benefit of the
parties and their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
417956.2
LEISURE TIME CASINOS AND RESORTS, INC., a Colvion
1.<
Name:< . C;W~,52 z /,--5,2ob G
STAR BCINCINNATI, INC., a,n Ohio corporation By: Nar4e:/ C;CAFtLg5 Z tEz Tit*/
<~lt84S
Henry E.~Davis, Trustee
<PAGE> 1
EXHIBIT 10.41
AMENDMENT TO THE CONTRACT FOR DISTRIBUTION
By the present instrument of amendment to the CONTRACT FOR DISTRIBUTION
signed on January 22,1998, on one side, LEISURE TIME TECHNOLOGY, hereafter
called COMPANY with main offices at 5825-B, Peachtree Corners East, Norcross,
Georgia 30092, United States, represented in this act by its partner ALAN NEIL
JOHNSON, North-American, businessman, social security number ###-##-#### and
Passport No. 083843455, Type P, domiciled at 7300 Lake Shore Dr. Suite #09, New
Orleans, Louisiana 70124, United States, and, on the other side, SAO PAULO GAMES
COMERCIAL LTDA hereinafter called DISTRIBUTOR with main offices at Rua Joaquim
Floriano 733, Conj, 3B- Itaim Bibi, in this Capital, registered at the CGC/MF
under the No. 02.261.144/0001-27, by its legal representatives FERNANDO MENDES
DIAS, JOSE PAULO TEIXEIRA CRUZ FIGUEIREDO and ARTUR JOSE VALENTE DE OLIVEIRA,
taking into consideration the following reasons:
WHEREAS:
A) Whereas the Contract for Distribution hereby amended establishes in
its Article II (2.10) that the DISTRIBUTOR must make minimum purchases of
quantities or sums of Machines of multiple games or of POG Multi-Game Products
described and mentioned in the same;
B) Also whereas, in case the DISTRIBUTOR purchases quantities of
Machines or Products which are over the minimum established for the period, this
purchased amount which surpasses this minimum must be transferred and
compensated in the next acquisition period.
C) Furthermore, whereas the DISTRIBUTOR has already purchased from the
COMPANY 200 (two hundred machines) until the present date, with a total purchase
of US$1.,072,832.50 (one million, seventy two thousand and eight hundred and
thirty two dollars and fifty cents - American dollars);
THEREFORE, taking into account the foregoing, the parties decide among
them accepted and contracted, to amend the mentioned Contract for Distribution
and do so according with the following:
ARTICLE I) The DISTRIBUTOR must credit the 200 (two hundred) machines
already purchased from the COMPANY, with a total purchase sum of
US$1,072,832.50, that is, from the minimum quantity established for the first
trimester, described in the Article II, item 2.l, it must be considered that the
DISTRIBUTOR had already acquired the amount here described.
ARTICLE II) Likewise, the COMPANY admits that the DISTRIBUTOR has
already purchased 200 (two hundred) machines, an investment of US$ 1,072,832.50
and therefore, this amount should be considered as part of the compliance with
article II, item 2.1.
ARTICLE III) If the DISTRIBUTOR surpasses the minimum amount of
purchases established in Article II, item 2.1 of the contract hereby amended,
taking already into consideration the above purchase, the amount which surpasses
the legal minimum must be considered as part of
<PAGE> 2
compliance with the obligation of purchases during the following semester, as
established at the end of item 2.2 of the mentioned article.
ARTICLE IV) For all purposes, the COMPANY must consider the above
mentioned sum, that is, US$1,072,832.50 as having been spent by the DISTRIBUTOR
for the purchase of Machines or products described in the amended contract.
Therefore, being in agreement, the Contract of Distribution is hereby
amended with the considerations and articles above described and mentioned and
they sign the present private instrument of amendment in 3 (three) copies of
sole and equal content, before 2 (two) witnesses, for all legal purposes.
Sao Paulo, January 21,1999
LEISURE TIME TECHNOLOGY
/s/
SAO PAULO GAMES COMERCIAL LTDA
WITNESSES
1) /s/
2) /s/
<PAGE> 1
EXHIBIT 10.42
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made this 22 day of April, 1999 by and between LEISURE
EXPRESS CRUISE, LLC, a Colorado limited liability company ("Buyer"), LEISURE
TIME CASINOS & RESORTS, INC., a corporation formed under the laws of the State
of Colorado ("Leisure Time"), and J. KENT MANLEY, an individual resident of the
State of Florida ("Seller").
W I T N E S S E T H:
WHEREAS, Seller is the sole owner of all of the issued and outstanding
shares of stock of Florida Casino Cruises, Inc., a corporation organized under
the laws of the State of Georgia ("Company"); and
WHEREAS, Company owns a U.S. registered vessel known as the Vegas Express
(the "Vessel"); and
WHEREAS, Leisure Time is the beneficial owner of Buyer; and
WHEREAS, Seller desires to sell and Buyer desires to purchase 100% of the
issued and outstanding shares of stock of Company;
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
ARTICLE .
PURCHASE AND SALE OF SHARES
[ ]1[ ]1 Purchase and Sale of Shares. Subject to the terms and conditions
of this Agreement, and on the basis of the representations and warranties
hereinafter set forth and for the consideration hereinafter provided, Seller
shall sell, transfer, assign, convey and deliver to Buyer at the Closing, and
Buyer shall purchase from Seller, 100% of the issued and outstanding shares of
stock of Company represented by 1,000 shares of $1 par value common stock (the
"Shares") thereby making Company a wholly-owned subsidiary of Buyer.
[ ]1[ ]1 Purchase Price and Payment. Subject to the terms and conditions of
this Agreement, the purchase price to be paid by Buyer for the Shares shall be
the sum of Two Million One Hundred Thousand Dollars ($2,100,000);
In addition, Buyer shall cause Leisure Time to issue to Seller the
following:
<PAGE> 2
[ ]1[ ]1.1 a copy of the following documents:
[ ]1[ ]1.1.1 Authorization. Seller has full power, legal capacity
and legal right to execute and deliver this Agreement, to consummate
the transactions contemplated hereby and to take all actions required
to be taken by Seller pursuant to the provisions hereof, and this
Agreement constitutes the valid and binding obligation of Seller
enforceable in accordance with its terms.
[ ]1[ ]1 Non-Contravention. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby, does or
will violate, conflict with, result in breach of any material provision of,
constitute a default under, result in the termination of or permit any third
party to terminate (with or without notice, lapse of time or pursuant to any
legal or equitable principle) or accelerate the performance required on the part
of the Company by the terms of, the charter or bylaws of the Company or any
material agreement or instrument (including any Contract, as defined in Section
3.14) to which either the Company is a party or by which the Company or any of
its assets is subject or bound, or result in the creation or imposition of any
lien, charge or encumbrance on or security interest in or restriction on the use
of any of the Company's assets.
[ ]1[ ]1 Ownership of the Shares. Seller has good title to the Shares with
full legal right, power and authority to sell, assign and transfer the Shares to
Buyer, free and clear of all claims, liens and encumbrances. Upon the sale of
the shares to Buyer, Buyer will own 100% of the issued and outstanding stock of
the Company free and clear of all liens and encumbrances.
[ ]1[ ]1 Tax Returns and Reports. All income, excise, property, sales, use,
information, payroll and other tax returns and reports required to be filed by
the Company (the "Tax Returns") have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such returns and reports are
required to be filed, and all such returns and reports properly reflect the
taxes of the Company, for the periods covered thereby. Except as set forth on
Schedule 3.6, all taxes, assessments, interest, penalties, deficiencies, fees
and other governmental charges or impositions which are called for as due by the
Tax Returns, or which are claimed to be due, or which are otherwise due to any
taxing authority from the Company (the "Taxes"), have been properly paid.
Neither the Company nor the Seller has received any notice of assessment or
proposed assessment by any taxing authority in connection with any Tax Returns
and there are no pending tax examinations of or tax claims asserted against the
Company or its properties, except as disclosed in Schedule 3.6, and the results
of any prior examinations have been properly reflected in the Financial
Statements. There has been no intentional disregard of any statute, regulation,
rule or revenue ruling in the preparation of any Tax Return applicable to the
Company.
<PAGE> 3
Except as disclosed in Schedule 3.6, there are no tax liens on any of the
properties or assets of the Company except for liens for current taxes not yet
due and payable. Except as disclosed in Schedule 3.6, there is no basis for any
additional assessment of any Taxes, penalties or interest with respect to the
Company. The Company has not waived any law or regulation fixing, or consented
to the extension of, any period of time for assessment of any Taxes which waiver
or consent is currently in effect.
[ ]1[ ]1 Financial Statements.
[ ]1[ ]1.1 Harbortowne Marina Lease. The Company is a party to a lease
agreement for dockage rights in Dania, Florida at the Harbortowne Marina
(the "Marina Lease"), a copy of which has been provided to Buyer. The
Marina Lease remains in full force and effect and the Company is not in
breach of any provisions thereof. Except with respect to parking
requirements imposed by the City of Dania, neither Seller nor Company is
aware of any reason for the Marina Lease to be terminated prior to May 31,
2000, its regular termination date. The sublease of the Marina Lease from
Company to Buyer remains in full force and effect.
[ ]1[ ]1 Condition of Assets.
[ ]1[ ]1.1 Contracts. Schedule 3.14 sets forth a complete and accurate
list of all material contracts to which the Company is a party or which
affect or relate to the Company's assets or its business or are used or
useful in its business as a going concern (each, a "Contract" and
collectively, the "Contracts") including, without limitation, those
described below. As used herein, the term Contract includes any written or
oral agreement, commitment, understanding or arrangement, including
purchase or sales of goods or services, commitments and letters of credit
or their equivalent.
"Contracts" includes, but is not limited to, the following:
[ ]1[ ]1.1 all Contracts relating to the future disposition or
acquisition of any assets individually or in the aggregate material to the
condition of the Business;
[ ]1[ ]1.1 Insurance. Schedule 3.15 contains a complete and correct
list and summary description of all material insurance policies maintained
by or on behalf of the Company as of the date hereof. Such policies are in
full force and effect, no premiums due thereunder have not been paid. The
Company has not received any notice that it is in default with the terms
and provisions of such policies in any respect.
[ ]1[ ]1 Property.
[ ]1[ ]1.1 No Violations. Except as disclosed in Schedule 3.17, the
Company has complied in all material respects with all environmental
permits and all applicable environmental laws pertaining to the Vessel and
the Marina
<PAGE> 4
Lease. None of the Company or the Seller has been notified that any person
has alleged any material violation by the Company of any environmental
permits or any applicable environmental law relating to the conduct of the
Business or the use, ownership or transferability of the Vessel or the
Marina Lease property.
[ ]1[ ]1.1 Employee Benefit Plans. Except as set forth on Schedule
3.19, the Company does not maintain or contribute to any "employee welfare
benefit plan" or "employee pension benefit plan," as such terms are defined
in ERISA (collectively, "Benefit Plans") which is under-funded or which
might give rise to a lien against the Company's assets. As used herein,
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time. The Company does not contribute, and has not
contributed since its formation, to a "multi-employer plan,"as that term is
defined in ERISA. Complete and correct copies of the following documents
have been attached hereto as Schedule 3.19:
[ ]1[ ]1.1 No Other Assets. The Seller does not own in his personal
capacity any assets which are used in the operation of the business of the
Company.
[ ]1[ ]1 Brokers and Finders. Neither the Seller nor the Company has
employed any broker, agent or finder or incurred any liability for any brokerage
fees, agent's commission or finder's fee concerning the transactions
contemplated hereby.
[ ]1[ ]1 Securities Representations and Warranties. Seller, as a further
material inducement to Buyer to enter into this Agreement, hereby represents and
warrants to Buyer and Leisure Time that:
[ ]1[ ]1.1 Seller has adequate means of providing for his current
needs and personal contingencies, is able to bear the substantial economic
risks of an investment in the Leisure Time Stock and Warrants for an
indefinite period of time, has no need for liquidity in such investment
and, at the present time, can afford a complete loss of such investment.
[ ]1[ ]1.1 Authorization. Buyer is a limited liability company duly
organized and validly existing under the laws of the state of Colorado and
has full authority to enter into this Agreement and to take all actions
required to be taken by Buyer pursuant to the provisions hereof, and this
Agreement constitutes the valid and binding obligation of Buyer,
enforceable in accordance with its terms.
[ ]1[ ]1 Brokers and Finders. The Buyer has not employed any broker, agent
or finder or incurred any liability for any brokerage fees, agent's commission
or finder's fee concerning the transactions contemplated hereby.
[ ]1[ ]1 Investment Intent. Buyer acknowledges that the purchase of the
Shares will not be registered under the Securities Act of 1933, as amended.
Buyer affirms that Buyer
<PAGE> 5
is acquiring the Shares for Buyer's own account for investment and not with a
view to, or for sale or other disposition in connection, any distribution
thereof nor with any present intention of selling or otherwise disposing
thereof.
ARTICLE .
COVENANTS OF SELLER
Seller covenants and agrees as follows:
[ ]1[ ]1 Operation in Ordinary Course. From the date of this Agreement to
the Closing Date, the Company shall (a) conduct its business only in the
ordinary course and in substantially the same manner as conducted at the date
hereof, (b) use its best efforts to preserve its business organization intact
and to retain the services of its present officers, key employees, purchasing
and sales personnel and representatives, (c) use its best efforts to preserve
its favorable relationship with its employees, customers, suppliers and others
having business relations with it, and (d) use its best efforts to comply with
all laws, ordinances and regulations applicable to it in the conduct of its
business.
[ ]1[ ]1 Notification. Seller shall promptly notify Buyer of (a) any event,
condition or circumstance occurring from the date of this Agreement through the
Closing Date which would constitute a violation or breach of this Agreement and
(b) any lawsuits, claims, proceedings or investigations which after the date
hereof are threatened or commenced against the Company, Seller or any officer,
director, employee, consultant, or agent of the Company with respect to the
affairs of the Company.
[ ]1[ ]1 Best Efforts. Seller shall utilize his best efforts to obtain,
prior to the Closing Date, all consents, approvals and waivers of third parties
required as a condition precedent to the obligations to close hereunder or that
may otherwise be necessary or desirable to permit the consummation of the
transactions contemplated in this Agreement and to satisfy all the conditions
necessary to Closing.
[ ]1[ ]1 Exclusive Dealing. So long as this Agreement remains in effect,
Seller shall not directly or indirectly take any action to encourage, initiate
or engage in discussions or negotiations with, or provide any information to,
any corporation, partnership, person, or other entity or group, other than
Buyer, concerning the purchase and sale of the Shares, or the purchase and sale
of substantially all of the assets of the Company, or any transaction similar to
the foregoing involving Seller or the Company.
[ ]1[ ]1 Further Assurances. Seller covenants and agrees that from and
after the Closing he will execute, deliver and acknowledge (or cause to be
executed, delivered and acknowledged), from time to time at the request of Buyer
and without further consideration, all such further instruments and take all
such further action as may be reasonably necessary or appropriate to transfer
more effectively to Buyer, or to perfect or record Buyer's title to or interest
in or to enable Buyer to use, the Shares, or to enable the
<PAGE> 6
Company to use its assets, or otherwise to confirm or carry out the provisions
and intent of this Agreement.
ARTICLE .
COVENANTS OF BUYER
[ ]1[ ]1 Manley Mortgage. Buyer covenants and agrees that the Manley
Mortgage held against the Company and the Vessel shall be satisfied by the
payment of the Mortgage Satisfaction Payment provided for herein.
ARTICLE .
LIABILITY SATISFACTION AMOUNTS
During the three (3) years after the Closing, the Buyer shall continue to
work on resolving the disclosed liabilities listed on Schedule 7 attached hereto
for the Company. Buyer shall provide Seller with a copy of the final resolution
of the liabilities after which Seller shall have thirty (30) days in which to
advise Buyer in the event Seller disagrees with the computation. If Seller
disagrees with the computation, then Seller's accountant and Buyer's accountant
shall select a third independent accountant who will make the computation of
resolved disclosed liabilities to the best of his or her ability. Such number
shall be conclusive. Seller shall reimburse Buyer by one-half of the amount by
which the total of the disclosed liabilities paid by Buyer is in excess of One
Million Four Hundred Fifty Thousand and No/100ths Dollars ($1,450,000.00).
Seller shall reimburse Buyer by said amount within a fifteen (15) day period
after the computation has become final.
ARTICLE .
CONDITIONS TO CLOSING
[ ]1[ ]1 Conditions Precedent to Obligations of Seller. The obligations of
Seller to proceed with the transactions contemplated hereunder to be consummated
at the Closing are subject, at the option of Seller, to the fulfillment of each
and all of the following conditions at or prior to the Closing Date:
[ ]1[ ]1.1 any fees, expenses or other payments incurred or owed by
Seller to any brokers or comparable third parties retained or employed by
it in connection with the transactions contemplated by the Agreement;
[ ]1[ ]1.1 Nature and Survival of Representations and Warranties. The
representations and warranties made by Seller and Buyer under this
Agreement shall survive the Closing for a period of one year except for the
representations given by Seller
<PAGE> 7
in Section 3.6 (Tax Returns and Reports) which shall survive the Closing
for so long as any governmental agency can assess against the Company
additional taxes, interest, penalties, deficiencies, fees or other
governmental charges based upon any actions or inactions of Seller or the
Company during any period prior to Closing. All statements made by or on
behalf of either party herein or in the Schedules, or in any other written
instrument delivered to the other party hereunder shall be deemed
representations and warranties of such party relied upon by such other
party regardless of any investigation made by or on behalf of such other
party, and shall not be affected in any respect by such investigation.
ARTICLE .
GENERAL PROVISIONS
The parties further covenant and agree as follows:
[ ]1[ ]1 Waiver of Terms. Any of the terms or conditions of this Agreement
may be waived at any time by the party or parties entitled to the benefit
thereof but only by a written notice signed by the party or parties waiving such
terms or conditions.
[ ]1[ ]1 Amendment of Agreement. This Agreement may be amended,
supplemented or interpreted at any time only by written instrument duly executed
by each of the parties hereto.
[ ]1[ ]1 Payment of Expenses. The parties shall each pay their own
expenses, including, without limitation, the expenses of their own counsel and
accountants, incurred in connection with the preparation, execution and delivery
of this Agreement and the other agreements and documents referred to herein and
the consummation of the transactions contemplated hereby and thereby.
[ ]1[ ]1 Parties in Interest, Assignment. All representations, warranties,
covenants, terms and conditions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective heirs, legal
representatives, successors and permitted assigns of the parties hereto;
provided, however, that none of the rights or obligations of any of the parties
hereto may be assigned without the prior written consent of, in the case of
assignment by Seller, Buyer, or, in the case of assignment by Buyer, Seller,
which consent shall not unreasonably be withheld; provided however, that Buyer
may assign all or part of its rights under this Agreement and may delegate all
or part of its obligations under this Agreement to one or more corporations all
or substantially all of the capital stock or equity interest of which is owned,
directly or indirectly, by Buyer, or which entity owns, directly or indirectly,
all of the membership interest of Buyer, or to Foothill Capital Corporation, in
which event all the rights and powers of Buyer and the remedies available to it
under this Agreement shall extend to and be enforceable by such assignee. In the
event of any such assignment and delegation, the term "Buyer" as used in this
<PAGE> 8
Agreement shall be deemed to refer to each such assignee of Buyer and shall be
deemed to include both Buyer and each such assignee where appropriate.
[ ]1[ ]1 Notices. All notices, requests, demands, service of process and
other communications required or permitted to be given hereunder shall be by
hand-delivery, certified or registered mail, return receipt requested; by
telecopier, or air courier to the parties set forth below. The notice shall be
considered given at the time personally delivered, if delivered by hand or by
courier; at the time received if sent certified or registered mail; when receipt
is acknowledged by telecopy equipment, if telecopied.
If to Buyer: Leisure Express Cruise, LLC
4238 Communications Drive
Norcross, Georgia
Telecopier No.: _____________
With a copy to: William B. Wood, Esq.
Smith, Gambrell & Russell, LLP
Suite 3100, Promenade II
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309-3592
Telecopier No.: (404) 685-6867
And a copy to: Foothill Capital Corporation
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, CA 90025
Attn: Mr. Barry A. Grossman
Telecopier No.: 310-477-5853
If to Seller: Kent Manley
2077 Pine Ridge Road
Naples, FL 34109
Telecopier No.: 941-597-4338
With a copy to: Ken Johnson, Esq.
4001 Tamrani Trail, Suite 300
Naples, FL 34103
Telecopier No.: 941-435-1218
[ ]1[ ]1 Severability. In the event that any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect for any reason,
<PAGE> 9
the validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions of this Agreement shall not be in any
way impaired.
[ ]1[ ]1 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed an original, and all of which together
shall constitute one and the same agreement. One or more counterparts of this
Agreement (or portions hereof) may be delivered via telecopier with the
intention that they shall have the same effect as an original counterpart hereof
(or of portions of an original counterpart hereof).
[ ]1[ ]1 Headings. The headings of the Sections and the subsections of this
Agreement are inserted for convenience of reference only and shall not
constitute a part hereof.
[ ]1[ ]1 Governing Law; Jurisdiction. This Agreement shall be governed,
construed and enforced in accordance with the laws of the State of Georgia.
[ ]1[ ]1 Instruments of Further Assurance. Each of the parties hereto
agrees, upon the request of any of the other parties hereto, from time to time
to execute and deliver to such other party or parties all such instruments and
documents of further assurance or otherwise as shall be reasonable under the
circumstances, and to do any and all such acts and things as may reasonably be
required to carry out the obligations of such requested party hereunder.
[ ]1[ ]1 Merger. This Agreement sets forth the entire agreement between the
parties and supercedes all prior agreements, commitments, understandings and
obligations whatsoever oral or written, including, but not limited to the
Purchase Option Agreement dated January 22, 1999 issued by Company in favor of
Buyer.
ARTICLE .
TERMINATION
To the extent under the circumstances set forth herein, this Agreement may
be terminated at any time by Buyer or Seller prior to the Closing, upon written
notice to the other party, and upon such termination, the terminating party
shall have no liability to the other parties.
[ ]1[ ]1 Material Adverse Change. Termination may be made by Buyer if a
material adverse change in the financial condition, physical condition or
business of the Vessel or the Company shall have occurred or the Vessel or the
Company shall have suffered a material loss or damage which effects or impairs
the ability of the Vessel or the Company to conduct business.
[ ]1[ ]1 Noncompliance by Seller. Buyer may terminate this agreement if the
terms, covenants or conditions of this Agreement to be complied with or
performed by Seller at
<PAGE> 10
or before the Closing shall not by that time have been complied with or
performed in all material respects and such noncompliance or nonperformance
shall not have been waived in writing by Buyer.
[ ]1[ ]1 Noncompliance by Buyer. This agreement may be terminated by Seller
if the terms, covenants or conditions of this Agreement to be complied with or
performed by Buyer at or before the Closing shall not by that time have been
complied with or performed in all material respects and such noncompliance or
nonperformance shall not have been waived in writing by Seller.
[Signatures on Following Page]
<PAGE> 11
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto on the day and year first above written.
"SELLER"
J. Kent Manley
/s/
----------------------------------------
"BUYER"
Leisure Express Cruise, LLC
By: /s/
-------------------------------------
Its:
------------------------------------
"LEISURE TIME"
Leisure Time Casinos & Resorts, Inc.
By: /s/
-------------------------------------
Its:
------------------------------------
<PAGE> 1
EXHIBIT 10.43
SECURED PROMISSORY NOTE
$2,100,000.00 Los Angeles, California
April 22, 1999
FOR VALUE RECEIVED, the undersigned hereby promises to pay to
FOOTHILL CAPITAL CORPORATION ("Foothill"), or order, at 11111 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 90025-3333, or at such other
address as the holder of this Secured Promissory Note ("Note") may specify in
writing, the principal sum of TWO MILLION ONE HUNDRED THOUSAND DOLLARS
($2,100,000.00) plus interest in the manner and upon the terms and conditions
set forth below. This Note is made pursuant to that certain Security Agreement,
dated as of even date herewith, between the undersigned and Foothill (as
hereafter amended, restated, supplemented, or modified from time to time, the
"Agreement"), the provisions of which are incorporated herein by reference. All
capitalized terms used herein, unless otherwise defined herein, shall have the
meanings ascribed to them in the Agreement.
1. Rate of Interest
The principal balance of this Note shall bear interest from
the date hereof at a per annum rate equal to two and one-quarter (2.25)
percentage points above the Reference Rate. For purposes of this Note,
"Reference Rate" means the variable rate of interest per annum most recently
announced by Wells Fargo Bank, National Association, or any successor to such
institution, as its "prime rate" or "reference rate," as the case may be,
irrespective of whether such announced rate is the best rate available from
such financial institution, all as determined by Foothill. In the event that
the Reference Rate is changed from time to time hereafter, the applicable rate
of interest hereunder automatically and immediately shall be increased or
decreased by an amount equal to the Reference Rate change. Upon the occurrence
of an Event of Default under the Agreement, the rate of interest on this Note
shall, at the option of the holder of this Note, be increased to six and
one-quarter (6.25) percentage points above the Reference Rate. Interest charged
on this Note shall be computed on the basis of a three hundred sixty (360) day
year for actual days elapsed.
In no event shall the interest rate or rates payable under
this Note, plus any other amounts paid in connection herewith, exceed the
highest rate permissible under any law that a court of competent jurisdiction
shall, in a final determination, deem applicable. The undersigned and Foothill
intend legally to agree upon the rate or rates of interest (and the other
amounts paid in connection herewith) and manner of payment stated within this
Note; provided, however, that anything contained herein to the contrary
notwithstanding, if said interest rate or rates of interest (or other amounts
paid in connection herewith) or the manner of payment exceeds the maximum
allowable under applicable law, then, ipso facto as of the
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date of this Note, the undersigned is and shall be liable only for the payment
of such maximum as allowed by law, and payment received from the undersigned in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of this Note to the extent of such excess.
2. Schedule of Payments
Principal and interest under this Note shall be due and
payable according to the following schedule:
a. Interest shall be due and payable in arrears
on the first (1st) day of each month commencing June 1, 1999, and continuing
thereafter until this Note has been paid in full;
b. Sixty (60) installments of principal, each
in the amount of Thirty Five Thousand Dollars ($35,000.00), shall be due and
payable on the first (1st) day of each month commencing June 1, 1999, and
continuing thereafter until this Note has been paid in full;
c. Any remaining outstanding principal,
together with all accrued and unpaid interest thereon and any other sums owing
in connection herewith, shall be due and payable in full on May 1, 2004.
3. [Intentionally Omitted].
4. Prepayment
Prepayments of the principal balance of this Note shall be
permitted at any time; provided that each such prepayment shall be accompanied
by all interest that has accrued and remains unpaid with respect to the amount
of principal being repaid and a prepayment fee equal to the following:
(i) Five percent (5.0%) of the amount prepaid
with respect to any prepayments made prior to May 1, 2000;
(ii) Three percent (3.0%) of the amount prepaid
with respect to any prepayments made on or after May 1, 2000, and prior to May
1, 2001; and
(iii) One percent (1.0%) of the amount prepaid
with respect to any prepayments made on or after May 1, 2001.
Amounts repaid or prepaid with respect to this Note may not be reborrowed.
Partial prepayments of principal shall be applied to scheduled payments of
principal in the inverse order of their maturity.
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5. Holder's Right of Acceleration
Upon the occurrence of an Event of Default under the
Agreement, including, but not limited to, the failure to pay any installment of
principal or interest hereunder when due, the holder of this Note may, at its
election and without notice to the undersigned, declare the entire balance
hereof (including, but not limited to, all principal and interest) immediately
due and payable.
6. Additional Rights of Holder
If any installment of principal or interest hereunder is not
paid when due, the holder shall have the following rights in addition to the
rights set forth herein, in the Agreement, and under law:
a. the right to compound interest by adding
the unpaid interest to principal, with such amount thereafter bearing interest
at the rates provided in this Note; and
b. if any installment is more than ten (10)
days past due, the right to collect a charge equal to the greater of Fifteen
Dollars ($15) or five percent (5%) of the late payment for each month in which
it is late. This charge is a result of a reasonable endeavor by the undersigned
and the holder to estimate the holder's added costs and damages resulting from
the undersigned's failure to make timely payments under this Note; hence the
undersigned agrees that the charge shall be presumed to be the amount of damage
sustained by the holder since it is extremely difficult to determine the actual
amount necessary to reimburse the holder for damages.
7. General Provisions
a. If this Note is not paid when due, the
undersigned further promises to pay all costs of collection, foreclosure fees,
and reasonable attorneys' fees incurred by the holder, whether or not suit is
filed hereon, together with the fees, costs and expenses as provided in the
Agreement.
b. The undersigned hereby consents to any and
all renewals, replacements, and/or extensions of time for payment of this Note
before, at, or after maturity.
c. The undersigned hereby consents to the
acceptance, release, or substitution of security for this Note.
d. Presentment for payment, demand, notice of
dishonor, protest, and notice of protest are hereby expressly waived.
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e. Any waiver of any rights under this Note, the
Agreement, or under any other agreement, instrument, or paper signed by the
undersigned is neither valid nor effective unless made in writing and signed by
the holder of this Note.
f. No delay or omission on the part of the
holder of this Note in exercising any right shall operate as a waiver thereof
or of any other right.
g. A waiver by the holder of this Note upon
any one occasion shall not be construed as a bar or waiver of any right or
remedy on any future occasion.
h. Should any one or more of the provisions
of this Note be determined illegal or unenforceable, all other provisions shall
nevertheless remain effective.
i. This Note cannot be changed, modified, amended,
or terminated orally.
j. This Note shall be governed by, and
construed and enforced in accordance with, the laws of the State of California,
without reference to the principles of conflicts of laws thereof.
8. Security for this Note
This Note is secured by the collateral described in the
Agreement and other Loan Documents, and is subject to all of the terms and
conditions thereof including, but not limited to, the remedies specified
therein or granted in connection therewith.
9. Venue: Jurisdiction; Waiver of Trial by Jury
THE UNDERSIGNED AGREES THAT ALL ACTIONS OR PROCEEDINGS
ARISING IN CONNECTION WITH THIS NOTE SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH
FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. THE UNDERSIGNED WAIVES, TO
THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 9. THE UNDERSIGNED, TO
THE EXTENT IT MAY LEGALLY DO SO, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING UNDER
OR WITH RESPECT TO THIS NOTE, OR IN ANY WAY CONNECTED WITH, OR RELATED TO, OR
INCIDENTAL TO, THE DEALINGS OF THE PARTIES HERETO
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WITH RESPECT TO THIS NOTE OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE. THE UNDERSIGNED, TO THE EXTENT IT MAY LEGALLY
DO SO, HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT THE HOLDER
OF THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 9 WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE UNDERSIGNED TO THE WAIVER
OF ITS RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, this Note has been executed and delivered
on the date first set forth above.
LEISURE EXPRESS CRUISE, L.L.C.,
a Colorado limited liability company
By: /s/
----------------------------------
Print Name:
Title:
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EXHIBIT 10.44
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, is entered into as of April 22, 1999, between
FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a
place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 90025-3333, and LEISURE EXPRESS CRUISE, L.L.C., a Colorado
limited liability company ("Borrower"), with its chief executive office located
at 4258 Communications Drive, Norcross, Georgia 30093.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following
terms shall have the following definitions:
"Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods or the rendition of services
by Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of
the foregoing.
"Agreement" means this Security Agreement and any
extensions, riders, supplements, notes, amendments, or modifications to or in
connection with this Security Agreement.
"Amendment Documents" means the Amendment No. 1 to Loan
Documents, the Second Amendment to First Preferred Ship Mortgage, and all
related documents, agreements, and instruments executed by Cruise Corporation
in connection with the Cruise Corporation Obligations and the Amendments to the
Continuing Guaranties executed by Leisure Time Technology, Inc. and Leisure
Time Casinos and Resorts, Inc. with respect to the Cruise Corporation
Obligations.
"Borrower's Books" means all of Borrower's books and
records including: ledgers; records indicating, summarizing, or evidencing
Borrower's assets or liabilities, or the Collateral; all information relating
to Borrower's business operations or financial condition; and all computer
programs, disc or tape files, printouts, runs, or other computer prepared
information, and the equipment containing such information.
"Borrower's Guaranty" means the Continuing Guaranty
executed by Borrower in favor of Foothill, of even date herewith, pertaining to
the Cruise Corporation
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Obligations and the Florida Casino Obligations.
"Closing Date" means the date on which Foothill makes the
Term Loan to Borrower.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following: the Accounts;
Borrower's Books; the Equipment; the Freights; the General Intangibles; the
Inventory; the Negotiable Collateral; the Investment Property, including the
Florida Casino Stock; the collateral described in the First Preferred Ship
Mortgages; any money, or other assets of Borrower which hereafter come into the
possession, custody, or control of Foothill; and the proceeds and products,
whether tangible or intangible, of any of the foregoing, including proceeds of
insurance covering any or all of the Collateral, and any and all Accounts,
Equipment, General Intangibles, Inventory, Negotiable Collateral, Investment
Property, money, deposit accounts, or other tangible or intangible property
resulting from the sale or other disposition of the Collateral, or any portion
thereof or interest therein, and the proceeds thereof.
"Corporate Guarantors" means (i) Leisure Time Casinos and
Resorts, Inc., (ii) Leisure Time Technology, Inc., (iii) Cruise Corporation and
(iv) Florida Casino.
"Cruise Corporation" means Leisure Time Cruise
Corporation, a Colorado corporation.
"Cruise Corporation Obligations" means all "Obligations"
described in the Security Agreement executed by Cruise Corporation in favor of
Foothill, dated October 9, 1998, whether now owing or hereafter arising.
"Equipment" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, dies,
jigs, goods, including, without limitation, all items of equipment and other
personal property located on the Vessels, and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing, wherever
located. Notwithstanding the foregoing, "Equipment" shall not include any
vessels acquired by Borrower after the Closing Date (except to the extent such
after-acquired vessel(s) constitute proceeds of the Leisure Lady or the Vegas
Express, or are vessels used in connection with the Leisure Lady or the Vegas
Express).
"Event of Default" has the meaning set forth in Section 8.
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"First Preferred Ship Mortgages" means the first preferred
ship mortgages executed by Florida Casino and Cruise Corporation, respectively,
in connection with the Florida Casino Obligations and the Cruise Corporation
Obligations, respectively, that encumber the Vegas Express and the Leisure Lady
and secure the Florida Casino Obligations, the Cruise Corporation Obligations,
and certain other obligations described in such mortgages, as amended.
"Florida Casino" means Florida Casino Cruises, Inc., a
Georgia corporation.
"Florida Casino Documents" means, collectively, the
Security Agreement, the Secured Promissory Note, and any other agreement or
instrument executed by Florida Casino in connection with the Florida Casino
Obligations, and the Continuing Guaranties of the Corporate Guarantors and
Borrower and the Limited Continuing Guaranty of Alan Johnson with respect to
the Florida Casino Obligations.
"Florida Casino Obligations" means all "Obligations"
described in the Security Agreement executed by Florida Casino in favor of
Foothill, dated April 22, 1999, whether now owing or hereafter arising.
"Florida Casino Stock" means the capital stock of Florida
Casino now or hereafter owned by Borrower.
"Foothill Expenses" means all: reasonable costs or
expenses (including taxes, photocopying, notarization, telecommunication, and
insurance premiums) required to be paid by Borrower under any of the Loan
Documents that are paid or advanced by Foothill; documentation, filing,
recording, publication, appraisal (including periodic Collateral appraisals),
and search fees assessed, paid, or incurred by Foothill in connection with
Foothill's transactions with Borrower; costs and expenses incurred by Foothill
in the disbursement of funds to Borrower (by wire transfer or otherwise);
charges paid or incurred by Foothill resulting from the dishonor of checks;
costs and expenses paid or incurred by Foothill to correct any default or
enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, removing (including, but not limited to, all
costs and expenses incurred by Foothill with respect to any obligations of
Foothill under a landlord's or mortgagee's waiver and consent entered into in
connection with the Loan Documents), storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof, whether or
not a sale is consummated; costs and expenses paid or incurred by Foothill in
examining Borrower's Books; costs and expenses of third party claims or any
other suit paid or incurred by Foothill in enforcing or defending the Loan
Documents; and Foothill's reasonable attorneys' fees and expenses incurred in
advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including attorneys' fees and expenses incurred in
connection with a "workout", a "restructuring", or an Insolvency Proceeding
concerning Borrower or any guarantor of the Obligations), defending, or
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concerning the Loan Documents, whether or not suit is brought.
"Freights" means all presently existing and hereafter
arising (i) freights, hire and other monies earned and to be earned, due or to
become due, or paid or payable to, or for the account of, Borrower, of
whatsoever nature, arising out of or as a result of the ownership and operation
by Borrower or its agents of the Vessels, (ii) all monies and claims for moneys
due and to become due to Borrower and all claims for damages arising out of the
breach of any and all present and future charter parties, bills of lading,
contracts and other engagements of affreightment or for the carriage or
transportation of cargo, mail and/or passengers, and operations of every kind
whatsoever of the Vessels and in and to any and all claims and causes of action
for money, loss or damages that may accrue or belong to Borrower, its
successors and assigns, arising out of or in any way connected with the present
or future use, operation or management of the Vessels or arising out of or in
any way connected with any and all present and further requisitions, charter
parties, bills of lading, contracts and other engagements of affreightment or
the carriage or transportation of cargo, mail and/or passengers, and other
operations of the Vessels, (iii) all monies and claims for monies due and to
become due to Borrower, and all claims for damages in respect of the actual or
constructive total loss of or requisition of use of or title to the Vessels,
and (iv) any proceeds of the foregoing. Notwithstanding anything to the
contrary herein, and so long as no Event of Default has occurred and is
continuing, any gaming or other revenue generated in the normal and customary
operation of the Vessels may be retained and used by Borrower for general
working capital purposes.
"GAAP" means generally accepted accounting principles as
in effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and
future general intangibles and other personal property (including choses or
things in action, goodwill, patents, trade names, trademarks, service marks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due
or recoverable from pension funds, route lists, monies due under any royalty or
licensing agreements, infringement claims, computer programs, computer discs,
computer tapes, literature, reports, catalogs, deposit accounts, insurance
premium rebates, tax refunds, and tax refund claims) other than goods and
Accounts, and Borrower's Books relating to any of the foregoing; excluding,
however, any general intangibles (including, without limitation, licenses)
which by their terms are not transferrable or assignable (or which attempted
transfer or assignment would be void).
"Guarantors" means, collectively, the Corporate Guarantors
and Alan Johnson, individually.
"Insolvency Proceeding" means any proceeding commenced by
or against any person or entity under any provision of the United States
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the
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benefit of creditors, formal or informal moratoria, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
"Inventory" means all present and future inventory in
which Borrower has any interest, including goods held for sale or lease or to
be furnished under a contract of service and all of Borrower's present and
future raw materials, work in process, finished goods, and packing and shipping
materials, wherever located, and any documents of title representing any of the
above, and Borrower's Books relating to any of the foregoing.
"Investment Property" means all Borrower's present and
hereafter acquired investment property, securities (certificated and
uncertificated), security entitlements, security accounts, and any interest in
any of the foregoing, and all replacements, substitutions, and additions to any
of the foregoing, wherever located.
"Judicial Officer or Assignee" means any trustee,
receiver, controller, custodian, assignee for the benefit of creditors, or any
other person or entity having powers or duties like or similar to the powers
and duties of a trustee, receiver, controller, custodian, or assignee for the
benefit of creditors.
"Leisure Lady" means the vessel known as the "Leisure
Lady", United States Coast Guard Official No. 671576, more fully described on
Schedule "1" attached hereto.
"Loan Documents" means, collectively, this Agreement, the
Term Note, the Continuing Guaranties of the Corporate Guarantors and the
Limited Continuing Guaranty of Alan Johnson, the Pledge Agreement, the
Borrower's Guaranty, and any other agreement entered into in connection with
this Agreement, together with all alterations, amendments, changes, extensions,
modifications, refinancings, refundings, renewals, replacements, restatements,
or supplements, of or to any of the foregoing.
"Negotiable Collateral" means all of Borrower's present
and future letters of credit, notes, drafts, instruments, documents, leases,
and chattel paper, and Borrower's Books relating to any of the foregoing.
"Obligations" means all loans, advances, debts, principal,
interest (including any interest that, but for the provisions of the United
States Bankruptcy Code, would have accrued), premiums, liabilities (including
all amounts charged to Borrower's loan account pursuant to any agreement
authorizing Foothill to charge Borrower's loan account), obligations, fees,
lease payments, guaranties (including the Borrower's Guaranty), covenants, and
duties owing by Borrower to Foothill of any kind and description (whether
pursuant to or evidenced by the Loan Documents, by any note or other
instrument, or by any other agreement between Foothill and Borrower, and
whether or not for the payment of money), whether direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter arising,
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and including any debt, liability, or obligation owing from Borrower to others
that Foothill may have obtained by assignment or otherwise, and further
including all interest not paid when due and all Foothill Expenses that
Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise. All Obligations shall accrue interest at the rate(s) set forth in
the Term Note from the date such Obligations arise, and such interest shall in
turn be deemed "Obligations" for all purposes under this Agreement and shall be
due and payable when interest is due and payable under the Term Note.
"Pay-Off Letters" means letters, in form and substance
reasonably satisfactory to Foothill, from other lenders, secured creditors, or
lessors respecting the amount necessary to (a) repay in full all of the
obligations of Borrower owing to such lenders, secured creditors, and/or
lessors and (b) obtain (i) terminations/releases of all of the security
interests or liens existing in favor of such lenders, secured creditors, and/or
lessors in and to the properties or assets of Borrower and (ii) good and
marketable title to such properties or assets (in the case of leased property).
"Permitted Liens" means: (a) liens and security interests
held by Foothill; (b) liens for unpaid taxes that are not yet due and payable;
(c) purchase money security interests and liens of lessors under capital
leases, and so long as the security interest or lien only secures the purchase
price of the asset and does not encumber any other assets of the Borrower; and
(d) any liens or encumbrances permitted under the terms and conditions of the
First Preferred Ship Mortgages.
"Permitted Protest" means the right of Borrower to protest
any lien, tax, rental payment, or other charge, other than any such lien or
charge that secures the Obligations, provided (i) a reserve with respect to
such obligation is established on the books of Borrower in an amount that is
reasonably satisfactory to Foothill, (ii) any such protest is instituted and
diligently prosecuted by Borrower in good faith, and (iii) Foothill is
satisfied that, while any such protest is pending, there will be no impairment
of the enforceability, validity, or priority of any of the liens or security
interests of Foothill in and to the property or assets of Borrower.
"Pledge Agreement" means that certain Pledge Agreement, of
even date herewith, by Borrower in favor of Foothill, whereby Borrower grants
to Foothill a security interest in all outstanding shares of stock of Florida
Casino now or hereafter held by Borrower, and any extensions, renewals,
replacements, or substitutions therefor.
"Term Loan" means the loan made by Foothill to Borrower in
connection with this Agreement, which loan is further evidenced by the Term
Note.
"Term Note" means that certain Secured Promissory Note, of
even date herewith, by Borrower to the order of Foothill, in the original
principal amount of Two Million One Hundred Thousand Dollars ($2,100,000), and
any extensions, renewals,
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replacements, or substitutions therefor.
"Vegas Express" means the vessel known as the "Vegas
Express", United States Coast Guard Official No. 594643, more fully described
on Schedule "1" attached hereto.
"Vessels" means the vessels described on Schedule "1"
attached hereto and by this reference made a part hereof.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein,
the term "financial statements" shall include the notes and schedules thereto.
1.3 Code. Any terms used in this Agreement which are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, to the
singular include the plural, and the term "including" is not limiting. The
words "hereof," "herein," "hereby," "hereunder," and similar terms in this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Section, subsection, clause, and exhibit
references are to this Agreement unless otherwise specified.
1.5 Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. FEES.
Borrower shall pay to Foothill the following fees:
2.1 Closing Fee. A one time closing fee of Twenty One Thousand
Dollars ($21,000) which is earned, in full, on the Closing Date and is due and
payable by Borrower to Foothill in connection with this Agreement on the
Closing Date;
2.2 Annual Fee. An annual fee equal to one percent (1%) of the
outstanding principal balance of the Obligations (as of April 1, 2000, and each
anniversary thereafter), which shall be due and payable by Borrower to Foothill
in connection with this Agreement on April 1, 2000, and on each anniversary of
such date occurring thereafter; and
2.3 Appraisal and Documentation Fees. Foothill's customary
appraisal fee of Seven Hundred Fifty Dollars ($750) per day per appraiser, plus
out-of-pocket expenses
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for each appraisal of the Collateral performed by Foothill or its agents.
3. CONDITIONS TO EFFECTIVENESS: TERM OF AGREEMENT.
3.1 Conditions Precedent. The obligation of Foothill to make
the loan evidenced by the Term Note is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions
on or before the Closing Date:
(a) The Closing Date shall occur on or before April 30,
1999;
(b) Other than with respect to Permitted Liens (if any),
Borrower's existing lenders, creditors, and lessors shall have executed and
delivered Pay-Off Letters, UCC termination statements, bills of sale, and other
documentation evidencing the termination of their liens and security interests
in the assets of Borrower (and the transfer of title to such assets to
Borrower, in the case of leased property) or a subordination agreement in form
and substance satisfactory to Foothill in its sole discretion;
(c) Foothill shall have received copies of Borrower's and
each Corporate Guarantor's By-laws and Articles or Certificates of
Incorporation, as amended, modified, or supplemented to the Closing Date,
certified by the Secretaries of Borrower and the Corporate Guarantors;
(d) Foothill shall have received certificates of corporate
status with respect to Borrower and each Corporate Guarantor, dated within ten
(10) days of the Closing Date, by the Secretary(ies) of State of the states of
incorporation of Borrower and each Corporate Guarantor, which certificate shall
indicate that Borrower and each Corporate Guarantor is in good standing in such
state(s);
(e) Foothill shall have received a certificate from the
Secretaries of Borrower and each Corporate Guarantor attesting to the
resolutions of Borrower's and each Corporate Guarantor's Board of Directors
authorizing their execution and delivery of this Agreement and the other Loan
Documents to which each is a party and authorizing specific officers of
Borrower and each Corporate Guarantor to execute same;
(f) Foothill shall have received certificates of corporate
status with respect to Borrower, each dated within ten (10) days of the Closing
Date, such certificates to be issued by the Secretary of State of the states in
which its failure to be duly qualified or licensed would have a material
adverse effect on the financial condition or assets of Borrower, which
certificates shall indicate that Borrower is in good standing;
(g) Foothill shall have received the insurance
certificates, certified copies of policies, required by Section 6.8 hereof and
as required by the First Preferred Ship Mortgages, along with a 438BFU Lender's
Loss Payable Endorsement naming Foothill as sole loss payee, all in form and
substance satisfactory to Foothill and its counsel;
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(h) Foothill shall have received each of the following
documents and agreements, in form and substance satisfactory to Foothill and
its counsel, duly executed, and each such document and agreement shall be in
full force and effect:
(1) This Agreement;
(2) The Term Note;
(3) The Borrower's Guaranty;
(4) Continuing Guaranties from Alan Johnson, individually,
Leisure Time Casinos and Resorts, Inc., Leisure Time
Technology, Inc., Cruise Corporation and Florida
Casino;
(5) The Pledge Agreement;
(6) Assignment of Insurances;
(7) The Amendment Documents;
(8) The Florida Casino Documents; and
(9) Such other documents and instruments as Foothill shall
deem necessary or desirable to ensure that Foothill
has a first priority perfected security interest in
and lien on the Collateral;
(i) Foothill shall have received searches reflecting the
filing of its financing statements and fixture filing;
(j) Foothill shall have received evidence that the First
Preferred Ship Mortgage encumbering the Vegas Express has been duly filed with
and recorded by the United States Coast Guard, and that all other steps deemed
necessary or desirable by Foothill have been duly completed in order for
Foothill to have obtained a first priority perfected security interest in and
lien on the Vegas Express;
(k) Foothill shall have received evidence that the Second
Amendment to First Preferred Ship Mortgage encumbering the Leisure Lady has
been duly filed with and recorded by the United States Coast Guard, and that
all other steps deemed necessary or desirable by Foothill have been duly
completed in order for Foothill to have obtained a first priority perfected
security interest in and lien on the Leisure Lady;
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(l) Foothill shall have received landlord and mortgagee
waivers from the lessors and mortgagees of the locations where the Equipment
is located;
(m) Foothill shall have received a written opinion of
Borrower's legal counsel in form and substance satisfactory to Foothill with
respect to the transactions governed by the Loan Documents, the Florida Casino
Documents and the Amendment Documents;
(n) Foothill shall have received the Closing Fee
referenced in Section 2.1, all of Foothill Expenses incurred as of the Closing
Date, and all other costs and expenses incurred by Foothill in connection
herewith, including without limitation, audit fees, search fees, appraisal
fees, documentation, recording and filing fees, and the fees and costs of
Morgan, Lewis and Bockius LLP, for the negotiation, preparation and
documentation of the Loan Documents;
(o) All representations and warranties set forth in this
Agreement and the other Loan Documents are true and correct as of the Closing
Date, no "Event of Default" has occurred under this Agreement or any of the
other Loan Documents, and all of the Loan Documents are in full force and
effect;
(p) The closing of the (i) loan contemplated by the
Florida Casino Documents and (ii) the amendment contemplated by the Amendment
Documents shall have occurred (or shall occur concurrently with the closing of
the loan represented by the Term Note);
(q) Borrower shall have acquired, or will acquire
concurrently the closing contemplated by this Agreement, the Florida Casino
Stock on terms and conditions satisfactory to Foothill (in Foothill's sole
discretion); and
(r) All other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered
or executed or recorded and shall be in form and substance satisfactory to
Foothill and its counsel.
3.2 Term. This Agreement shall become effective upon the
execution and delivery hereof by Borrower and Foothill, and shall continue in
full force and effect until all Obligations, all Cruise Corporation Obligations
and all Florida Casino Obligations have been indefeasibly paid in full.
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants to
Foothill a continuing security interest in all currently existing and hereafter
acquired or arising Collateral in order to secure (i) prompt repayment of any
and all Obligations and (ii) prompt performance
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by Borrower of each of its covenants and duties under the Loan Documents.
Foothill's security interest in the Collateral shall attach to all Collateral
without further act on the part of Foothill or Borrower.
4.2 Delivery of Additional Documentation Required. Borrower
shall execute and deliver to Foothill, prior to or concurrently with Borrower's
execution and delivery of this Agreement and at any time thereafter at the
request of Foothill, all financing statements, continuation financing
statements, fixture filings, security agreements, chattel mortgages, pledges,
assignments, endorsements of certificates of title, applications for title,
affidavits, reports, notices, letters of authority, and all other documents
that Foothill may reasonably request, in form satisfactory to Foothill, to
perfect and continue perfected Foothill's security interests in the Collateral
and in order to fully consummate all of the transactions contemplated under the
Loan Documents.
4.3 Power of Attorney. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Borrower's true and lawful attorney, with
power to: (a) sign the name of Borrower on any of the documents described in
Section 4.2 or on any other similar documents to be executed, recorded, or
filed in order to perfect or continue perfected Foothill's security interest in
the Collateral; (b) at any time that an Event of Default has occurred or
Foothill deems itself insecure, endorse Borrower's name on any checks, notices,
acceptances, money orders, drafts, or other item of payment or security that
may come into Foothill's possession; (c) at any time that an Event of Default
has occurred or Foothill deems itself insecure, make, settle, and adjust all
claims under Borrower's policies of insurance in respect of the Collateral and
make all determinations and decisions with respect to such policies of
insurance. The appointment of Foothill as Borrower's attorney, and each and
every one of Foothill's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations, the Cruise Corporation Obligations
and Florida Casino Obligations have been fully repaid and performed and
Foothill's obligation to provide advances hereunder is terminated.
4.4 Right to Inspect. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter, to
inspect Borrower's Books and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Prior Encumbrances. Borrower has good and indefeasible
title to the Collateral, free and clear of liens, claims, security interests,
or encumbrances except for
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Permitted Liens. None of the Collateral has been purchased by Borrower within
the six (6) months period preceding the Closing Date, except for (i) sales to
Borrower in the ordinary course of the seller's business, and (ii) the
acquisition of the Florida Casino Stock by Borrower.
5.2 Location of Equipment. The Equipment is not now and shall
not at any time hereafter be stored with a bailee, warehouseman, or similar
party without Foothill's prior written consent. Borrower shall keep the
Equipment only on the Leisure Lady or the Vegas Express or at the following
location: 1284 Miller Road, Avon, Ohio 44011.
None of the Equipment has been located, during the six (6) month
period prior to the Closing Date, in any jurisdiction other than the
county(ies) and state(s) set forth in this Section.
5.3 Location of Chief Executive Office. The chief executive
office of Borrower is located at the address indicated in the first paragraph
of this Agreement and Borrower covenants and agrees that it will not, without
thirty (30) days prior written notification to Foothill, relocate such chief
executive office.
5.4 Fictitious Business Name(s). Borrower uses only the
following Fictitious Business Names and none other: [none].
5.5 Due Organization and Qualification. Borrower is and shall
at all times hereafter be duly organized and existing and in good standing
under the laws of the state of its incorporation and qualified and licensed to
do business in, and in good standing in, any state in which the conduct of its
business or its ownership of the Collateral requires that it be so qualified.
5.6 Due Authorization; No Conflict. The execution, delivery,
and performance of the Loan Documents are within Borrower's corporate powers,
have been duly authorized, and are not in conflict with nor constitute a breach
of any provision contained in Borrower's Articles or Certificate of
Incorporation, or By-laws, nor will they constitute an event of default under
any material agreement to which Borrower is a party.
5.7 Litigation. There are no actions or proceedings pending by
or against Borrower before any court or administrative agency and Borrower does
not have knowledge or belief of any pending, threatened, or imminent
litigation, governmental investigations, or claims, complaints, actions, or
prosecutions involving Borrower or any guarantor of the Obligations, except for
ongoing collection matters in which the Borrower is the plaintiff.
5.8 No Material Adverse Change in Financial Condition. All
financial statements relating to Borrower or any guarantor of the Obligations
that have been or
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may hereafter be delivered by Borrower to Foothill have been prepared in
accordance with GAAP and fairly present Borrower's and such guarantor's
financial condition as of the date thereof and Borrower's and such guarantor's
results of operations for the period then ended. There has not been a material
adverse change in the financial condition of Borrower or any guarantor since
the date of the latest financial statements submitted to Foothill on or before
the Closing Date.
5.9 Solvency. Borrower's assets at a fair valuation exceed the
amount of all of its debts at a fair valuation and Borrower is able to pay all
of its debts (including trade debts and contingent liabilities) as they become
due.
5.10 Environmental Condition. None of Borrower's properties or
assets has ever been used by Borrower or, to the best of Borrower's knowledge,
by previous owners or operators in the disposal of, or to produce, store,
handle, treat, release, or transport, any hazardous waste or hazardous
substance in violation of any law, statute, rule, regulation, or policy of any
federal or state governmental agency. None of Borrower's properties or assets
has ever been designated or identified in any manner pursuant to any
environmental protection statute as a hazardous waste or hazardous substance
disposal site, or a candidate for closure pursuant to any environmental
protection statute. No lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned or
operated by Borrower. Borrower has not received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal or
state governmental agency concerning any action or omission by Borrower
resulting in the releasing or disposing of hazardous waste or hazardous
substances into the environment.
5.11 Reliance by Foothill; Cumulative. Each warranty and
representation contained in this Agreement shall be conclusively presumed to
have been relied on by Foothill regardless of any investigation made or
information possessed by Foothill. The warranties and representations set forth
herein shall be cumulative and in addition to any and all other warranties and
representations that Borrower shall now or hereinafter give, or cause to be
given, to Foothill.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the Obligations, the
Cruise Corporation Obligations and the Florida Casino Obligations, and unless
Foothill shall otherwise consent in writing, Borrower shall do all of the
following:
6.1 Financial Statements, Reports, Certificates. Borrower
agrees to deliver to Foothill: (a) as soon as available, but in any event
within thirty (30) days after the end of each month during each of Borrower's
fiscal years, a company prepared balance sheet, income statement, and cash flow
statement covering Borrower's operations during such period;
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<PAGE> 14
and (b) as soon as available, but in any event within ninety (90) days after
the end of each of Borrower's fiscal years, financial statements of Borrower
for each such fiscal year, reviewed by independent certified public accountants
acceptable to Foothill and certified, without any qualifications, by such
accountants to have been prepared in accordance with GAAP, together with a
certificate of such accountants addressed to Foothill stating that such
accountants do not have knowledge of the existence of any event or condition
constituting an Event of Default, or that would, with the passage of time or
the giving of notice, constitute an Event of Default. Such reviewed financial
statements shall include a balance sheet, profit and loss statement, and cash
flow statement, and such accountants' letter to management. Borrower shall have
issued written instructions to its independent certified public accountants
authorizing them to communicate with Foothill and to release to Foothill
whatever financial information concerning Borrower that Foothill may request.
If Borrower is a parent company of one or more subsidiaries, or affiliates, or
is a subsidiary or affiliate of another company, then, in addition to the
financial statements referred to above, Borrower agrees to deliver financial
statements prepared on a consolidating basis so as to present Borrower and each
such related entity separately, and on a consolidated basis.
Borrower hereby irrevocably authorizes and directs all auditors,
accountants, or other third parties to deliver to Foothill, at Borrower's
expense, copies of Borrower's financial statements, papers related thereto, and
other accounting records of any nature in their possession, and to disclose to
Foothill any information they may have regarding Borrower's business affairs
and financial conditions.
6.2 Other Reports. Borrower agrees to deliver to Foothill by
no later than the fifteenth (15th) day of each month, an accounts receivable
and accounts payable aging report as of the end of the prior calendar month.
Borrower agrees to deliver to Foothill within three (3) business days after
Borrower's payroll taxes are due, evidence that such payroll taxes have been
timely and fully paid.
6.3 Tax Returns. Borrower agrees to deliver to Foothill copies
of each of Borrower's future federal income tax returns, and any amendments
thereto, within thirty (30) days of the filing thereof with the Internal
Revenue Service.
6.4 Guarantor Reports. Borrower agrees to cause any guarantor
of any of the Obligations to deliver its annual financial statements at the
time when Borrower provides its reviewed financial statements to Foothill and
copies of all federal income tax returns as soon as the same are available and
in any event no later than thirty (30) days after the same are required to be
filed by law.
6.5 Title to Equipment. Upon Foothill's request, Borrower
shall immediately deliver to Foothill, properly endorsed, any and all evidences
of ownership of, certificates of title, or applications for title to any items
of Equipment.
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6.6 Maintenance of Equipment. Borrower shall keep and maintain
the Equipment in good operating condition and repair, and make all necessary
replacements thereto so that the value and operating efficiency thereof shall
at all times be maintained and preserved. Borrower shall not permit any item of
Equipment to become a fixture to real estate or an accession to other property,
and the Equipment is now and shall at all times remain personal property.
6.7 Taxes. All assessments and taxes, whether real, personal,
or otherwise, due or payable by, or imposed, levied, or assessed against
Borrower or any of its property have been paid, and shall hereafter be paid in
full, before delinquency or before the expiration of any extension period.
Borrower shall make due and timely payment or deposit of all federal, state,
and local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Foothill, on demand, appropriate certificates attesting
to the payment or deposit thereof. Borrower shall make timely payment or
deposit of all tax payments and withholding taxes required of it by applicable
laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and
local, state, and federal income taxes, and shall, upon request, furnish
Foothill with proof satisfactory to Foothill indicating that Borrower has made
such payments or deposits.
6.8 Insurance.
(a) Borrower, at its expense, shall keep the Collateral
insured against "all risks" including loss or damage by fire, theft, explosion,
sprinklers, and all other hazards and risks, and in the full insurable value
thereof. Borrower also shall maintain public liability, product liability, and
property damage insurance relating to Borrower's ownership and use of the
Collateral, as well as insurance against larceny, embezzlement, and criminal
misappropriation.
(b) All such policies of insurance shall be in such form,
with such companies, and in such amounts as may be satisfactory to Foothill.
All such policies of insurance (except those of public liability and property
damage) shall contain a 438BFU lender's loss payable endorsement, or an
equivalent endorsement in a form satisfactory to Foothill, showing Foothill as
loss payee thereof, and shall contain a waiver of warranties, and shall specify
that the insurer must give at least ten (10) days prior written notice to
Foothill before canceling its policy for any reason. Borrower shall deliver to
Foothill certified copies of such policies of insurance and evidence of the
payment of all premiums therefor. All proceeds payable under any such policy
shall be payable to Foothill to be applied on account of the Obligations.
6.9 Foothill Expenses. Borrower shall immediately and without
demand reimburse Foothill for all sums expended by Foothill which constitute
Foothill Expenses and Borrower hereby authorizes and approves all advances and
payments by Foothill for items constituting Foothill Expenses. Any Foothill
Expenses not paid promptly by
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Borrower shall constitute Obligations and shall accrue interest at the rate and
in the manner of Obligations existing under the Term Note.
6.10 No Setoffs or Counterclaims. All payments hereunder and
under the other Loan Documents made by or on behalf of Borrower shall be made
without setoff or counterclaim and free and clear of, and without deduction or
withholding for or on account of, any federal, state or local taxes.
6.11 Compliance with Laws. Borrower shall comply with all
applicable laws, rules, and regulations. Without limiting the generality of the
foregoing, Borrower shall (i) at all times operate the Vessels in accordance
with all applicable laws, rules and regulations, and (ii) not be permitted to
place, or maintain, any slot machines, similar gaming equipment, or other
gaming equipment on the Leisure Lady or the Vegas Express unless Foothill
determines in Foothill's discretion that it would not violate any applicable
law.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the Obligations, the
Cruise Corporation Obligations and the Florida Casino Obligations, Borrower
will not do any of the following without Foothill's prior written consent:
7.1 Liens. Create, incur, assume, or permit to exist, directly
or indirectly, any lien on or with respect to any of the Collateral, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens.
7.2 Restrictions on Fundamental Changes. Enter into any
acquisition, merger, consolidation, reorganization, or recapitalization, or
reclassify its capital stock, or liquidate, wind up, or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, assign, lease,
transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business, property, or assets,
whether now owned or hereafter acquired, or acquire by purchase or otherwise
all or substantially all the assets, stock, or other evidence of beneficial
ownership of any person or entity.
7.3 Extraordinary Transactions and Disposal of Collateral.
Sell, lease, or otherwise dispose of, move, relocate, or transfer, whether by
sale or otherwise, any of the Collateral.
7.4 Change Name. Change Borrower's name, business structure,
or identity, or add any new fictitious name.
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8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the United
States Bankruptcy Code, would have accrued on such amounts), fees and charges
due Foothill, taxes, reimbursement of Foothill Expenses, or otherwise);
8.2 If Borrower fails or neglects to perform, keep, or observe
any term, provision, condition, covenant, or agreement contained in this
Agreement, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Foothill;
8.3 If any "default" or "Event of Default" occurs under or in
connection with the loan documents evidencing, or pertaining to, the Cruise
Corporation Obligations or the Florida Casino Obligations;
8.4 If there is a material impairment of the prospect of
repayment of any portion of the Obligations owing to Foothill or a material
impairment of the value or priority of Foothill's security interests in the
Collateral;
8.5 Except as (and only to the extent) expressly permitted in
the First Preferred Ship Mortgages (given in favor of Foothill) with respect to
the Vegas Express or the Leisure Lady, if any material portion of Borrower's
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any Judicial Officer or Assignee;
8.6 If an Insolvency Proceeding is commenced by Borrower;
8.7 If an Insolvency Proceeding is commenced against Borrower;
8.8 If Borrower is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs;
8.9 Except as (and only to the extent) expressly permitted in
the First Preferred Ship Mortgages with respect to the Vegas Express or the
Leisure Lady, if a notice of lien, levy, or assessment is filed of record with
respect to any of Borrower's assets by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether choate or
otherwise, upon any of Borrower's assets and the same is not paid on the
payment date thereof;
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8.10 If a judgment or other claim becomes a lien or encumbrance
upon any material portion of Borrower's assets;
8.11 If there is a default in any material agreement to which
Borrower is a party with third parties resulting in a right by such third
parties, whether or not exercised, to accelerate the maturity of Borrower's
indebtedness thereunder;
8.12 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to
Foothill by Borrower or any officer, employee, agent, or director of Borrower,
or if any such warranty or representation is withdrawn by any officer or
director; or
8.13 If the obligation of any guarantor or other third party
under any Loan Document is limited or terminated by operation of law or by the
guarantor or other third party thereunder, or any such guarantor or other third
party becomes the subject of an Insolvency Proceeding.
9. FOOTHILL'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence of an Event of
Default Foothill may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are
authorized by Borrower:
(a) Declare all Obligations, the Cruise Corporation
Obligations and/or the Florida Casino Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due
and payable;
(b) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Foothill, but without
affecting Foothill's rights and security interest in the Collateral and without
affecting the Obligations, the Cruise Corporation Obligations or the Florida
Casino Obligations;
(c) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Foothill considers necessary
or reasonable to protect its security interest in the Collateral. Borrower
agrees to assemble the Collateral if Foothill so requires, and to make the
Collateral available to Foothill as Foothill may designate. Borrower authorizes
Foothill to enter the premises where the Collateral is located, to take and
maintain possession of the Collateral, or any part of it, and to pay, purchase,
contest, or compromise any encumbrance, charge, or lien that in Foothill's
determination appears to be prior or superior to its security interest and to
pay all expenses incurred in connection therewith. With respect to any of
Borrower's owned premises, Borrower hereby grants Foothill a license to enter
into possession of such premises and to occupy the same, without charge, for up
to one hundred twenty (120) days in order to exercise any of Foothill's rights
or
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remedies provided herein, at law, in equity, or otherwise;
(d) Without notice to Borrower (such notice being
expressly waived) set off and apply to the Obligations, the Cruise Corporation
Obligations and/or the Florida Casino Obligations any and all (i) balances and
deposits of Borrower held by Foothill, or (ii) indebtedness at any time owing
to or for the credit or the account of Borrower held by Foothill;
(e) Store, maintain, repair, prepare for sale, advertise
for sale, and sell (in the manner provided for herein) the Collateral. Foothill
is hereby granted a license or other right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, advertising for sale and
selling any Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to Foothill's benefit;
(f) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as
Foothill determines is commercially reasonable. It is not necessary that the
Collateral be present at any such sale;
(g) Foothill may credit bid and purchase at any public
sale.
Foothill shall give notice of the disposition of the Collateral as follows:
(i) Foothill shall give Borrower and each holder of a
security interest in the Collateral who has filed with Foothill a
written request for notice, a notice in writing of the time and place
of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Collateral,
then the time on or after which the private sale or other disposition
is to be made;
(ii) The notice shall be personally delivered or
mailed, postage prepaid, to Borrower as provided in Section 12, at
least five (5) calendar days before the date fixed for the sale, or at
least five (5) calendar days before the date on or after which the
private sale or other disposition is to be made, unless the Collateral
is perishable or threatens to decline speedily in value. Notice to
persons other than Borrower claiming an interest in the Collateral
shall be sent to such addresses as they have furnished to Foothill;
and
(iii) If the sale is to be a public sale, Foothill
also shall give notice of the time and place by publishing a notice
one time at least five (5) calendar days before the date of the sale
in a newspaper of general circulation in
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the county in which the sale is to be held.
9.2 Deficiency; Excess Proceeds. Any deficiency that exists
after disposition of the Collateral as provided above will be paid immediately
by Borrower. Any excess will be returned, without interest and subject to the
rights of third parties, by Foothill to Borrower.
9.3 Remedies Cumulative. Foothill's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by
Foothill of one right or remedy shall be deemed an election, and no waiver by
Foothill of any Event of Default shall be deemed a continuing waiver. No delay
by Foothill shall constitute a waiver, election, or acquiescence by it.
100 TAXES AND EXPENSES REGARDING THE COLLATERAL
Except with respect to Permitted Protests, if Borrower fails to
pay any monies (whether taxes, rents, assessments, insurance premiums, or
otherwise) due to third persons or entities, or fails to make any deposits or
furnish any required proof of payment or deposit, all as required under the
terms of this Agreement, then, to the extent that Foothill determines that such
failure by Borrower could have a material adverse effect on Foothill's
interests in the Collateral, in its discretion and without prior notice to
Borrower, Foothill may do any or all of the following: (a) make payment of the
same or any part thereof; or (b) obtain and maintain insurance policies of the
type described in Section 6.8, and take any action with respect to such
policies as Foothill deems prudent. Any amounts paid or deposited by Foothill
shall constitute Foothill Expenses, shall be immediately charged to Borrower
and become additional Obligations, shall bear interest at the then applicable
rate set forth in the Term Note, and shall be secured by the Collateral. Any
payments made by Foothill shall not constitute an agreement by Foothill to make
similar payments in the future or a waiver by Foothill of any Event of Default
under this Agreement. Foothill need not inquire as to, or contest the validity
of, any such expense, tax, security interest, encumbrance, or lien and the
receipt of the usual official notice for the payment thereof shall be
conclusive evidence that the same was validly due and owing.
110 WAIVERS; INDEMNIFICATION
11.1 Demand; Protest; etc. Borrower waives demand,
protest, notice of protest, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by Foothill on
which Borrower may in any way be liable.
11.2 Foothill's Liability for Collateral. So long as
Foothill complies
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with its obligations, if any, under Section 9207 of the Code, Foothill shall
not in any way or manner be liable or responsible for: (a) the safekeeping of
the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other person. All risk of loss, damage, or destruction of the Collateral
shall be borne by Borrower.
11.3 Indemnification. Borrower agrees to indemnify
Foothill and its officers, employees, and agents and hold Foothill harmless
against: (a) all obligations, demands, claims, and liabilities claimed or
asserted by any other party, and (b) all losses in any way suffered, incurred,
or paid by Foothill as a result of or in any way arising out of, following, or
consequential to transactions with Borrower whether under this Agreement, or
otherwise. This provision shall survive the termination of this Agreement.
120 NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection therewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by registered or
certified mail, postage prepaid, return receipt requested, or by prepaid telex,
TWX, telefacsimile, or telegram (with messenger delivery specified) to Borrower
or to Foothill, as the case may be, at its addresses set forth below:
<TABLE>
<S> <C>
If to Borrower: LEISURE EXPRESS CRUISE, L.L.C.
4258 Communications Drive
Norcross, Georgia 30093
Attn: Mr. ________________
Telecopy No.: ________________________
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn.: Small Business Lending Division Manager
Telecopy No.: 310-477-5853
</TABLE>
The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other. All
notices or demands sent in accordance with this Section 12, other than notices
by Foothill in connection with Sections 9504 or 9505 of the Code, shall be
deemed received on the earlier of the date of actual receipt or three (3)
calendar days after the deposit thereof in the mail. Borrower acknowledges and
agrees that notices sent by Foothill in connection with Sections 9504 or 9505
of the Code shall
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be deemed sent when deposited in the mail or transmitted by telefacsimile or
other similar method set forth above.
130 DESTRUCTION OF BORROWER'S DOCUMENTS
All documents, agings, or other papers delivered to Foothill may
be destroyed or otherwise disposed of by Foothill four (4) months after they
are delivered to or received by Foothill, unless Borrower requests, in writing,
the return of said documents, schedules, or other papers and makes
arrangements, at Borrower's expense, for their return.
140 GENERAL PROVISIONS
14.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
14.2 Successors and Assigns. This Agreement shall bind and inure
to the benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrower may not assign this Agreement or any rights or
duties hereunder without Foothill's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Foothill
shall release Borrower from its Obligations. Foothill may assign this Agreement
and its rights and duties hereunder. Foothill reserves the right to sell,
assign, transfer, negotiate, or grant participation in all or any part of, or
any interest in Foothill's rights and benefits hereunder. In connection
therewith, Foothill may disclose all documents and information which Foothill
now or hereafter may have relating to Borrower or Borrower's business. To the
extent that Foothill assigns its rights and obligations hereunder to a third
party, Foothill shall thereafter be released from such assigned obligations to
Borrower and such assignment shall effect a novation between Borrower and such
third party.
14.3 Section Headings. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each paragraph applies equally to this entire
Agreement.
14.4 Interpretation. Neither this Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against Foothill or
Borrower, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
14.5 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
14.6 Amendments in Writing. This Agreement cannot be changed or
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terminated orally. All prior agreements, understandings, representations,
warranties, and negotiations, if any, are merged into this Agreement.
14.7 Counterparts. This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same Agreement.
14.8 Revival and Reinstatement of Obligations. If the
incurrence or payment of the Obligations by Borrower or any guarantor of the
Obligations or the transfer by either or both of such parties to Foothill of
any property of either or both of such parties should for any reason
subsequently be declared to be improper under any state or federal law relating
to creditors' rights, including, without limitation, provisions of the United
States Bankruptcy Code relating to fraudulent conveyances, preferences, and
other voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if Foothill is required to repay or
restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Foothill is required to repay or restore,
and as to all reasonable costs, expenses and attorneys' fees of Foothill
related thereto, the liability of Borrower or such guarantor shall
automatically be revived, reinstated, and restored and shall exist as though
such Voidable Transfer had never been made.
14.9 Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted, modified, or
qualified by any other agreement, oral or written, whether before or after the
date hereof.
14.10 CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. THE VALIDITY
OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE
RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED
AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER
COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF
BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 15.10.
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BORROWER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWER AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY
OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed at Los Angeles, California.
"Borrower"
LEISURE EXPRESS CRUISE, L.L.C.,
a Colorado limited liability company
By: /s/
---------------------------------
Print Name:
Title:
Accepted and effective this 22nd day of April, 1999.
"Foothill"
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/
--------------------------------
Print Name:
Its:
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SCHEDULE "1"
VESSELS
1. Name: LEISURE LADY
Official No.: 671576
Hailing Port: NEW YORK, NEW YORK
Gross Tons: 88
Net Tons: 88
Built: 1984 (Chesapeake Shipbuilding, Maryland)
Length Overall: 137 feet
Depth: 7.5 feet
2. Name: VEGAS EXPRESS
Official No.: 594643
Gross Tons: 432
Net Tons: 293
Built: 1978 (RYSCO Shipyard, Blountstown, Florida)
Length Overall: 173.5 feet
Depth: 14 feet
25
<PAGE> 1
EXHIBIT 10.45
SECURED PROMISSORY NOTE
$3,225,000.00 Los Angeles, California
April 22, 1999
FOR VALUE RECEIVED, the undersigned hereby promises to pay to FOOTHILL
CAPITAL CORPORATION ("Foothill"), or order, at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, or at such other address as the
holder of this Secured Promissory Note ("Note") may specify in writing, the
principal sum of THREE MILLION TWO HUNDRED TWENTY FIVE THOUSAND DOLLARS
($3,225,000.00) plus interest in the manner and upon the terms and conditions
set forth below. This Note is made pursuant to that certain Security Agreement,
dated as of even date herewith, between the undersigned and Foothill (as
hereafter amended, restated, supplemented, or modified from time to time, the
"Agreement"), the provisions of which are incorporated herein by reference. All
capitalized terms used herein, unless otherwise defined herein, shall have the
meanings ascribed to them in the Agreement.
1. Rate of Interest
The principal balance of this Note shall bear interest from the date
hereof at a per annum rate equal to two and one-quarter (2.25) percentage
points above the Reference Rate. For purposes of this Note, "Reference Rate"
means the variable rate of interest per annum most recently announced by Wells
Fargo Bank, National Association, or any successor to such institution, as its
"prime rate" or "reference rate," as the case may be, irrespective of whether
such announced rate is the best rate available from such financial institution,
all as determined by Foothill. In the event that the Reference Rate is changed
from time to time hereafter, the applicable rate of interest hereunder
automatically and immediately shall be increased or decreased by an amount
equal to the Reference Rate change. Upon the occurrence of an Event of Default
under the Agreement, the rate of interest on this Note shall, at the option of
the holder of this Note, be increased to six and one-quarter (6.25) percentage
points above the Reference Rate. Interest charged on this Note shall be
computed on the basis of a three hundred sixty (360) day year for actual days
elapsed.
In no event shall the interest rate or rates payable under this Note,
plus any other amounts paid in connection herewith, exceed the highest rate
permissible under any law that a court of competent jurisdiction shall, in a
final determination, deem applicable. The undersigned and Foothill intend
legally to agree upon the rate or rates of interest (and the other amounts paid
in connection herewith) and manner of payment stated within this Note;
provided, however, that anything contained herein to the contrary
notwithstanding, if said interest rate or rates of interest (or other amounts
paid in connection herewith) or the manner of payment exceeds the maximum
allowable under applicable law, then, ipso facto as of the
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date of this Note, the undersigned is and shall be liable only for the payment
of such maximum as allowed by law, and payment received from the undersigned in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of this Note to the extent of such excess.
2. Schedule of Payments
Principal and interest under this Note shall be due and payable
according to the following schedule:
a. Interest shall be due and payable in arrears on the first (1st)
day of each month commencing June 1, 1999, and continuing thereafter until this
Note has been paid in full;
b. Sixty (60) installments of principal, each in the amount of
Fifty Three Thousand Seven Hundred Fifty Dollars ($53,750.00), shall be due and
payable on the first (1st) day of each month commencing June 1, 1999, and
continuing thereafter until this Note has been paid in full;
c. Any remaining outstanding principal, together with all accrued
and unpaid interest thereon and any other sums owing in connection herewith,
shall be due and payable in full on May 1, 2004.
3. [Intentionally Omitted].
4. Prepayment
Prepayments of the principal balance of this Note shall be permitted
at any time; provided that each such prepayment shall be accompanied by all
interest that has accrued and remains unpaid with respect to the amount of
principal being repaid and a prepayment fee equal to the following:
(i) Five percent (5.0%) of the amount prepaid with respect to any
prepayments made prior to May 1, 2000;
(ii) Three percent (3.0%) of the amount prepaid with respect to
any prepayments made on or after May 1, 2000, and prior to May 1, 2001; and
(iii) One percent (1.0%) of the amount prepaid with respect to any
prepayments made on or after May 1, 2001.
Amounts repaid or prepaid with respect to this Note may not be reborrowed.
Partial prepayments of principal shall be applied to scheduled payments of
principal in the inverse
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order of their maturity.
5. Holder's Right of Acceleration
Upon the occurrence of an Event of Default under the Agreement,
including, but not limited to, the failure to pay any installment of principal
or interest hereunder when due, the holder of this Note may, at its election
and without notice to the undersigned, declare the entire balance hereof
(including, but not limited to, all principal and interest) immediately due and
payable.
6. Additional Rights of Holder
If any installment of principal or interest hereunder is not paid when
due, the holder shall have the following rights in addition to the rights set
forth herein, in the Agreement, and under law:
a. the right to compound interest by adding the unpaid interest to
principal, with such amount thereafter bearing interest at the rates provided
in this Note; and
b. if any installment is more than ten (10) days past due, the
right to collect a charge equal to the greater of Fifteen Dollars ($15) or five
percent (5%) of the late payment for each month in which it is late. This
charge is a result of a reasonable endeavor by the undersigned and the holder
to estimate the holder's added costs and damages resulting from the
undersigned's failure to make timely payments under this Note; hence the
undersigned agrees that the charge shall be presumed to be the amount of damage
sustained by the holder since it is extremely difficult to determine the actual
amount necessary to reimburse the holder for damages.
7. General Provisions
a. If this Note is not paid when due, the undersigned further
promises to pay all costs of collection, foreclosure fees, and reasonable
attorneys' fees incurred by the holder, whether or not suit is filed hereon,
together with the fees, costs and expenses as provided in the Agreement.
b. The undersigned hereby consents to any and all renewals,
replacements, and/or extensions of time for payment of this Note before, at, or
after maturity.
c. The undersigned hereby consents to the acceptance, release, or
substitution of security for this Note.
d. Presentment for payment, demand, notice of dishonor, protest,
and notice of protest are hereby expressly waived.
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e. Any waiver of any rights under this Note, the Agreement, or
under any other agreement, instrument, or paper signed by the undersigned is
neither valid nor effective unless made in writing and signed by the holder of
this Note.
f. No delay or omission on the part of the holder of this Note in
exercising any right shall operate as a waiver thereof or of any other right.
g. A waiver by the holder of this Note upon any one occasion shall
not be construed as a bar or waiver of any right or remedy on any future
occasion.
h. Should any one or more of the provisions of this Note be
determined illegal or unenforceable, all other provisions shall nevertheless
remain effective.
i. This Note cannot be changed, modified, amended, or terminated
orally.
j. This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of California, without reference to the
principles of conflicts of laws thereof.
8. Security for this Note
This Note is secured by the collateral described in the Agreement and
other Loan Documents, and is subject to all of the terms and conditions thereof
including, but not limited to, the remedies specified therein or granted in
connection therewith.
9. Venue: Jurisdiction; Waiver of Trial by Jury
THE UNDERSIGNED AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS NOTE SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT
THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. THE UNDERSIGNED WAIVES, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 9. THE UNDERSIGNED, TO
THE EXTENT IT MAY LEGALLY DO SO, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING UNDER
OR WITH RESPECT TO THIS NOTE, OR IN ANY WAY CONNECTED WITH, OR RELATED TO, OR
INCIDENTAL TO, THE DEALINGS OF THE PARTIES HERETO
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WITH RESPECT TO THIS NOTE OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE. THE UNDERSIGNED, TO THE EXTENT IT MAY LEGALLY
DO SO, HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT THE HOLDER
OF THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 9 WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE UNDERSIGNED TO THE WAIVER
OF ITS RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, this Note has been executed and delivered on the
date first set forth above.
FLORIDA CASINO CRUISES, INC.
a Georgia corporation
By: /s/
--------------------------------
Print Name:
Title:
5
<PAGE> 1
EXHIBIT 10.46
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, is entered into as of April 22, 1999, between
FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a
place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 90025-3333, and FLORIDA CASINO CRUISES, INC., a Georgia
corporation ("Borrower"), with its chief executive office located at 2077 Pine
Ridge Road, Naples, Florida 34109.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods or the rendition of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of
the foregoing.
"Agreement" means this Security Agreement and any extensions,
riders, supplements, notes, amendments, or modifications to or in connection
with this Security Agreement.
"Amendment Documents" means the Amendment No. 1 to Loan
Documents, the Second Amendment to First Preferred Ship Mortgage, and all
related documents, agreements, and instruments executed by Cruise Corporation
in connection with the Cruise Corporation Obligations and the Amendments to the
Continuing Guaranties executed by Leisure Time Technology, Inc. and Leisure
Time Casinos and Resorts, Inc. with respect to the Cruise Corporation
Obligations.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
assets or liabilities, or the Collateral; all information relating to
Borrower's business operations or financial condition; and all computer
programs, disc or tape files, printouts, runs, or other computer prepared
information, and the equipment containing such information.
"Borrower's Guaranty" means the Continuing Guaranty executed
by Borrower in favor of Foothill, of even date herewith, pertaining to the
Cruise Corporation Obligations and the Leisure Express Obligations.
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"Closing Date" means the date on which Foothill makes the
Term Loan to Borrower.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following: the Accounts;
Borrower's Books; the Equipment; the Freights; the General Intangibles; the
Inventory; the Negotiable Collateral; the Investment Property; the collateral
described in the First Preferred Ship Mortgages; any money, or other assets of
Borrower which hereafter come into the possession, custody, or control of
Foothill; and the proceeds and products, whether tangible or intangible, of any
of the foregoing, including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Equipment, General Intangibles,
Inventory, Negotiable Collateral, Investment Property, money, deposit accounts,
or other tangible or intangible property resulting from the sale or other
disposition of the Collateral, or any portion thereof or interest therein, and
the proceeds thereof.
"Corporate Guarantors" means (i) Leisure Time Casinos and
Resorts, Inc., (ii) Leisure Time Technology, Inc., (iii) Cruise Corporation and
(iv) Leisure Express.
"Cruise Corporation" means Leisure Time Cruise Corporation, a
Colorado corporation.
"Cruise Corporation Obligations" means all "Obligations"
described in the Security Agreement executed by Cruise Corporation in favor of
Foothill, dated October 9, 1998, whether now owing or hereafter arising.
"Equipment" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, dies,
jigs, goods, including, without limitation, all items of equipment and other
personal property located on the Vessels, and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing, wherever
located. Notwithstanding the foregoing, "Equipment" shall not include any
vessels acquired by Borrower after the Closing Date (except to the extent such
after-acquired vessel(s) constitute proceeds of the Leisure Lady or the Vegas
Express, or are vessels used in connection with the Leisure Lady or the Vegas
Express).
"Event of Default" has the meaning set forth in Section 8.
"First Preferred Ship Mortgages" means the first preferred
ship mortgages executed by Borrower and Cruise Corporation, respectively, in
connection with the
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Term Loan and the Cruise Corporation Obligations, respectively, that encumber
the Vegas Express and the Leisure Lady and secure the Term Loan, the Cruise
Corporation Obligations, and certain other obligations described in such
mortgages, as amended.
"Foothill Expenses" means all: reasonable costs or expenses
(including taxes, photocopying, notarization, telecommunication, and insurance
premiums) required to be paid by Borrower under any of the Loan Documents that
are paid or advanced by Foothill; documentation, filing, recording,
publication, appraisal (including periodic Collateral appraisals), and search
fees assessed, paid, or incurred by Foothill in connection with Foothill's
transactions with Borrower; costs and expenses incurred by Foothill in the
disbursement of funds to Borrower (by wire transfer or otherwise); charges paid
or incurred by Foothill resulting from the dishonor of checks; costs and
expenses paid or incurred by Foothill to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, removing (including, but not limited to, all costs and
expenses incurred by Foothill with respect to any obligations of Foothill under
a landlord's or mortgagee's waiver and consent entered into in connection with
the Loan Documents), storing, shipping, selling, preparing for sale, or
advertising to sell the Collateral, or any portion thereof, whether or not a
sale is consummated; costs and expenses paid or incurred by Foothill in
examining Borrower's Books; costs and expenses of third party claims or any
other suit paid or incurred by Foothill in enforcing or defending the Loan
Documents; and Foothill's reasonable attorneys' fees and expenses incurred in
advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including attorneys' fees and expenses incurred in
connection with a "workout", a "restructuring", or an Insolvency Proceeding
concerning Borrower or any guarantor of the Obligations), defending, or
concerning the Loan Documents, whether or not suit is brought.
"Freights" means all presently existing and hereafter arising
(i) freights, hire and other monies earned and to be earned, due or to become
due, or paid or payable to, or for the account of, Borrower, of whatsoever
nature, arising out of or as a result of the ownership and operation by
Borrower or its agents of the Vessels, (ii) all monies and claims for moneys
due and to become due to Borrower and all claims for damages arising out of the
breach of any and all present and future charter parties, bills of lading,
contracts and other engagements of affreightment or for the carriage or
transportation of cargo, mail and/or passengers, and operations of every kind
whatsoever of the Vessels and in and to any and all claims and causes of action
for money, loss or damages that may accrue or belong to Borrower, its
successors and assigns, arising out of or in any way connected with the present
or future use, operation or management of the Vessels or arising out of or in
any way connected with any and all present and further requisitions, charter
parties, bills of lading, contracts and other engagements of affreightment or
the carriage or transportation of cargo, mail and/or passengers, and other
operations of the Vessels, (iii) all monies and claims for monies due and to
become due to Borrower, and all claims for damages in respect of the actual or
constructive total loss of or requisition of use of or title to the Vessels,
and (iv) any proceeds of the foregoing. Notwithstanding anything to the
contrary herein, and so long as no
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Event of Default has occurred and is continuing, any gaming or other revenue
generated in the normal and customary operation of the Vessels may be retained
and used by Borrower for general working capital purposes.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and
future general intangibles and other personal property (including choses or
things in action, goodwill, patents, trade names, trademarks, service marks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due
or recoverable from pension funds, route lists, monies due under any royalty or
licensing agreements, infringement claims, computer programs, computer discs,
computer tapes, literature, reports, catalogs, deposit accounts, insurance
premium rebates, tax refunds, and tax refund claims) other than goods and
Accounts, and Borrower's Books relating to any of the foregoing; excluding,
however, any general intangibles (including, without limitation, licenses)
which by their terms are not transferrable or assignable (or which attempted
transfer or assignment would be void).
"Guarantors" means, collectively, the Corporate Guarantors
and Alan Johnson, individually.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with its creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Inventory" means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located, and any documents of title representing any of the
above, and Borrower's Books relating to any of the foregoing.
"Investment Property" means all Borrower's present and
hereafter acquired investment property, securities (certificated and
uncertificated), security entitlements, security accounts, and any interest in
any of the foregoing, and all replacements, substitutions, and additions to any
of the foregoing, wherever located.
"Judicial Officer or Assignee" means any trustee, receiver,
controller, custodian, assignee for the benefit of creditors, or any other
person or entity having powers or duties like or similar to the powers and
duties of a trustee, receiver, controller, custodian, or assignee for the
benefit of creditors.
"Leisure Express" means Leisure Express Cruise, L.L.C., a
Colorado limited liability company.
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"Leisure Express Documents" means, collectively, the Security
Agreement, the Secured Promissory Note, the Pledge Agreement and any other
agreement or instrument executed by Leisure Express in connection with the
Leisure Express Obligations, and the Continuing Guaranties of the Corporate
Guarantors and the Borrower and the Limited Continuing Guaranty of Alan Johnson
with respect to the Leisure Express Obligations.
"Leisure Express Obligations" means all "Obligations"
described in the Security Agreement executed by Leisure Express in favor of
Foothill, dated April 22, 1999, whether now owing or hereafter arising.
"Leisure Lady" means the vessel known as the "Leisure Lady",
United States Coast Guard Official No. 671576, more fully described on Schedule
"1" attached hereto.
"Loan Documents" means, collectively, this Agreement, the
Term Note, the Continuing Guaranties of the Corporate Guarantors and the
Limited Continuing Guaranty of Alan Johnson, the Borrower's Guaranty and any
other agreement entered into in connection with this Agreement, together with
all alterations, amendments, changes, extensions, modifications, refinancings,
refundings, renewals, replacements, restatements, or supplements, of or to any
of the foregoing.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit, notes, drafts, instruments, documents, leases, and
chattel paper, and Borrower's Books relating to any of the foregoing.
"Obligations" means all loans, advances, debts, principal,
interest (including any interest that, but for the provisions of the United
States Bankruptcy Code, would have accrued), premiums, liabilities (including
all amounts charged to Borrower's loan account pursuant to any agreement
authorizing Foothill to charge Borrower's loan account), obligations, fees,
lease payments, guaranties (including the Borrower's Guaranty), covenants, and
duties owing by Borrower to Foothill of any kind and description (whether
pursuant to or evidenced by the Loan Documents, by any note or other
instrument, or by any other agreement between Foothill and Borrower, and
whether or not for the payment of money), whether direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter arising, and
including any debt, liability, or obligation owing from Borrower to others that
Foothill may have obtained by assignment or otherwise, and further including
all interest not paid when due and all Foothill Expenses that Borrower is
required to pay or reimburse by the Loan Documents, by law, or otherwise. All
Obligations shall accrue interest at the rate(s) set forth in the Term Note
from the date such Obligations arise, and such interest shall in turn be deemed
"Obligations" for all purposes under this Agreement and shall be due and
payable when interest is due and payable under the Term Note.
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"Pay-Off Letters" means letters, in form and substance
reasonably satisfactory to Foothill, from other lenders, secured creditors, or
lessors respecting the amount necessary to (a) repay in full all of the
obligations of Borrower owing to such lenders, secured creditors, and/or
lessors and (b) obtain (i) terminations/releases of all of the security
interests or liens existing in favor of such lenders, secured creditors, and/or
lessors in and to the properties or assets of Borrower and (ii) good and
marketable title to such properties or assets (in the case of leased property).
"Permitted Liens" means: (a) liens and security interests
held by Foothill; (b) liens for unpaid taxes that are not yet due and payable;
(c) purchase money security interests and liens of lessors under capital
leases, and so long as the security interest or lien only secures the purchase
price of the asset and does not encumber any other assets of the Borrower; and
(d) any liens or encumbrances permitted under the terms and conditions of the
First Preferred Ship Mortgages.
"Permitted Protest" means the right of Borrower to protest
any lien, tax, rental payment, or other charge, other than any such lien or
charge that secures the Obligations, provided (i) a reserve with respect to
such obligation is established on the books of Borrower in an amount that is
reasonably satisfactory to Foothill, (ii) any such protest is instituted and
diligently prosecuted by Borrower in good faith, and (iii) Foothill is
satisfied that, while any such protest is pending, there will be no impairment
of the enforceability, validity, or priority of any of the liens or security
interests of Foothill in and to the property or assets of Borrower.
"Term Loan" means the loan made by Foothill to Borrower in
connection with this Agreement, which loan is further evidenced by the Term
Note.
"Term Note" means that certain Secured Promissory Note, of
even date herewith, by Borrower to the order of Foothill, in the original
principal amount of Three Million Two Hundred Twenty-Five Thousand Dollars
($3,225,000), and any extensions, renewals, replacements, or substitutions
therefor.
"Vegas Express" means the vessel known as the "Vegas
Express", United States Coast Guard Official No. 594643, more fully described
on Schedule "1" attached hereto.
"Vessels" means the vessels described on Schedule "1"
attached hereto and by this reference made a part hereof.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein,
the term "financial statements" shall include the notes and schedules thereto.
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1.3 Code. Any terms used in this Agreement which are defined
in the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 Construction. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular, to
the singular include the plural, and the term "including" is not limiting. The
words "hereof," "herein," "hereby," "hereunder," and similar terms in this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Section, subsection, clause, and exhibit
references are to this Agreement unless otherwise specified.
1.5 Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. FEES.
Borrower shall pay to Foothill the following fees:
2.1 Closing Fee. A one time closing fee of Thirty-Two
Thousand Two Hundred Fifty Dollars ($32,250) which is earned, in full, on the
Closing Date and is due and payable by Borrower to Foothill in connection with
this Agreement on the Closing Date;
2.2 Annual Fee. An annual fee equal to one percent (1%) of
the outstanding principal balance of the Obligations (as of April 1, 2000, and
each anniversary thereafter), which shall be due and payable by Borrower to
Foothill in connection with this Agreement on April 1, 2000, and on each
anniversary of such date occurring thereafter; and
2.3 Appraisal and Documentation Fees. Foothill's customary
appraisal fee of Seven Hundred Fifty Dollars ($750) per day per appraiser, plus
out-of-pocket expenses for each appraisal of the Collateral performed by
Foothill or its agents.
3. CONDITIONS TO EFFECTIVENESS: TERM OF AGREEMENT.
3.1 Conditions Precedent. The obligation of Foothill to make
the loan evidenced by the Term Note is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions
on or before the Closing Date:
(a) The Closing Date shall occur on or before April 30,
1999;
(b) Other than with respect to Permitted Liens (if any),
Borrower's existing lenders, creditors, and lessors shall have executed and
delivered Pay-Off
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Letters, UCC termination statements, bills of sale, and other documentation
evidencing the termination of their liens and security interests in the assets
of Borrower (and the transfer of title to such assets to Borrower, in the case
of leased property) or a subordination agreement in form and substance
satisfactory to Foothill in its sole discretion;
(c) Foothill shall have received copies of Borrower's
and each Corporate Guarantor's By-laws and Articles or Certificates of
Incorporation, as amended, modified, or supplemented to the Closing Date,
certified by the Secretaries of Borrower and the Corporate Guarantors;
(d) Foothill shall have received certificates of
corporate status with respect to Borrower and each Corporate Guarantor, dated
within ten (10) days of the Closing Date, by the Secretary(ies) of State of the
states of incorporation of Borrower and each Corporate Guarantor, which
certificate shall indicate that Borrower and each Corporate Guarantor is in
good standing in such state(s);
(e) Foothill shall have received a certificate from the
Secretaries of Borrower and each Corporate Guarantor attesting to the
resolutions of Borrower's and each Corporate Guarantor's Board of Directors
authorizing their execution and delivery of this Agreement and the other Loan
Documents to which each is a party and authorizing specific officers of
Borrower and each Corporate Guarantor to execute same;
(f) Foothill shall have received certificates of
corporate status with respect to Borrower, each dated within ten (10) days of
the Closing Date, such certificates to be issued by the Secretary of State of
the states in which its failure to be duly qualified or licensed would have a
material adverse effect on the financial condition or assets of Borrower, which
certificates shall indicate that Borrower is in good standing;
(g) Foothill shall have received the insurance
certificates, certified copies of policies, required by Section 6.8 hereof and
as required by the First Preferred Ship Mortgages, along with a 438BFU Lender's
Loss Payable Endorsement naming Foothill as sole loss payee, all in form and
substance satisfactory to Foothill and its counsel;
(h) Foothill shall have received each of the following
documents and agreements, in form and substance satisfactory to Foothill and
its counsel, duly executed, and each such document and agreement shall be in
full force and effect:
(1) This Agreement;
(2) The Term Note;
(3) The Borrower's Guaranty;
(4) Continuing Guaranties from Alan Johnson,
individually,
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Leisure Time Casinos and Resorts, Inc.,
Leisure Time Technology, Inc., Cruise
Corporation and Leisure Express;
(5) Assignment of Insurances;
(6) The Amendment Documents;
(7) The Leisure Express Documents; and
(8) Such other documents and instruments as
Foothill shall deem necessary or desirable
to ensure that Foothill has a first
priority perfected security interest in and
lien on the Collateral;
(i) Foothill shall have received searches reflecting the
filing of its financing statements and fixture filing;
(j) Foothill shall have received evidence that the First
Preferred Ship Mortgage encumbering the Vegas Express has been duly filed with
and recorded by the United States Coast Guard, and that all other steps deemed
necessary or desirable by Foothill have been duly completed in order for
Foothill to have obtained a first priority perfected security interest in and
lien on the Vegas Express;
(k) Foothill shall have received evidence that the
Second Amendment to First Preferred Ship Mortgage encumbering the Leisure Lady
has been duly filed with and recorded by the United States Coast Guard, and
that all other steps deemed necessary or desirable by Foothill have been duly
completed in order for Foothill to have obtained a first priority perfected
security interest in and lien on the Leisure Lady;
(l) Foothill shall have received landlord and mortgagee
waivers from the lessors and mortgagees of the locations where the Equipment is
located;
(m) Foothill shall have received a written opinion of
Borrower's legal counsel in form and substance satisfactory to Foothill with
respect to the transactions governed by the Loan Documents, the Leisure Express
Documents and the Amendment Documents;
(n) Foothill shall have received the Closing Fee
referenced in Section 2.1, all of Foothill Expenses incurred as of the Closing
Date, and all other costs and expenses incurred by Foothill in connection
herewith, including without limitation, audit fees, search fees, appraisal
fees, documentation, recording and filing fees, and the fees and costs of
Morgan, Lewis and Bockius LLP, for the negotiation, preparation and
documentation of the Loan Documents;
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(o) All representations and warranties set forth in this
Agreement and the other Loan Documents are true and correct as of the Closing
Date, no "Event of Default" has occurred under this Agreement or any of the
other Loan Documents, and all of the Loan Documents are in full force and
effect; and
(p) The closing of the (i) loan contemplated by the
Leisure Express Documents and (ii) the amendment contemplated by the Amendment
Documents shall have occurred (or shall occur concurrently with the closing of
the loan represented by the Term Note); and
(q) All other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered
or executed or recorded and shall be in form and substance satisfactory to
Foothill and its counsel.
3.2 Term. This Agreement shall become effective upon the
execution and delivery hereof by Borrower and Foothill, and shall continue in
full force and effect until all Obligations, all Cruise Corporation Obligations
and all Leisure Express Obligations have been indefeasibly paid in full.
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants to
Foothill a continuing security interest in all currently existing and hereafter
acquired or arising Collateral in order to secure (i) prompt repayment of any
and all Obligations and (ii) prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Foothill's security interest in
the Collateral shall attach to all Collateral without further act on the part
of Foothill or Borrower.
4.2 Delivery of Additional Documentation Required. Borrower
shall execute and deliver to Foothill, prior to or concurrently with Borrower's
execution and delivery of this Agreement and at any time thereafter at the
request of Foothill, all financing statements, continuation financing
statements, fixture filings, security agreements, chattel mortgages, pledges,
assignments, endorsements of certificates of title, applications for title,
affidavits, reports, notices, letters of authority, and all other documents
that Foothill may reasonably request, in form satisfactory to Foothill, to
perfect and continue perfected Foothill's security interests in the Collateral
and in order to fully consummate all of the transactions contemplated under the
Loan Documents.
4.3 Power of Attorney. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Borrower's true and lawful attorney, with
power to: (a) sign the
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name of Borrower on any of the documents described in Section 4.2 or on any
other similar documents to be executed, recorded, or filed in order to perfect
or continue perfected Foothill's security interest in the Collateral; (b) at
any time that an Event of Default has occurred or Foothill deems itself
insecure, endorse Borrower's name on any checks, notices, acceptances, money
orders, drafts, or other item of payment or security that may come into
Foothill's possession; (c) at any time that an Event of Default has occurred or
Foothill deems itself insecure, make, settle, and adjust all claims under
Borrower's policies of insurance in respect of the Collateral and make all
determinations and decisions with respect to such policies of insurance. The
appointment of Foothill as Borrower's attorney, and each and every one of
Foothill's rights and powers, being coupled with an interest, is irrevocable
until all of the Obligations, the Cruise Corporation Obligations and Leisure
Express Obligations have been fully repaid and performed and Foothill's
obligation to provide advances hereunder is terminated.
4.4 Right to Inspect. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter, to
inspect Borrower's Books and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Prior Encumbrances. Borrower has good and indefeasible
title to the Collateral, free and clear of liens, claims, security interests,
or encumbrances except for Permitted Liens. None of the Collateral has been
purchased by Borrower within the six (6) months period preceding the Closing
Date, except for (i) sales to Borrower in the ordinary course of the seller's
business, and (ii) the acquisition of the Vegas Express by Borrower.
5.2 Location of Equipment. The Equipment is not now and shall
not at any time hereafter be stored with a bailee, warehouseman, or similar
party without Foothill's prior written consent. Borrower shall keep the
Equipment only on the Leisure Lady or the Vegas Express or at the following
location: 1284 Miller Road, Avon, Ohio 44011.
None of the Equipment has been located, during the six (6)
month period prior to the Closing Date, in any jurisdiction other than the
county(ies) and state(s) set forth in this Section.
5.3 Location of Chief Executive Office. The chief executive
office of Borrower is located at the address indicated in the first paragraph
of this Agreement and Borrower covenants and agrees that it will not, without
thirty (30) days prior written notification to Foothill, relocate such chief
executive office.
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5.4 Fictitious Business Name(s). Borrower uses only the
following Fictitious Business Names and none other: [none].
5.5 Due Organization and Qualification. Borrower is and shall
at all times hereafter be duly organized and existing and in good standing
under the laws of the state of its incorporation and qualified and licensed to
do business in, and in good standing in, any state in which the conduct of its
business or its ownership of the Collateral requires that it be so qualified.
5.6 Due Authorization; No Conflict. The execution, delivery,
and performance of the Loan Documents are within Borrower's corporate powers,
have been duly authorized, and are not in conflict with nor constitute a breach
of any provision contained in Borrower's Articles or Certificate of
Incorporation, or By-laws, nor will they constitute an event of default under
any material agreement to which Borrower is a party.
5.7 Litigation. There are no actions or proceedings pending
by or against Borrower before any court or administrative agency and Borrower
does not have knowledge or belief of any pending, threatened, or imminent
litigation, governmental investigations, or claims, complaints, actions, or
prosecutions involving Borrower or any guarantor of the Obligations, except for
ongoing collection matters in which the Borrower is the plaintiff.
5.8 No Material Adverse Change in Financial Condition. All
financial statements relating to Borrower or any guarantor of the Obligations
that have been or may hereafter be delivered by Borrower to Foothill have been
prepared in accordance with GAAP and fairly present Borrower's and such
guarantor's financial condition as of the date thereof and Borrower's and such
guarantor's results of operations for the period then ended. There has not been
a material adverse change in the financial condition of Borrower or any
guarantor since the date of the latest financial statements submitted to
Foothill on or before the Closing Date.
5.9 Solvency. Borrower's assets at a fair valuation exceed
the amount of all of its debts at a fair valuation and Borrower is able to pay
all of its debts (including trade debts and contingent liabilities) as they
become due.
5.10 Environmental Condition. None of Borrower's properties
or assets has ever been used by Borrower or, to the best of Borrower's
knowledge, by previous owners or operators in the disposal of, or to produce,
store, handle, treat, release, or transport, any hazardous waste or hazardous
substance in violation of any law, statute, rule, regulation, or policy of any
federal or state governmental agency. None of Borrower's properties or assets
has ever been designated or identified in any manner pursuant to any
environmental protection statute as a hazardous waste or hazardous substance
disposal site, or a candidate for
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closure pursuant to any environmental protection statute. No lien arising under
any environmental protection statute has attached to any revenues or to any
real or personal property owned or operated by Borrower. Borrower has not
received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal or state governmental agency concerning
any action or omission by Borrower resulting in the releasing or disposing of
hazardous waste or hazardous substances into the environment.
5.11 Reliance by Foothill; Cumulative. Each warranty and
representation contained in this Agreement shall be conclusively presumed to
have been relied on by Foothill regardless of any investigation made or
information possessed by Foothill. The warranties and representations set forth
herein shall be cumulative and in addition to any and all other warranties and
representations that Borrower shall now or hereinafter give, or cause to be
given, to Foothill.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the Obligations, the
Cruise Corporation Obligations and the Leisure Express Obligations, and unless
Foothill shall otherwise consent in writing, Borrower shall do all of the
following:
6.1 Financial Statements, Reports, Certificates. Borrower
agrees to deliver to Foothill: (a) as soon as available, but in any event
within thirty (30) days after the end of each month during each of Borrower's
fiscal years, a company prepared balance sheet, income statement, and cash flow
statement covering Borrower's operations during such period; and (b) as soon as
available, but in any event within ninety (90) days after the end of each of
Borrower's fiscal years, financial statements of Borrower for each such fiscal
year, reviewed by independent certified public accountants acceptable to
Foothill and certified, without any qualifications, by such accountants to have
been prepared in accordance with GAAP, together with a certificate of such
accountants addressed to Foothill stating that such accountants do not have
knowledge of the existence of any event or condition constituting an Event of
Default, or that would, with the passage of time or the giving of notice,
constitute an Event of Default. Such reviewed financial statements shall
include a balance sheet, profit and loss statement, and cash flow statement,
and such accountants' letter to management. Borrower shall have issued written
instructions to its independent certified public accountants authorizing them
to communicate with Foothill and to release to Foothill whatever financial
information concerning Borrower that Foothill may request. If Borrower is a
parent company of one or more subsidiaries, or affiliates, or is a subsidiary
or affiliate of another company, then, in addition to the financial statements
referred to above, Borrower agrees to deliver financial statements prepared on
a consolidating basis so as to present Borrower and each such related entity
separately, and on a consolidated basis.
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Borrower hereby irrevocably authorizes and directs all
auditors, accountants, or other third parties to deliver to Foothill, at
Borrower's expense, copies of Borrower's financial statements, papers related
thereto, and other accounting records of any nature in their possession, and to
disclose to Foothill any information they may have regarding Borrower's
business affairs and financial conditions.
6.2 Other Reports. Borrower agrees to deliver to Foothill by
no later than the fifteenth (15th) day of each month, an accounts receivable
and accounts payable aging report as of the end of the prior calendar month.
Borrower agrees to deliver to Foothill within three (3) business days after
Borrower's payroll taxes are due, evidence that such payroll taxes have been
timely and fully paid.
6.3 Tax Returns. Borrower agrees to deliver to Foothill
copies of each of Borrower's future federal income tax returns, and any
amendments thereto, within thirty (30) days of the filing thereof with the
Internal Revenue Service.
6.4 Guarantor Reports. Borrower agrees to cause any guarantor
of any of the Obligations to deliver its annual financial statements at the
time when Borrower provides its reviewed financial statements to Foothill and
copies of all federal income tax returns as soon as the same are available and
in any event no later than thirty (30) days after the same are required to be
filed by law.
6.5 Title to Equipment. Upon Foothill's request, Borrower
shall immediately deliver to Foothill, properly endorsed, any and all evidences
of ownership of, certificates of title, or applications for title to any items
of Equipment.
6.6 Maintenance of Equipment. Borrower shall keep and
maintain the Equipment in good operating condition and repair, and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Borrower shall not
permit any item of Equipment to become a fixture to real estate or an accession
to other property, and the Equipment is now and shall at all times remain
personal property.
6.7 Taxes. All assessments and taxes, whether real, personal,
or otherwise, due or payable by, or imposed, levied, or assessed against
Borrower or any of its property have been paid, and shall hereafter be paid in
full, before delinquency or before the expiration of any extension period.
Borrower shall make due and timely payment or deposit of all federal, state,
and local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Foothill, on demand, appropriate certificates attesting
to the payment or deposit thereof. Borrower shall make timely payment or
deposit of all tax payments and withholding taxes required of it by applicable
laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and
local, state, and federal income taxes, and shall, upon request, furnish
Foothill with proof satisfactory to Foothill indicating that Borrower has made
such payments or deposits.
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6.8 Insurance.
(a) Borrower, at its expense, shall keep the Collateral
insured against "all risks" including loss or damage by fire, theft, explosion,
sprinklers, and all other hazards and risks, and in the full insurable value
thereof. Borrower also shall maintain public liability, product liability, and
property damage insurance relating to Borrower's ownership and use of the
Collateral, as well as insurance against larceny, embezzlement, and criminal
misappropriation.
(b) All such policies of insurance shall be in such
form, with such companies, and in such amounts as may be satisfactory to
Foothill. All such policies of insurance (except those of public liability and
property damage) shall contain a 438BFU lender's loss payable endorsement, or
an equivalent endorsement in a form satisfactory to Foothill, showing Foothill
as loss payee thereof, and shall contain a waiver of warranties, and shall
specify that the insurer must give at least ten (10) days prior written notice
to Foothill before canceling its policy for any reason. Borrower shall deliver
to Foothill certified copies of such policies of insurance and evidence of the
payment of all premiums therefor. All proceeds payable under any such policy
shall be payable to Foothill to be applied on account of the Obligations.
6.9 Foothill Expenses. Borrower shall immediately and without
demand reimburse Foothill for all sums expended by Foothill which constitute
Foothill Expenses and Borrower hereby authorizes and approves all advances and
payments by Foothill for items constituting Foothill Expenses. Any Foothill
Expenses not paid promptly by Borrower shall constitute Obligations and shall
accrue interest at the rate and in the manner of Obligations existing under the
Term Note.
6.10 No Setoffs or Counterclaims. All payments hereunder and
under the other Loan Documents made by or on behalf of Borrower shall be made
without setoff or counterclaim and free and clear of, and without deduction or
withholding for or on account of, any federal, state or local taxes.
6.11 Compliance with Laws. Borrower shall comply with all
applicable laws, rules, and regulations. Without limiting the generality of the
foregoing, Borrower shall (i) at all times operate the Vessels in accordance
with all applicable laws, rules and regulations, and (ii) not be permitted to
place, or maintain, any slot machines, similar gaming equipment, or other
gaming equipment on the Leisure Lady or the Vegas Express unless Foothill
determines in Foothill's discretion that it would not violate any applicable
law.
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7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the Obligations, the
Cruise Corporation Obligations and the Leisure Express Obligations, Borrower
will not do any of the following without Foothill's prior written consent:
7.1 Liens. Create, incur, assume, or permit to exist,
directly or indirectly, any lien on or with respect to any of the Collateral,
of any kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens.
7.2 Restrictions on Fundamental Changes. Enter into any
acquisition, merger, consolidation, reorganization, or recapitalization, or
reclassify its capital stock, or liquidate, wind up, or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, assign, lease,
transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business, property, or assets,
whether now owned or hereafter acquired, or acquire by purchase or otherwise
all or substantially all the assets, stock, or other evidence of beneficial
ownership of any person or entity.
7.3 Extraordinary Transactions and Disposal of Collateral.
Sell, lease, or otherwise dispose of, move, relocate, or transfer, whether by
sale or otherwise, any of the Collateral.
7.4 Change Name. Change Borrower's name, business structure,
or identity, or add any new fictitious name.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the United
States Bankruptcy Code, would have accrued on such amounts), fees and charges
due Foothill, taxes, reimbursement of Foothill Expenses, or otherwise);
8.2 If Borrower fails or neglects to perform, keep, or
observe any term, provision, condition, covenant, or agreement contained in
this Agreement, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Foothill;
8.3 If any "default" or "Event of Default" occurs under or in
connection with the loan documents evidencing, or pertaining to, the Cruise
Corporation Obligations or the Leisure Express Obligations;
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8.4 If there is a material impairment of the prospect of
repayment of any portion of the Obligations owing to Foothill or a material
impairment of the value or priority of Foothill's security interests in the
Collateral;
8.5 Except as (and only to the extent) expressly permitted in
the First Preferred Ship Mortgages (given in favor of Foothill) with respect to
the Vegas Express or the Leisure Lady, if any material portion of Borrower's
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any Judicial Officer or Assignee;
8.6 If an Insolvency Proceeding is commenced by Borrower;
8.7 If an Insolvency Proceeding is commenced against
Borrower;
8.8 If Borrower is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs;
8.9 Except as (and only to the extent) expressly permitted in
the First Preferred Ship Mortgages with respect to the Vegas Express or the
Leisure Lady, if a notice of lien, levy, or assessment is filed of record with
respect to any of Borrower's assets by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether choate or
otherwise, upon any of Borrower's assets and the same is not paid on the
payment date thereof;
8.10 If a judgment or other claim becomes a lien or
encumbrance upon any material portion of Borrower's assets;
8.11 If there is a default in any material agreement to which
Borrower is a party with third parties resulting in a right by such third
parties, whether or not exercised, to accelerate the maturity of Borrower's
indebtedness thereunder;
8.12 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to
Foothill by Borrower or any officer, employee, agent, or director of Borrower,
or if any such warranty or representation is withdrawn by any officer or
director; or
8.13 If the obligation of any guarantor or other third party
under any Loan Document is limited or terminated by operation of law or by the
guarantor or other third party thereunder, or any such guarantor or other third
party becomes the subject of an Insolvency Proceeding.
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90 FOOTHILL'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence of an Event of
Default Foothill may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are
authorized by Borrower:
(a) Declare all Obligations, the Cruise Corporation
Obligations and/or the Leisure Express Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due
and payable;
(b) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Foothill, but without
affecting Foothill's rights and security interest in the Collateral and without
affecting the Obligations, the Cruise Corporation Obligations or the Leisure
Express Obligations;
(c) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Foothill considers necessary
or reasonable to protect its security interest in the Collateral. Borrower
agrees to assemble the Collateral if Foothill so requires, and to make the
Collateral available to Foothill as Foothill may designate. Borrower authorizes
Foothill to enter the premises where the Collateral is located, to take and
maintain possession of the Collateral, or any part of it, and to pay, purchase,
contest, or compromise any encumbrance, charge, or lien that in Foothill's
determination appears to be prior or superior to its security interest and to
pay all expenses incurred in connection therewith. With respect to any of
Borrower's owned premises, Borrower hereby grants Foothill a license to enter
into possession of such premises and to occupy the same, without charge, for up
to one hundred twenty (120) days in order to exercise any of Foothill's rights
or remedies provided herein, at law, in equity, or otherwise;
(d) Without notice to Borrower (such notice being
expressly waived) set off and apply to the Obligations, the Cruise Corporation
Obligations and/or the Leisure Express Obligations any and all (i) balances and
deposits of Borrower held by Foothill, or (ii) indebtedness at any time owing
to or for the credit or the account of Borrower held by Foothill;
(e) Store, maintain, repair, prepare for sale, advertise
for sale, and sell (in the manner provided for herein) the Collateral. Foothill
is hereby granted a license or other right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, advertising for sale and
selling any Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to Foothill's benefit;
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(f) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as
Foothill determines is commercially reasonable. It is not necessary that the
Collateral be present at any such sale;
(g) Foothill may credit bid and purchase at any public
sale.
Foothill shall give notice of the disposition of the Collateral as follows:
(i) Foothill shall give Borrower and each
holder of a security interest in the Collateral who has filed
with Foothill a written request for notice, a notice in
writing of the time and place of public sale, or, if the sale
is a private sale or some other disposition other than a
public sale is to be made of the Collateral, then the time on
or after which the private sale or other disposition is to be
made;
(ii) The notice shall be personally
delivered or mailed, postage prepaid, to Borrower as provided
in Section 12, at least five (5) calendar days before the
date fixed for the sale, or at least five (5) calendar days
before the date on or after which the private sale or other
disposition is to be made, unless the Collateral is
perishable or threatens to decline speedily in value. Notice
to persons other than Borrower claiming an interest in the
Collateral shall be sent to such addresses as they have
furnished to Foothill; and
(iii) If the sale is to be a public sale,
Foothill also shall give notice of the time and place by
publishing a notice one time at least five (5) calendar days
before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held.
9.2 Deficiency; Excess Proceeds. Any deficiency that exists
after disposition of the Collateral as provided above will be paid immediately
by Borrower. Any excess will be returned, without interest and subject to the
rights of third parties, by Foothill to Borrower.
9.3 Remedies Cumulative. Foothill's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by
Foothill of one right or remedy shall be deemed an election, and no waiver by
Foothill of any Event of Default shall be deemed a continuing waiver. No delay
by Foothill shall constitute a waiver, election, or acquiescence by it.
100 TAXES AND EXPENSES REGARDING THE COLLATERAL
Except with respect to Permitted Protests, if Borrower fails
to pay any
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monies (whether taxes, rents, assessments, insurance premiums, or otherwise)
due to third persons or entities, or fails to make any deposits or furnish any
required proof of payment or deposit, all as required under the terms of this
Agreement, then, to the extent that Foothill determines that such failure by
Borrower could have a material adverse effect on Foothill's interests in the
Collateral, in its discretion and without prior notice to Borrower, Foothill
may do any or all of the following: (a) make payment of the same or any part
thereof; or (b) obtain and maintain insurance policies of the type described in
Section 6.8, and take any action with respect to such policies as Foothill
deems prudent. Any amounts paid or deposited by Foothill shall constitute
Foothill Expenses, shall be immediately charged to Borrower and become
additional Obligations, shall bear interest at the then applicable rate set
forth in the Term Note, and shall be secured by the Collateral. Any payments
made by Foothill shall not constitute an agreement by Foothill to make similar
payments in the future or a waiver by Foothill of any Event of Default under
this Agreement. Foothill need not inquire as to, or contest the validity of,
any such expense, tax, security interest, encumbrance, or lien and the receipt
of the usual official notice for the payment thereof shall be conclusive
evidence that the same was validly due and owing.
110 WAIVERS; INDEMNIFICATION
11.1 Demand; Protest; etc. Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees at any time held by Foothill on which Borrower may in any
way be liable.
11.2 Foothill's Liability for Collateral. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code, Foothill
shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the
value thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other person. All risk of loss, damage, or destruction of
the Collateral shall be borne by Borrower.
11.3 Indemnification. Borrower agrees to indemnify Foothill
and its officers, employees, and agents and hold Foothill harmless against: (a)
all obligations, demands, claims, and liabilities claimed or asserted by any
other party, and (b) all losses in any way suffered, incurred, or paid by
Foothill as a result of or in any way arising out of, following, or
consequential to transactions with Borrower whether under this Agreement, or
otherwise. This provision shall survive the termination of this Agreement.
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120 NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection therewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by registered or
certified mail, postage prepaid, return receipt requested, or by prepaid telex,
TWX, telefacsimile, or telegram (with messenger delivery specified) to Borrower
or to Foothill, as the case may be, at its addresses set forth below:
If to Borrower: FLORIDA CASINO CRUISES, INC.
4258 Communications Drive
Norcross, Georgia 30093
Attn: Mr. Elden Rance
Telecopy No.: 770-923-3344
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn.: Small Business Lending Division Manager
Telecopy No.: 310-477-5853
The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other. All
notices or demands sent in accordance with this Section 12, other than notices
by Foothill in connection with Sections 9504 or 9505 of the Code, shall be
deemed received on the earlier of the date of actual receipt or three (3)
calendar days after the deposit thereof in the mail. Borrower acknowledges and
agrees that notices sent by Foothill in connection with Sections 9504 or 9505
of the Code shall be deemed sent when deposited in the mail or transmitted by
telefacsimile or other similar method set forth above.
130 DESTRUCTION OF BORROWER'S DOCUMENTS
All documents, agings, or other papers delivered to Foothill
may be destroyed or otherwise disposed of by Foothill four (4) months after
they are delivered to or received by Foothill, unless Borrower requests, in
writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrower's expense, for their return.
140 GENERAL PROVISIONS
14.1 Effectiveness. This Agreement shall be binding and
deemed effective when executed by Borrower and Foothill.
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14.2 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; provided, however, that Borrower may not assign this Agreement or any
rights or duties hereunder without Foothill's prior written consent and any
prohibited assignment shall be absolutely void. No consent to an assignment by
Foothill shall release Borrower from its Obligations. Foothill may assign this
Agreement and its rights and duties hereunder. Foothill reserves the right to
sell, assign, transfer, negotiate, or grant participation in all or any part
of, or any interest in Foothill's rights and benefits hereunder. In connection
therewith, Foothill may disclose all documents and information which Foothill
now or hereafter may have relating to Borrower or Borrower's business. To the
extent that Foothill assigns its rights and obligations hereunder to a third
party, Foothill shall thereafter be released from such assigned obligations to
Borrower and such assignment shall effect a novation between Borrower and such
third party.
14.3 Section Headings. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each paragraph applies equally to this entire
Agreement.
14.4 Interpretation. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against Foothill
or Borrower, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of all parties hereto.
14.5 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
14.6 Amendments in Writing. This Agreement cannot be changed
or terminated orally. All prior agreements, understandings, representations,
warranties, and negotiations, if any, are merged into this Agreement.
14.7 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.
14.8 Revival and Reinstatement of Obligations. If the
incurrence or payment of the Obligations by Borrower or any guarantor of the
Obligations or the transfer by either or both of such parties to Foothill of
any property of either or both of such parties should for any reason
subsequently be declared to be improper under any state or federal law relating
to creditors' rights, including, without limitation, provisions of the United
States Bankruptcy Code relating to fraudulent conveyances, preferences, and
other voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"),
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and if Foothill is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice of its
counsel, then, as to any such Voidable Transfer, or the amount thereof that
Foothill is required to repay or restore, and as to all reasonable costs,
expenses and attorneys' fees of Foothill related thereto, the liability of
Borrower or such guarantor shall automatically be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.
14.9 Integration. This Agreement, together with the other
Loan Documents, reflects the entire understanding of the parties with respect
to the transactions contemplated hereby and shall not be contradicted,
modified, or qualified by any other agreement, oral or written, whether before
or after the date hereof.
14.10 CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. THE
VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT,
AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED
AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER
COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF
BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 15.10. BORROWER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
OR STATUTORY CLAIMS. BORROWER AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY
OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed at Los Angeles, California.
"Borrower"
FLORIDA CASINO CRUISES, INC.,
a Georgia corporation
By: /s/
-----------------------------------
Print Name:
Title:
Accepted and effective this 22nd day of April, 1999.
"Foothill"
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/
---------------------------
Print Name:
Its:
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SCHEDULE "1"
VESSELS
1. Name: LEISURE LADY
Official No.: 671576
Hailing Port: NEW YORK, NEW YORK
Gross Tons: 88
Net Tons: 88
Built: 1984 (Chesapeake Shipbuilding, Maryland)
Length Overall: 137 feet
Depth: 7.5 feet
2. Name: VEGAS EXPRESS
Official No.: 594643
Gross Tons: 432
Net Tons: 293
Built: 1978 (RYSCO Shipyard, Blountstown, Florida)
Length Overall: 173.5 feet
Depth: 14 feet
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EXHIBIT 10.47
CONTINUING GUARANTY
THIS CONTINUING GUARANTY ("Guaranty"), dated as of April 22, 1999, is
executed and delivered by LEISURE EXPRESS CRUISE, L.L.C., a Colorado limited
liability company ("Guarantor"), in favor of FOOTHILL CAPITAL CORPORATION, a
California corporation ("Foothill"), with reference to the following:
RECITALS
A. Leisure Time Cruise Corporation, a Colorado corporation ("Cruise
Corporation"), and Foothill have previously entered into the Cruise Corporation
Documents (as defined below);
B. Florida Casino Cruises, Inc., a Georgia corporation ("Florida
Casino"; Cruise Corporation and Florida Casino are sometimes referred to herein
individually as a "Borrower" and collectively as the "Borrowers"), is
contemporaneously herewith, entering into the Florida Casino Documents (as
defined below) with Foothill; and
C. In order to induce Foothill to extend financial accommodations to
Borrowers concurrently herewith, and in consideration thereof, and in
consideration of any loans or other financial accommodations heretofore or
hereafter extended by Foothill to Borrowers, Guarantor has agreed to guarantee
the Guaranteed Obligations (defined below).
NOW, THEREFORE, in consideration of the foregoing, Guarantor hereby
agrees, in favor of Foothill, as follows:
1. Definitions and Construction.
(a) Definitions. The following terms, as used in this Guaranty,
shall have the following meanings:
"Bankruptcy Code" means The Bankruptcy Reform Act of 1978 (11
U.S.C. Sections 101-1330), as amended or supplemented from time to time, and
any successor statute, and any and all rules issued or promulgated in
connection therewith.
"Cruise Corporation Documents" shall mean that certain Security
Agreement, dated October 9, 1998, as amended, between Foothill and Cruise
Corporation, that certain Secured Promissory Note in the principal amount of
THREE MILLION DOLLARS ($3,000,000) issued by Cruise Corporation in connection
therewith, and those documents, instruments, and agreements which either now or
in the future exist among Cruise Corporation, Guarantor, or any affiliate of
Cruise Corporation, on the one hand, and Foothill, on the other hand, and any
amendments, modifications, or supplements to any of the foregoing.
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"Florida Casino Documents" shall mean that certain Security
Agreement, of even date herewith, between Foothill and Florida Casino, that
certain Secured Promissory Note in the principal amount of THREE MILLION TWO
HUNDRED TWENTY FIVE THOUSAND DOLLARS ($3,225,000) issued by Florida Casino in
connection therewith, that certain First Preferred Ship Mortgage by Florida
Casino in favor of Foothill, and those documents, instruments, and agreements
which either now or in the future exist among Florida Casino, Guarantor, or any
affiliate of Florida Casino, on the one hand, and Foothill, on the other hand,
and any amendments, modifications, or supplements to any of the foregoing.
"Guaranteed Obligations" means any and all obligations,
indebtedness, or liabilities of any kind or character owed by each Borrower to
Foothill including all such obligations, indebtedness, or liabilities, whether
for principal, interest (including any interest which, but for the application
of the provisions of the Bankruptcy Code, would have accrued on such amounts),
premium, reimbursement obligations, fees, costs, expenses (including,
attorneys' fees), or indemnity obligations, whether heretofore, now, or
hereafter made, incurred, or created, whether voluntarily or involuntarily
made, incurred, or created, whether secured or unsecured (and if secured,
regardless of the nature or extent of the security), whether absolute or
contingent, liquidated or unliquidated, determined or indeterminate, whether
such Borrower is liable individually or jointly with others, and whether
recovery is or hereafter becomes barred by any statute of limitations or
otherwise becomes unenforceable for any reason whatsoever, including any act or
failure to act by Foothill.
"Loan Documents" shall mean, collectively, the Cruise
Corporation Documents and the Florida Casino Documents.
(b) Construction. Unless the context of this Guaranty clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, and the term "including" is not limiting.
The words "hereof," "herein," "hereby," "hereunder," and other similar terms
refer to this Guaranty as a whole and not to any particular provision of this
Guaranty. Any reference herein to any of the Loan Documents includes any and
all alterations, amendments, extensions, modifications, renewals, or
supplements thereto or thereof, as applicable. Neither this Guaranty nor any
uncertainty or ambiguity herein shall be construed or resolved against Foothill
or Guarantor, whether under any rule of construction or otherwise. On the
contrary, this Guaranty has been reviewed by Guarantor, Foothill, and their
respective counsel, and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of Foothill and Guarantor.
2. Guaranteed Obligations. Guarantor hereby irrevocably and
unconditionally guarantees to Foothill, as and for its own debt, until final
and indefeasible
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payment thereof has been made, (a) payment of the Guaranteed Obligations, in
each case when and as the same shall become due and payable, whether at
maturity, pursuant to a mandatory prepayment requirement, by acceleration, or
otherwise; it being the intent of Guarantor that the guaranty set forth herein
shall be a guaranty of payment and not a guaranty of collection; and (b) the
punctual and faithful performance, keeping, observance, and fulfillment by each
Borrower of all of the agreements, conditions, covenants, and obligations of
such Borrower contained in the Loan Documents.
3. Continuing Guaranty. This Guaranty includes Guaranteed Obligations
arising under successive transactions continuing, compromising, extending,
increasing, modifying, releasing, or renewing the Guaranteed Obligations,
changing the interest rate, payment terms, or other terms and conditions
thereof, or creating new or additional Guaranteed Obligations after prior
Guaranteed Obligations have been satisfied in whole or in part. To the maximum
extent permitted by law, Guarantor hereby waives any right to revoke this
Guaranty as to future indebtedness. If such a revocation is effective
notwithstanding the foregoing waiver, Guarantor acknowledges and agrees that
(a) no such revocation shall be effective until written notice thereof has been
received by Foothill, (b) no such revocation shall apply to any Guaranteed
Obligations in existence on such date (including, any subsequent continuation,
extension, or renewal thereof, or change in the interest rate, payment terms,
or other terms and conditions thereof), (c) no such revocation shall apply to
any Guaranteed Obligations made or created after such date to the extent made
or created pursuant to a legally binding commitment of Foothill in existence on
the date of such revocation, (d) no payment by Guarantor, a Borrower, or from
any other source, prior to the date of such revocation shall reduce the maximum
obligation of Guarantor hereunder, and (e) any payment by Borrower or from any
source other than Guarantor, subsequent to the date of such revocation, shall
first be applied to that portion of the Guaranteed Obligations as to which the
revocation is effective and which are not, therefore, guaranteed hereunder, and
to the extent so applied shall not reduce the maximum obligation of Guarantor
hereunder.
4. Performance Under This Guaranty. In the event that a Borrower fails
to make any payment of any Guaranteed Obligations on or before the due date
thereof, or if a Borrower shall fail to perform, keep, observe, or fulfill any
other obligation referred to in clause (b) of Section 2 hereof in the manner
provided in the Loan Documents, Guarantor immediately shall cause such payment
to be made or each of such obligations to be performed, kept, observed, or
fulfilled.
5. Primary Obligations. This Guaranty is a primary and original
obligation of Guarantor, is not merely the creation of a surety relationship,
and is an absolute, unconditional, and continuing guaranty of payment and
performance which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity or
irregularity with respect to the Loan Documents. Guarantor agrees that it is
directly, jointly and severally with any other guarantor of the Guaranteed
Obligations, liable to Foothill, that the obligations of Guarantor hereunder
are independent of the obligations of
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Borrowers or any other guarantor, and that a separate action may be brought
against Guarantor whether such action is brought against a Borrower or any
other guarantor or whether such Borrower or any such other guarantor is joined
in such action. Guarantor agrees that its liability hereunder shall be
immediate and shall not be contingent upon the exercise or enforcement by
Foothill of whatever remedies it may have against a Borrower or any other
guarantor, or the enforcement of any lien or realization upon any security
Foothill may at any time possess. Guarantor agrees that any release which may
be given by Foothill to a Borrower or any other guarantor shall not release
Guarantor. Guarantor consents and agrees that Foothill shall be under no
obligation to marshal any assets of Borrowers or any other guarantor in favor
of Guarantor, or against or in payment of any or all of the Guaranteed
Obligations.
6. Waivers.
(a) To the maximum extent permitted by law, Guarantor hereby
waives: (1) notice of acceptance hereof; (2) notice of any loans or other
financial accommodations made or extended under the Loan Documents or the
creation or existence of any Guaranteed Obligations; (3) notice of the amount
of the Guaranteed Obligations, subject, however, to Guarantor's right to make
inquiry of Foothill to ascertain the amount of the Guaranteed Obligations at
any reasonable time; (4) notice of any adverse change in the financial
condition of either Borrower or of any other fact that might increase
Guarantor's risk hereunder; (5) notice of presentment for payment, demand,
protest, and notice thereof as to any promissory notes or other instruments
among the Loan Documents; (6) notice of any event of default under the Loan
Documents; and (7) all other notices (except if such notice is specifically
required to be given to Guarantor hereunder or under any Loan Document to which
Guarantor is a party) and demands to which Guarantor might otherwise be
entitled.
(b) To the maximum extent permitted by law, Guarantor hereby waives
the right by statute or otherwise to require Foothill to institute suit against
a Borrower or to exhaust any rights and remedies which Foothill has or may have
against such Borrower. In this regard, Guarantor agrees that it is bound to the
payment of all Guaranteed Obligations, whether now existing or hereafter
accruing, as fully as if such Guaranteed Obligations were directly owing to
Foothill by Guarantor. Guarantor further waives any defense arising by reason
of any disability or other defense (other than the defense that the Guaranteed
Obligations shall have been fully and finally performed and indefeasibly paid)
of a Borrower or by reason of the cessation from any cause whatsoever of the
liability of such Borrower in respect thereof.
(c) To the maximum extent permitted by law, Guarantor hereby
waives: (1) any rights to assert against Foothill any defense (legal or
equitable), set-off, counterclaim, or claim which Guarantor may now or at any
time hereafter have against a Borrower or any other party liable to Foothill;
(2) any defense, set-off, counterclaim, or claim, of any kind or nature,
arising directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed Obligations or any
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security therefor; (3) any defense based upon or arising out of an election of
remedies by Foothill including any defense based upon an election of remedies
by Foothill under the provisions of Sections 580d and 726 of the California
Code of Civil Procedure, or any similar law of California or any other
jurisdiction; (4) the benefit of any statute of limitations affecting
Guarantor's liability hereunder or the enforcement thereof, and any act which
shall defer or delay the operation of any statute of limitations applicable to
the Guaranteed Obligations shall similarly operate to defer or delay the
operation of such statute of limitations applicable to Guarantor's liability
hereunder; (5) all rights and defenses arising out of an election of remedies
by Foothill, even though that election of remedies, such as nonjudicial
foreclosure with respect to security for the Guaranteed Obligations, has
destroyed the Guarantors' rights of subrogation and reimbursement against a
Borrower by the operation of Section 580d of the California Code of Civil
Procedure or otherwise; and (6) all rights and defenses that Guarantor may have
because the Guaranteed Obligations are secured by real property or an estate
for years. As to clause "(6)" of this paragraph 6(c), this waiver means, among
other things: (i) Foothill may collect from Guarantor without first foreclosing
on any real or personal property collateral pledged by a Borrower; and (ii) if
Foothill forecloses on any real property (or an estate for years) pledged by
such Borrower: (A) the amount of the Guaranteed Obligations may be reduced only
by the price for which that collateral is sold at the foreclosure sale, even if
the collateral is worth more than the sale price, and (B) Foothill may collect
from Guarantor even if Foothill, by foreclosing on the real property
collateral, has destroyed any right Guarantor may have to collect from such
Borrower. The waiver in clause "(6)" of this paragraph 6(c) is an unconditional
and irrevocable waiver of any rights and defenses that Guarantor may have
because either Borrower's debt is secured by real property or an estate for
years. These rights and defenses include, but are not limited to, any rights or
defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of
Civil Procedure.
(d) To the maximum extent permitted by law, Guarantor hereby waives
any right of subrogation or reimbursement Guarantor has or may have as against
Borrowers with respect to the Guaranteed Obligations. In addition, Guarantor
hereby waives any right to proceed against either Borrower, now or hereafter,
for contribution, indemnity, reimbursement, and any other suretyship rights and
claims, whether direct or indirect, liquidated or contingent, whether arising
under express or implied contract or by operation of law, which Guarantor may
now have or hereafter have as against such Borrower with respect to the
Guaranteed Obligations. Guarantor also hereby waives any rights to recourse to
or with respect to any asset of either Borrower. Guarantor agrees that in light
of the immediately foregoing waivers, the execution of this Guaranty shall not
be deemed to make Guarantor a "creditor" of either Borrower, and that for
purposes of Sections 547 and 550 of the Bankruptcy Code Guarantor shall not be
deemed a "creditor" of either Borrower.
(e) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY WAIVES, TO THE MAXIMUM
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHTS, BENEFITS, SANCTIONS, OR DEFENSES
ARISING DIRECTLY OR
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INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE SECTIONS 2787 TO
2855, INCLUSIVE, CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 580a, 580b, 580c,
580d, AND 726, AND CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL CODE.
7. Releases. Guarantor consents and agrees that, without notice to or
by Guarantor and without affecting or impairing the obligations of Guarantor
hereunder, Foothill may, by action or inaction:
(a) compromise, settle, extend the duration or the time for the
payment of, or discharge the performance of, or may refuse to or otherwise not
enforce the Loan Documents;
(b) release all or any one or more parties to any one or more of
the Loan Documents or grant other indulgences to either Borrower in respect
thereof;
(c) amend or modify in any manner and at any time (or from time to
time) any of the Loan Documents;
(d) increase or decrease at any time (or from time to time) the
amount of the Guaranteed Obligations, the amount or rate of interest applicable
thereto, and/or the amount of fees or other charges imposed in connection
therewith; or
(e) release or substitute any other guarantor, if any, of the
Guaranteed Obligations, or enforce, exchange, release, or waive any security
for the Guaranteed Obligations or any other guaranty of the Guaranteed
Obligations, or any portion thereof.
8. No Election. Foothill shall have the right to seek recourse against
Guarantor to the fullest extent provided for herein, and no election by
Foothill to proceed in one form of action or proceeding, or against any party,
or on any obligation, shall constitute a waiver of Foothill's right to proceed
in any other form of action or proceeding or against other parties unless
Foothill has expressly waived such right in writing. Specifically, but without
limiting the generality of the foregoing, no action or proceeding by Foothill
under any document or instrument evidencing the Guaranteed Obligations shall
serve to diminish the liability of Guarantor under this Guaranty except to the
extent that Foothill finally and unconditionally shall have realized
indefeasible payment by such action or proceeding.
9. Indefeasible Payment. The Guaranteed Obligations shall not be
considered indefeasibly paid for purposes of this Guaranty unless and until all
payments to Foothill are no longer subject to any right on the part of any
person, including each Borrower, a Borrower as a debtor in possession, or any
trustee (whether appointed under the Bankruptcy Code or otherwise) of either
Borrower's assets to invalidate or set aside such payments or to
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<PAGE> 7
seek to recoup the amount of such payments or any portion thereof, or to
declare same to be fraudulent or preferential. Until such full and final
performance and indefeasible payment of the Guaranteed Obligations whether by
Guarantor or a Borrower, Foothill shall have no obligation whatsoever to
transfer or assign its interest in the Loan Documents to Guarantor. In the
event that, for any reason, any portion of such payments to Foothill is set
aside or restored, whether voluntarily or involuntarily, after the making
thereof, then the obligation intended to be satisfied thereby shall be revived
and continued in full force and effect as if said payment or payments had not
been made, and Guarantor shall be liable for the full amount Foothill is
required to repay plus any and all costs and expenses (including attorneys'
fees) paid by Foothill in connection therewith.
10. Financial Condition of Borrowers. Guarantor represents and
warrants to Foothill that Guarantor is currently informed of the financial
condition of each Borrower and of all other circumstances which a diligent
inquiry would reveal and which bear upon the risk of nonpayment of the
Guaranteed Obligations. Guarantor further represents and warrants to Foothill
that Guarantor has read and understands the terms and conditions of the Loan
Documents. Guarantor hereby covenants that Guarantor will continue to keep
informed of each Borrower's financial condition, the financial condition of
other guarantors, if any, and of all other circumstances which bear upon the
risk of nonpayment or nonperformance of the Guaranteed Obligations.
11. Subordination. Guarantor hereby agrees that any and all present
and future indebtedness of each Borrower owing to Guarantor is postponed in
favor of and subordinated to payment, in full, in cash, of the Guaranteed
Obligations. In this regard, no payment of any kind whatsoever shall be made
with respect to such indebtedness until the Guaranteed Obligations have been
indefeasibly paid in full.
12. Payments; Application. All payments to be made hereunder by
Guarantor shall be made in lawful money of the United States of America at the
time of payment, shall be made in immediately available funds, and shall be
made without deduction (whether for taxes or otherwise) or offset. All payments
made by Guarantor hereunder shall be applied as follows: first, to all costs
and expenses (including attorneys' fees) incurred by Foothill in enforcing this
Guaranty or in collecting the Guaranteed Obligations; second, to all accrued
and unpaid interest, premium, if any, and fees owing to Foothill constituting
Guaranteed Obligations; and third, to the balance of the Guaranteed
Obligations.
13. Attorneys' Fees and Costs. Guarantor agrees to pay, on demand, all
reasonable attorneys' fees and all other costs and expenses which may be
incurred by Foothill in the enforcement of this Guaranty or in any way arising
out of, or consequential to the protection, assertion, or enforcement of the
Guaranteed Obligations (or any security therefor), whether or not suit is
brought.
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<PAGE> 8
14. Indemnification. Guarantor agrees to indemnify Foothill and hold
Foothill harmless against all obligations, demands, or liabilities asserted by
any party and against all losses in any way suffered, incurred, or paid by
Foothill as a result of or in any way arising out of, following, or
consequential to Foothill's transactions with either Borrower.
15. Notices. All notices or demands by Guarantor or Foothill to the
other relating to this Guaranty shall be in writing and either personally
served or sent by registered or certified mail, postage prepaid, return receipt
requested, or by prepaid telex, telefacsimile, or telegram, and shall be deemed
to be given for purposes of this Guaranty on the day that such writing is
received by the party to whom it is sent. Unless otherwise specified in a
notice sent or delivered in accordance with the provisions of this section,
such writing shall be sent, if to Guarantor, at Guarantor's address set forth
on the signature page hereof, and if to Foothill, then as follows:
Foothill Capital Corporation
11111 Santa Monica Boulevard, Suite 1500
Los Angeles, California 90025-3333
Attn: Small Business Lending Division
16. Cumulative Remedies. No remedy under this Guaranty or under any
Loan Document is intended to be exclusive of any other remedy, but each and
every remedy shall be cumulative and in addition to any and every other remedy
given hereunder or under any Loan Document, and those provided by law or in
equity. No delay or omission by Foothill to exercise any right under this
Guaranty shall impair any such right nor be construed to be a waiver thereof.
No failure on the part of Foothill 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.
17. Books and Records. Guarantor agrees that Foothill's books and
records showing the account between Foothill and either Borrower shall be
admissible in any action or proceeding and shall be binding upon Guarantor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof.
18. Severability of Provisions. Any provision of this Guaranty which
is prohibited or unenforceable under applicable law, shall be ineffective to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
19. Entire Agreement; Amendments. This Guaranty constitutes the entire
agreement between Guarantor and Foothill pertaining to the subject matter
contained herein. This Guaranty may not be altered, amended, or modified, nor
may any provision hereof be waived or noncompliance therewith consented to,
except by means of a writing executed by both Guarantor and Foothill. Any such
alteration, amendment, modification, waiver, or
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<PAGE> 9
consent shall be effective only to the extent specified therein and for the
specific purpose for which given. No course of dealing and no delay or waiver
of any right or default under this Guaranty shall be deemed a waiver of any
other, similar or dissimilar right or default or otherwise prejudice the rights
and remedies hereunder.
20. Successors and Assigns. The death of Guarantor shall not terminate
this Guaranty. This Guaranty shall be binding upon Guarantor's heirs,
executors, administrators, representatives, successors, and assigns and shall
inure to the benefit of the successors and assigns of Foothill; provided,
however, Guarantor shall not assign this Guaranty or delegate any of its duties
hereunder without Foothill's prior written consent. Any assignment without the
consent of Foothill shall be absolutely void. In the event of any assignment or
other transfer of rights by Foothill, the rights and benefits herein conferred
upon Foothill shall automatically extend to and be vested in such assignee or
other transferee.
21. Separate Property. Any married individual who signs this Guaranty
in his or her individual capacity hereby expressly agrees that recourse may be
had against his or her separate property for all Guaranteed Obligations
hereunder.
22. Choice of Law and Venue. THE VALIDITY OF THIS GUARANTY, ITS
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF GUARANTOR AND
FOOTHILL, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR HEREBY
AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS GUARANTY
SHALL BE TRIED AND DETERMINED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN
THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, OR, AT THE SOLE OPTION OF
FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR HEREBY
EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION.
23. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION,
CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS GUARANTY, OR IN ANY WAY CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
DEALINGS OF GUARANTOR AND FOOTHILL WITH RESPECT TO THIS GUARANTY, OR THE
TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT, OR
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<PAGE> 10
OTHERWISE. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR HEREBY AGREES THAT
ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING SHALL BE DECIDED
BY A COURT TRIAL WITHOUT A JURY AND THAT FOOTHILL MAY FILE AN ORIGINAL
COUNTERPART OF THIS SECTION WITH ANY COURT OR OTHER TRIBUNAL AS WRITTEN
EVIDENCE OF THE CONSENT OF GUARANTOR TO THE WAIVER OF ITS RIGHT TO TRIAL BY
JURY.
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date set forth in the first paragraph hereof.
LEISURE EXPRESS CRUISE, L.L.C.,
a Colorado limited liability company
By: Leisure Time Cruise Corporation,
a Colorado corporation,
its managing member
By: /s/
------------------------------------
Print Name:
Title:
Guarantor's
Address: 4258 Communications Drive
Norcross, Georgia 30093
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<PAGE> 1
EXHIBIT 10.48
FIRST PREFERRED SHIP MORTGAGE
THIS FIRST PREFERRED SHIP MORTGAGE made effective as of April 22, 1999,
by and between FLORIDA CASINO CRUISES, INC., a Georgia corporation, whose
address is 2077 Pine Ridge Road, Naples, Florida 34109 (the "Mortgagor"), and
FOOTHILL CAPITAL CORPORATION, a California corporation whose address is 11111
Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333 (the
"Mortgagee"). The Mortgagee shall be a mortgagee in 100% of the Vessel described
below.
W I T N E S S E T H:
MORTGAGE AMOUNT: THE AMOUNT OF THE DIRECT OR CONTINGENT OBLIGATIONS
THAT ARE OR MAY BECOME SECURED BY THIS FIRST PREFERRED SHIP MORTGAGE, EXCLUDING
INTEREST, EXPENSES AND OTHER FEES, IS $8,325,000.00.
WHEREAS, the Mortgagor is the sole owner of the whole of the following
vessel:
Name: Vegas Express
Official No.: 594643
Hailing Port:
Gross Tons: 432
Net Tons: 293
Built: 1978 (RYSCO Shipyard, Blounstown, Florida)
Length Overall: 173.8 feet
Depth: 14 feet
which vessel is duly documented under and pursuant to the laws of the United
States; and
WHEREAS, the Mortgagor is justly indebted to Mortgagee in the principal
sum of up to Eight Million Three Hundred Twenty Five Thousand Dollars
($8,325,000.00) (hereinafter referred to as the "Principal Sum"), and interest
thereon, which indebtedness is evidenced, inter alia, by a certain Security
Agreement, between Mortgagor and Mortgagee (the "Security Agreement", to which
reference is made for capitalized terms not otherwise defined herein), a Secured
Promissory Note in the original principal amount of $3,225,000, executed by
Mortgagor in favor of Mortgagee (the "Note"), a Continuing Guaranty, pertaining
to, among other things, certain indebtedness owing by Leisure Time Cruise
Corporation and Leisure Express Cruise, L.L.C. to Mortgagee, executed by
Mortgagor in favor of Mortgagee (the "Guaranty"), each of even date herewith,
and copies of which are attached hereto as Exhibit A; and
WHEREAS, the Principal Sum, all interest thereon, all late charges as
set forth in the Security Agreement, the Note, the Guaranty, all other costs and
expenses incurred by the Mortgagee in the enforcement and administration of the
Security Agreement, the Note, the
<PAGE> 2
Guaranty, and this First Preferred Ship Mortgage, and any and all future
advances as may be made from Mortgagee to Mortgagor the total of which, however,
shall not exceed the Principal Sum, shall be collectively referred to hereafter
as the "Secured Obligations"; and
WHEREAS, the Mortgagor, for the purpose of securing payment to the
Mortgagee of the Secured Obligations, as more fully set forth herein, has duly
executed and delivered this First Preferred Ship Mortgage on VEGAS EXPRESS to
the Mortgagee;
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
In consideration of the foregoing recitals and of the sum of One Dollar
($1.00) to the Mortgagor duly paid by the Mortgagee at and before the sealing
and delivery of these presents, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, and in order to secure the payment
of the Secured Obligations, the Mortgagor, by these presents, does grant,
bargain, sell, convey, transfer, assign, remise, mortgage set over, pledge,
create a security interest in, and confirm to the Mortgagee, its successors and
assigns, the following described property:
The whole of all that certain vessel designated and known as VEGAS
EXPRESS, Official No. 594643, together with all her engines, boilers, machinery,
masts, spars, motors, tools, booms, cranes, rigs, pumps, pipe, tanks, anchors,
cables, rigging, tackle, apparel, fixtures, furniture, boats, chains, equipment,
supplies, fittings, and all her other appurtenances thereunto appertaining and
belonging, whether aboard or removed from the said vessel, together with any and
all additions, improvements, and/or replacements which may hereafter be made to,
on or in said Vessel or any part thereof, whether on board or not, and in or to
her equipment and appurtenances aforesaid, and all rents, charters, charter
parties, charter hire, freights, sub-freights, cargoes, operating agreements and
revenues, lighterage, and all issues, revenues, profits and proceeds of any of
the foregoing, but in no event shall the Vessel include: (a) any accounts of
Mortgagor arising in connection with the operation of the Vessel by Mortgagor,
or the gensets, chassis or other equipment described in clause (b), and (b) any
gensets, chassis, or other equipment leased by Mortgagor and used on or in
connection with the operation of the Vessel, all of the foregoing being
hereinafter referred to as the "Vessel."
TO HAVE AND TO HOLD all of the Vessel unto the Mortgagee, its
successors and assigns, forever upon the terms herein set forth to secure the
performance and observance of and compliance with the covenants, terms and
conditions in this First Preferred Ship Mortgage and the Security Agreement,
Note, and Guaranty contained therein; provided, however, that if the Mortgagor
shall pay, or cause to be paid, to the Mortgagee, its successors or assigns, the
debt aforesaid, with interest thereon, as and when the same shall become due and
payable by maturity or otherwise, under the terms and in the manner provided in
the Security Agreement, the Note, the Guaranty, and this Preferred Ship
Mortgage, and keeps, performs and observes all and singular the covenants and
promises in the Security Agreement, the Note, and the Guaranty and in these
presents expressed to be kept, performed, and observed by or on the part of the
Mortgagor, then this First Preferred Ship Mortgage and the estate and rights
hereby granted shall cease.
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PAYMENT SCHEDULE: The Mortgagor shall pay or cause to be paid to the
Mortgagee, its successors or assigns, the Principal Sum with the interest
thereon, in accordance with the terms and conditions of the Security Agreement,
the Note, and the Guaranty.
MORTGAGE OBLIGATION: The Mortgagor hereby agrees to pay the Principal
Sum and the interest thereon as stipulated, and to fulfill, perform and observe
each and every one of the covenants, agreements, and conditions contained in
this First Preferred Ship Mortgage and in the Note, the Security Agreement, and
the Guaranty; and hereby covenants and agrees to and with the Mortgagee, its
successors and assigns, that the Vessel and the appurtenances thereunto
appertaining and belonging, and all additions, improvements and/or replacements
which may hereafter be made to, on or in said Vessel are to become subject
hereto, and are to be held subject to this First Preferred Ship Mortgage and the
further covenants, representations, warranties, conditions and uses hereinafter
set forth as follows:
Article 1. Corporate Representations and Warranties. Corporate representations
and warranties shall be as set forth in Section 5 of the Security Agreement.
Article 2. Validity of Mortgage. The Mortgagor covenants that this First
Preferred Ship Mortgage is and will be a valid and enforceable obligation of the
Mortgagor in accordance with its terms.
Article 3. Ownership of Vessel. The Mortgagor warrants that it is and shall
continue to be a citizen of the United States as defined and within the meaning
of the Shipping Act of 1916, as amended, 46 App. U.S.C. Section 802, and a
corporation established under the laws of the United States or of a State, whose
president or other chief executive officer and chairman of its board of
directors are citizens of the United States and no more of its directors are
noncitizens than a minority of the number necessary to constitute a quorum,
within the meaning of Section 7 of the Act of August 26, 1983, P.L. 98-89, 97
Stat. 585, as amended, 46 U.S.C. Section 12102, as amended. The Mortgagor
warrants that it is the true, lawful and sole owner of the whole of the Vessel,
including her engines, boilers, machinery, masts, anchors, cables, rigging,
tackle, apparel, furniture, small boats, and all other appurtenances, and that
its ownership is free and clear of all suits, liens, claims, charges, or
encumbrances of any kind or nature except for (a) liens arising prior to the
date of this First Preferred Ship Mortgage which arose in the ordinary course of
business and by operation of law, which liens are no greater than approximately
$25,000.00 as of this date and (b) liens granted to Mortgagee, and that all
action necessary and required by law for the execution and delivery of this
First Preferred Ship Mortgage has been duly and effectively taken, and that this
First Preferred Ship Mortgage is a valid and binding obligation of the Mortgagor
enforceable in accordance with its terms, and that it will forever warrant and
defend its title and possession for the benefit of the Mortgagee against any and
all claims and demands.
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<PAGE> 4
Article 4. Insurance.
(a) The Mortgagor at its own cost and expense as long as any part of the
Secured Obligations are unpaid shall keep the Vessel insured with responsible
underwriters in good standing and reasonably satisfactory to the Mortgagee fully
and adequately protecting the Vessel and the Mortgagee's interest therein
against any marine perils and disasters and all hazards, risks, or liabilities
in any way arising out of the ownership, operation or maintenance of the Vessel,
as provided in the aforesaid Security Agreement, including but not limited to
insurance as follows:
(i) Marine Hull and Machinery and Increased Value insurance in an
amount not less than the full market value of the Vessel, with
responsible underwriters and under policy forms satisfactory to the
Mortgagee, covering the hull and all equipment and appurtenances of the
Vessel against all usual marine risks subject, with respect to an
accident, occurrence, or event that does not result in an actual or
constructive total loss of the Vessel, to no deductible in excess of
$50,000.
(ii) Protection and Indemnity Insurance with underwriters and
under policy forms and in amounts reasonably satisfactory to the
Mortgagee.
(iii) When and while the Vessel is laid up, and in lieu of the
aforesaid insurance referred to in paragraph (i) of this section, Port
Risk Insurance on the Vessel may be taken out by the Mortgagor under
forms of port risk policies and with underwriters satisfactory to the
Mortgagee.
(iv) Insurance protecting against claims under the Longshoremen's
and Harbor Workers, Compensation Act, Workmen's Compensation and public
liability.
(v) Upon the request of the Mortgagee, Mortgagee's Interest
Insurance, including Breach of Warranty insurance if reasonably
available, with responsible underwriters and under policy forms
satisfactory to Mortgagee.
(vi) Collision and property damage insurance with underwriters and
under policy forms and in amounts satisfactory to the Mortgagee.
(vii) Wreck removal and fire insurance with underwriters and under
policy forms and in amounts satisfactory to the Mortgagee.
(viii) Insurance against loss of hire and strikes with a daily
indemnity of not less than $10,000.00 per day, commencing after 3 days
and continuing for up to 21 days per instance.
(ix) MII Additional Perils (Pollution) insurance with underwriters
and under policy forms and in amounts satisfactory to the Mortgagee.
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<PAGE> 5
(b) All Hull and Machinery insurance shall be taken out in the name of
the Mortgagor, but all losses shall be payable to the Mortgagee for distribution
by it, as its interests may appear, except that: (i) in the case of a total
loss, the Mortgagee consents that the underwriters pay direct to the Mortgagor
the amount by which the total loss exceeds the amount then due under the
Mortgage, the Security Agreement, the Note, and the Guaranty; and (ii) in the
event of a partial loss, if there is not a default under this First Preferred
Ship Mortgage, the Mortgagee agrees that the underwriters may pay directly for
repairs, salvage, or other charges and/or reimburse the Mortgagor therefor;
however, (iii) in any event, if the amount of the partial loss is less than
$5,000, Mortgagee consents that the underwriters may pay directly to the
Mortgagor. If the Mortgagor is in default under this First Preferred Ship
Mortgage, the Security Agreement, or the Note, the Mortgagee shall be entitled
to receive the proceeds of any such insurance and shall apply such proceeds in
the manner provided in Article 10(f).
(c) All insurance shall be taken out in the names of the Mortgagor and
any bareboat charterer, with Mortgagee named as an additional insured or loss
payee as follows: (i) Hull and Machinery Insurance and Port Risk Insurance shall
name the Mortgagee as first preferred Mortgagee and loss payee; (ii) Protection
& Indemnity Insurance shall name the Mortgagee as an additional insured.
(d) With respect to both the Mortgagee's Interest and the MII
Additional Perils (Pollution) policies, Mortgagor shall effect and maintain, or,
at the option of the Mortgagee from time to time, reimburse to the Mortgagee on
the Mortgagee's first demand from time to time all costs and expenses incurred
by the Mortgagee in effecting and maintaining, on such terms, in such amounts as
is customary in the industry, and with such insurers as the Mortgagee shall
consider reasonably appropriate.
(e) Copies of all policies, binders and cover notes, together with
original underwriter's certificates, shall be delivered to the Mortgagee from
time to time upon its request for approval and custody.
(f) Mortgagor will pay or cause to be paid the premiums on and costs of
all such insurance and all renewals thereof, when and as the same become
payable, and will forthwith furnish to Mortgagee evidence satisfactory to the
Mortgagee that the same has been paid if requested by the Mortgagee.
(g) The Mortgagor will keep the aforesaid insurance and renewals
thereof valid at all times while this First Preferred Ship Mortgage remains in
force, will comply and will cause any charterer or subcharterer to comply with
all Institute Warranties and Clauses, and will not suffer or permit the Vessel
to engage in any voyage or to carry any cargo not permitted by the policies of
insurance in effect at the time of the voyage, nor do, omit, neglect, or permit
to be done anything whereby any insurance, whether procured by the Mortgagor or
Mortgagee, is or is liable to be impaired or defeated. If at any time (i)
Mortgagor shall fail to deliver to and maintain with the Mortgagee, upon
request, original policies or other insurance documents and other evidence
satisfactory to the Mortgagee that the insurance has been effected and
maintained as hereinabove
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and in the Security Agreement required or (ii) any insurance required to be
maintained hereunder or under the Security Agreement is canceled, terminated or
fails to be renewed without replacement coverage complying with the requirements
hereof and of the Security Agreement, then the Mortgagee may procure the
insurance, and from the date of such expenditure the costs and expenses thereof,
with interest at the rates provided in the Note, shall be an additional
indebtedness due from the Mortgagor secured by this First Preferred Ship
Mortgage and shall be paid by the Mortgagor on demand. The Mortgagee shall not
be under any obligation to procure any such insurance.
(h) Each insurance policy shall prohibit cancellation or substantial
modification by the insurer without the written consent of both the Mortgagor
and the Mortgagee, or, in the absence of such consent, without at least 10 days'
prior written notice to Mortgagor and Mortgagee. Mortgagor shall request that
its P&I Club shall give the Mortgagee as much notice as possible of Mortgagor's
failure to renew its entry in the Club, and in any event Mortgagor shall so
notify Bank immediately if its entry in the Club is not renewed.
(i) Each insurance policy shall provide that there shall be no recourse
against the Mortgagee for premiums in respect thereof.
(j) On the date hereof and on or before April 30 of each year
thereafter, the Mortgagor will furnish to the Mortgagee a report signed by a
recognized marine insurance broker(s) selected by the Mortgagor and reasonably
satisfactory to the Mortgagee with respect to the insurance maintained under
this First Preferred Ship Mortgage (including, without limitation, as to each
policy, its number, the amount, the insurer, the named assureds, the type of
risk, the loss payees and the expiration date).
Article 5. Environmental Matters
(a) The Mortgagor shall operate the Vessel in material compliance with
all Environmental Laws, including but not limited to the Oil Pollution Act of
1990. The Mortgagor has a Vessel Response Plan and a Spill Prevention Plan and
Contingency Plan in force, to the extent applicable.
(b) The Mortgagor shall indemnify and hold harmless the Mortgagee and
its successors and assigns from and against all losses, costs, injuries, damages
(including consequential, punitive or treble damages) and expenses (including
attorneys' fees and disbursements) and, at the Mortgagee's request, defend any
indemnified person under this provision against any action, suit, or other
proceeding resulting from, arising out of or in any way connected directly or
indirectly with any violation of or liability under any Environmental Law with
respect to the ownership, custody, management, operation or control of the
Vessel or the generation of waste by, or the transportation of waste from, the
Vessel.
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(c) The Mortgagor shall maintain a Certificate of Financial
Responsibility issued by the United States pursuant to the Federal Water
Pollution Control Act, and any other applicable legislation.
Article 6. Creation of Liens.
(a) Neither the Mortgagor, the managing owner, ship's husband, master,
or any other person to whom the management of the Vessel may be entrusted, or
any charterer or subcharterer shall have any right, power or authority to
create, incur, or permit to be placed or imposed on the Vessel any liens or
encumbrances whatsoever, other than Ordinary Maritime Liens, which liens consist
of (a) liens in favor of Mortgagee or (b) statutory liens for crew's wages,
wages of stevedores, or for salvage (including contract salvage), or general
average or (c) liens arising in the ordinary course of business prior to the
date hereof or (d) other liens incurred in the ordinary course of business which
are not past due, but only to the extent that such other liens are subordinate
to the lien of this First Preferred Ship Mortgage.
(b) The Mortgagor shall carry a properly certified copy of this First
Preferred Ship Mortgage with the ship's papers and shall exhibit the same to any
person having business with the Vessel which may give rise to any lien other
than for crew's wages or salvage, or to the sale, mortgage or other conveyance
thereof. The Mortgagor shall place and keep prominently in the pilot house,
master's cabin, or engine room of the Vessel a printed or typewritten notice
written as follows:
"This Vessel is owned by FLORIDA CASINO CRUISES, INC. and is
subject to a First Preferred Ship Mortgage dated effective as of
April 22, 1999, in favor of FOOTHILL CAPITAL CORPORATION under
authority of the Act of November 23, 1988, P.L. 100-710, as
amended, and under the terms of said Mortgage, neither the owner,
the master nor any other person has any right, power or authority
to create, incur or permit to be imposed upon this vessel, its
freights, sub-freights, cargoes, profits, hire, charter hire or
revenues, any liens whatsoever, other than for crew's wages or
salvage, including contract salvage or general average."
(c) In the event that a claim for salvage is asserted against the
Vessel, Mortgagor and/or Mortgagee, the Mortgagor shall discharge any ultimate
lien, liability and/or judgment. Any amount paid by the Mortgagee, whether in
settlement of a claim or in satisfaction of a judgment, shall be a debt which is
part of the Secured Obligations, the repayment of which is secured by the lien
of this First Preferred Ship Mortgage and shall be payable when demanded by the
Mortgagee, with at the rates provided in the Note, from the date of payment by
the Mortgagee.
(d) In the event that the title or ownership of the Vessel shall be
requisitioned, purchased or taken by the United States of America or any
government of any other country or any department, agency or representative
thereof, pursuant to any present or future law, proclamation, decree, order or
otherwise, the lien of this First Preferred Ship Mortgage shall be deemed to
attach to the claim for compensation, and the compensation, purchase price,
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reimbursement or award for such requisition, purchase or other taking of such
title or ownership is hereby declared payable to Mortgagee, who shall be
entitled to receive the same and shall apply it to the prepayment of the Note
and the amounts covered by the Guaranty; and in the event of any such
requisition, purchase or taking, the Mortgagor shall promptly execute and
deliver to Mortgagee such documents, if any, as in the opinion of counsel for
Mortgagee may be necessary or useful to facilitate or expedite the collection by
Mortgagee of such compensation, purchase price, reimbursement or award.
(e) In the event that the United States of America or any government of
any other country or any department, agency or representative thereof shall not
take the title or ownership of the Vessel but shall requisition, charter, or in
any manner take over the use of such Vessel pursuant to any present or future
law, proclamation, decree, order or otherwise, and in the event Mortgagor is in
default of the terms of this First Preferred Ship Mortgage, all charter hire and
compensation resulting therefrom shall be payable to Mortgagee, and if, as a
result of such requisitioning, chartering or taking of the use of such Vessel
such government, department, agency or representative thereof shall pay or
become liable to pay any sum by reason of the loss of or injury to or
depreciation of the Vessel any such sum is hereby made payable to Mortgagee, and
in the event of any such requisitioning, chartering or taking of the use of the
Vessel, the Mortgagor shall promptly execute and deliver to Mortgagee such
documents, if any, and shall promptly do and perform such acts, if any, as in
the opinion of counsel for Mortgagee may be necessary or useful to facilitate or
expedite the collection by Mortgagee of such claims arising out of the
requisitioning, chartering or taking of the use of such Vessel.
Article 7. Maintenance and Operation of Vessel.
(a) The Vessel is tight, staunch, strong and well and sufficiently
tackled, appareled, victualed, fitted, manned, furnished, and equipped, and in
every respect seaworthy and in good running condition and repair and in all
respects fit for service. At all times, at its own cost and expense, the
Mortgagor will exercise due diligence to maintain and preserve the Vessel in as
good condition, working order and repair as at the time of the execution of this
First Preferred Ship Mortgage, ordinary wear and tear and depreciation excepted,
and will maintain the Vessel in accordance with good marine maintenance practice
and procedures and applicable legal or regulatory requirements for the service
in which it then is or will be engaged, and in such condition as will enable her
to pass such inspection as may be required by marine underwriters as a condition
of their writing such insurance and in such amounts as is required under this
First Preferred Ship Mortgage. Furthermore, if the vessel is not temporarily
laid-up, the Mortgagor will cause the Vessel to be periodically inspected,
drydocked and recoated (hull paint), and its machinery overhauled in accordance
with normal marine practices or as may be required by the United States Coast
Guard or applicable Classification Society.
(b) The Mortgagor shall afford the Mortgagee or its authorized
representatives, at their own risk and expense, full and complete access to the
Vessel for the purpose of inspecting the same and her cargoes and papers.
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(c) Mortgagor shall certify as often as required by Mortgagee that all
wage and other claims which give rise to liens have been paid, but in the
absence of a default or a potential default, no more often than once a quarter.
(d) The Mortgagor will keep the Vessel duly documented as a vessel of
the United States, under the flag of the United States, and will not suffer or
permit it to be operated in any manner prohibited by the laws or regulations
applicable to the Vessel under its certificate of documentation or its
classification, and will duly comply with all laws and governmental regulations
and contracts applicable to the Vessel and its operation. Mortgagor will never
operate the Vessel outside the navigational limits of the insurance carried
pursuant to Article 4.
(e) If applicable, Mortgagor shall keep the Vessel in such condition as
will entitle her to the highest classification and rating for a Vessel of the
same age, trade and type in the American Bureau of Shipping (NABSO) or such
other classification society as shall be acceptable to Mortgagee, and, upon
request, Mortgagor shall furnish to Mortgagee a certificate by such
classification bureau or society in which the Vessel is then entered that such
classification is maintained.
(f) Mortgagor will furnish Mortgagee within thirty (30) days after
receipt by the Mortgagor, copies of all Certificates of Inspection delivered by
the United States Coast Guard and/or Inspection Reports with respect to the
Vessel delivered by the American Bureau of Shipping, including (as may apply)
Annual Classification Surveys, Special Periodic or Continuous Surveys, Annual
Load-Line Surveys and Drydock Surveys.
(g) Mortgagor shall operate the Vessel in accordance with all
restrictions imposed by the United States Coast Guard, and shall maintain a
coastwise route in the Atlantic Ocean not more than twenty (20) miles offshore,
between Boon Island, Maine and Watch Hill, Rhode Island, and shall carry adult
passengers only.
(h) Mortgage shall operate the Vessel in accordance with all stability
letters issued by the United States Coast Guard.
Article 8. Release of Vessel. If a libel should be filed against the Vessel or
if the Vessel is otherwise levied against, attached, arrested or taken into
custody by virtue of any legal proceedings in any court, the Mortgagor will,
within thirty (30) days thereafter, cause the Vessel to be released and the lien
to be discharged.
Article 9. Payment of Charges. The Mortgagee shall have the right, but shall be
under no obligation, to make any payments and to do any acts which, under the
terms of this First Preferred Ship Mortgage, the Mortgagor is required to make
or do, but the making of any such payment or the doing of any such act by the
Mortgagee shall not relieve the Mortgagor of any default in that respect or
constitute in any respect a waiver of such default. The Mortgagor will reimburse
the Mortgagee promptly, with interest at the rate or rates provided in the Note,
for any and all payments and expenditures so made by it and for any and all
advances and expenses made or incurred by the Mortgagee at any time in taking
possession of Vessel or otherwise protecting its
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rights hereunder and for any and all damages sustained by the Mortgagee from or
by reason of any default or defaults of the Mortgagor and such payments,
expenditures, advances and expenses shall be and are secured by this First
Preferred Ship Mortgage.
Article 10. Events of Default; Remedies.
(a) The following shall constitute "Events of Default" hereunder:
(i) If the Mortgagor shall (a) sell or transfer, or attempt to
sell or transfer by operation of law or otherwise, its interest in the
Vessel, except as permitted in the Security Agreement, or (b) permit the
attachment of any suit, lien, claim, charge or encumbrance of any kind
(i) in excess of $25,000 in the aggregate at any time if the Vessel is in
drydock, (ii) which is not released within 30 days after it first
attaches if the Vessel is in drydock, (iii) in excess of $25,000 in the
aggregate at any time if the Vessel is not in drydock and the costs
relate to items other than non-drydock repairs made while the Vessel is
at port, and (iv) which is not released within 30 days after it first
attaches if the Vessel is not in drydock and the costs relate to items
other than non-drydock repairs made while the Vessel is at port; or
(ii) If the Mortgagor shall remove or attempt to remove the Vessel
beyond the limits of the United States, save on voyages with the
intention of returning to the United States, or shall abandon the Vessel;
or
(iii) If the Vessel shall be libeled and levied upon or taken by
virtue of any attachment or execution against the Mortgagor and such
libel or levy is not released by Mortgagor within 30 days; or
(iv) The occurrence of an "Event of Default" under the Security
Agreement;
(v) If the Mortgagor shall fail to pay any Secured Obligation when
due; or
(vi) The title or ownership of the Vessel shall be requisitioned,
purchased or taken by the government of any country or by any department,
agency or representative thereof and there shall not have been paid to
Mortgagee an amount in cash in United States dollars equal to the fair
value of such Vessel within ninety (90) days after such event occurs;
(b) Upon the occurrence of an Event of Default the Mortgagee may:
(i) Declare the Secured Obligations to be due and payable
forthwith, whereupon such Secured Obligations shall become and be
immediately due and payable;
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(ii) Exercise all of the rights, powers and remedies in
foreclosure and otherwise given to the Mortgagee by the provisions of
Chapter 313 of title 46, United States Code, and acts amendatory thereof
and supplemental thereto;
(iii) Recover judgment for any amount due on the debt and collect
the same out of any property of the Mortgagor without its security under
this First Preferred Ship Mortgage being in any way affected or impaired
thereby;
(iv) Demand and receive all freights, hires, charter hires,
earnings/or profits of the Vessel, due or to become due from any person
whomsoever;
(v) With or without legal process re-enter and take possession of
the Vessel at any time wherever it may be found and, without being
responsible for loss or damage, hold, lease, charter, operate or
otherwise use the Vessel for such time and on such terms as the Mortgagee
may deem advisable and collect and retain all freights, hires, earnings,
and/or other moneys due or to become due and arising therefrom, and/or if
it seems desirable to the Mortgagee, and without being responsible for
loss or damage, with or without possession, sell the Vessel free from any
claim by the Mortgagor in admiralty, in equity, at law or by statute,
after first giving notice of the time and place of sale, with a general
description of the property, by publishing such notice in such manner as
may be required by applicable rules of court and as may be reasonably
calculated to give adequate notice of the sale to potential buyers
through trade publication, via brokers, or otherwise, and by mailing a
similar notice to the Mortgagor at its last known business address on the
day of first publication. Such sale may be held at any place and at such
time as the Mortgagee may specify, and in such manner as the Mortgagee
may deem advisable, and may be conducted without bringing the Vessel to
the place of sale, and the Mortgagee may become a purchaser at the sale.
From time to time the Mortgagee may adjourn any such sale by announcement
at the time and place appointed for such sale or by any adjourned sale;
and without notice or publication, the Mortgagee may make such sale at
the time and place to which the same shall be so adjourned.
(vi) Bring suit at law, in equity or in admiralty, as it may be
advised, to recover judgment for any and all amounts due, and collect the
same from Mortgagor and/or out of any and all property of Mortgagor
whether covered by this First Preferred Ship Mortgage or otherwise;
(vii) Commence a civil action in rem to foreclose this First
Preferred Ship Mortgage and obtain an order to sell, and sell, the
Vessel, pursuant to the provisions of the Act of November 23, 1988, P.L.
100-710, 102 Stat. 4735, as amended, 46 U.S.C. 31325 and 31326, or their
successor provisions, or by other judicial process as may be provided in
the statutes.
(c) Mortgagor hereby consents to the appointment of a custodian of the
Vessel by Mortgagee with the costs thereof to be a cost of the sale to be paid
from the proceeds of the sale or by Mortgagor.
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(d) Each and every power or remedy herein specifically given to the
Mortgagee shall be cumulative and shall be in addition to every other power or
remedy herein specifically given or now or hereafter existing at law, in equity,
in admiralty or by statute, and each and every power or remedy, whether
specifically herein given or otherwise so existing may be exercised from time to
time and as often and at such order as may be deemed expedient by the Mortgagee,
and the exercise or the beginning of the exercise of any power or remedy shall
not be deemed a waiver of the right to exercise at the same time or thereafter
any other power or remedy. No delay or omission by the Mortgagee in the exercise
of any right or power accruing upon any Event of Default shall be construed to
be a waiver of such default or any acquiescence therein; nor shall the
acceptance by the Mortgagee of any security or of any payment after such default
or any payment on account of any past default be deemed a waiver of any right to
take advantage of any other default or of any past default not completely cured
thereby.
(e) If, at any time after an Event of Default and previous to the actual
sale of the Vessel by the Mortgagee or to any foreclosure proceedings, the
Mortgagor completely cures all Events of Default and pays all expenses, advances
and damages to the Mortgagee consequent on such Event of Default with interest
at the rates provided in the Note and the Guaranty (as applicable), then the
Mortgagee shall accept such payment and cure and restore the Mortgagor to its
former position, but such actions shall not affect any subsequent Event of
Default, nor impair any rights consequent thereon.
(f) The proceeds of any sale, and the net earnings of any charter,
operation or other use of the Vessel by the Mortgagee under any of the powers
herein specified, and the proceeds of any judgment collected by the Mortgagee
for any default hereunder and the proceeds of any insurance or of any claim for
damages on account of the Vessel, received by the Mortgagee while exercising any
such power, and any and all other proceeds collected by the Mortgagee, or in any
proceedings hereunder, the application of which has not elsewhere been
specifically provided for, shall be applied as follows:
First: To payment of all expenses and charges, including expenses of any
sale, expense of any retaking, attorney's fees, court costs, and any
other expenses made or incurred by the Mortgagee in the protection of its
rights hereunder, and to the payment of any damages sustained by the
Mortgagee from any default of the Mortgagor hereunder with interest as
provided herein; and to provide adequate indemnity against liens having
priority over this First Preferred Ship Mortgage.
Second: To the payment of the balance due and outstanding upon the
Secured Obligations or otherwise due under the Note, the Guaranty, and
the Security Agreement, including accrued and unpaid interest to the date
of such payment, with such payment to be applied pro rata to such
outstanding principal, interest, and to the payment of all other unpaid
items, costs or expenses constituting part of the Secured Obligations.
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Third: Any surplus thereafter remaining shall be paid to the Mortgagor.
(g) Any sale of the Vessel made in pursuance of this First Preferred Ship
Mortgage, whether under the power of sale hereby granted or any judicial
proceedings, shall operate to divest all right, title, and interest of any
nature whatsoever of the Mortgagor therein and thereto, and shall bar the
Mortgagor, its successors and assigns, and all persons claiming by, through, or
under them. At any such sale Mortgagee or other holder of the Note (the
"holder/purchaser") may bid for and purchase such Vessel and upon compliance
with the terms of the sale may hold, retain and dispose of such property without
further accountability therefor. In case of any such sale the holder/purchaser
shall be entitled, for the purpose of making settlement or payment for the
property purchased, to use and apply the Note, the Guaranty, or any portion
thereof in order that there may be credited against the amount remaining due and
unpaid thereon the sums payable to the holder/purchaser out of the net proceeds
of such sale after allowing for the costs and expense of sale and other charges;
and thereupon the holder/purchaser shall be credited, on account of such
purchase price, with the net proceeds that shall have been so credited upon the
Note and/or the Guaranty. No purchaser shall be bound to inquire whether notice
has been given, or whether any default has occurred, or as to the propriety of
the sale or as to the application of the proceeds thereof.
(h) Whenever any right to enter and take possession of the Vessel accrues
to Mortgagee, it may require the Mortgagor to deliver, and the Mortgagor shall
on demand, at its own cost and expense, deliver such Vessel to Mortgagee as
demanded. If any legal proceedings shall be taken to enforce any rights under
this First Preferred Ship Mortgage, Mortgagee shall be entitled as a matter of
right to the appointment of a receiver of the Vessel and the freights, hire,
earnings, issues, revenues, income and profits due or to become due and arising
from the operation thereof.
(i) Mortgagee is hereby appointed attorney-in-fact of the Mortgagor to
execute and deliver to any purchaser and is hereby vested with full power and
authority to make, in the name and in behalf of the Mortgagor, a good conveyance
of the title to the Vessel so sold. In the event of any sale of the Vessel,
under any power herein contained, the Mortgagor will, if and when required by
Mortgagee, execute such form of conveyance of such Vessel as Mortgagee may
direct or approve.
(j) Mortgagee is hereby appointed attorney-in-fact of the Mortgagor upon
the happening of any Event of Default, in the name of the Mortgagor to demand,
collect, receive, compromise and sue for, so far as may be permitted by law, all
freights, hire, earnings, tolls, rents, issues, revenues, income and profits of
the Vessel and all amounts due from underwriters under any insurance thereon as
payment of losses or as return premiums or otherwise, salvage awards and
recoveries, recoveries in general average or otherwise, and all other sums, due
or to become due at the time of the happening of any Event of Default in respect
to the Vessel, or in respect of any insurance thereof from any person
whomsoever, and to make, give and execute in the name of the Mortgagor
acceptances, receipts, releases, or other discharges for the same, whether under
seal or otherwise, and to endorse and accept in the name of the Mortgagor the
other instruments
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in writing with respect to the foregoing. All amounts so received shall first be
applied to operating expenses and then to the Secured Obligations (in any order
selected by the Mortgagee).
(k) If the Mortgagor shall default in the observance or performance of
any of the covenants, conditions or agreements in this First Preferred Ship
Mortgage on its part to be performed or observed (and such default shall
constitute an Event of Default), the Mortgagee may in its discretion, but shall
be under no obligation to, do all acts and make all expenditures necessary to
remedy such default, including, without limitation of the foregoing, entry upon
the Vessel to make repairs, and the Mortgagor shall forthwith reimburse the
Mortgagee, with interest at the interest rate set forth in the Note, for any and
all expenditures so made or incurred and, until the Mortgagor has so reimbursed
the Mortgagee for such expenditures, the amount thereof shall be a debt due from
the Mortgagor to the Mortgagee secured by a first priority claim on the Vessel,
provided, that the making of any such expenditure shall not relieve the
Mortgagor from the consequences of any such default. The Mortgagor shall also
forthwith reimburse the Mortgagee, with interest at the interest rate set forth
in the Note, for any and all advances made or expenses of Mortgagee at any time
in taking the Vessel or otherwise protecting its rights hereunder, and for any
and all damages sustained by the Mortgagee from or by reason of any default or
defaults of the Mortgagor, and the amount of such advances, expenses and damages
shall be a debt due from the Mortgagor to the Mortgagee secured by a first
priority claim on the Vessel.
(l) In the event that the Vessel shall be arrested or detained by a
marshal or other officer of any court of law, equity or admiralty jurisdiction
or by any government or other authority, and shall not be released from arrest
or detention within thirty days from the date of arrest or detention, the
Mortgagor hereby irrevocably authorizes and empowers the Mortgagee and its
appointee or appointees, with full power of substitution, in the name and at the
expense of the Mortgagor, to apply for, claim and receive or take possession of
the Vessel with all rights and powers that the Mortgagor might have and exercise
in any such event. The Mortgagor also irrevocably authorizes and empowers any
such persons to appear, in the name of the Mortgagor, or against the Vessel in
any court of any country or nation of the world where a suit is pending against
the Vessel, because of or on account of any alleged lien against the Vessel from
which the same has not been released, and to take such proceedings as they or
any of them may deem proper for the defense of such suit and for the release of
the Vessel therefrom in the event that the Mortgagor shall not be taking
proceedings reasonably satisfactory to Mortgagee, and in such case all
expenditures made or incurred by Mortgagee or its appointees for the purpose of
such defense or discharge shall be a debt due from the Mortgagor, its successors
and assigns, to Mortgagee, and shall be secured by the lien of this First
Preferred Ship Mortgage in like manner and extent as if the amount and
description thereof were written herein.
Article 11. Possession Prior to Default. Until one or more of the Events of
Default hereinbefore described shall happen, the Mortgagor shall retain actual
possession of the Vessel, and manage, operate and use the same and collect,
receive, take and use and enjoy the earnings, income, rents, freights, issues
and profits thereof.
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Article 12. Statutory Compliance.
(a) The Mortgagor shall comply with and satisfy all applicable
formalities and provisions of the laws and regulations of the United States of
America, including but not limited to the provisions of 46 U.S.C. Chapter 313 et
seq, as amended, including without limitation the provisions of the Act of
November 23, 1988, P.L. 100-710, 102 Stat. 4735, as amended, in order to
perfect, establish and maintain this First Preferred Ship Mortgage, and any
supplement or amendment thereto upon the Vessel and upon all renewals, as a
first preferred mortgage thereunder, and the Mortgagor shall not sell, mortgage,
transfer, nor merge or consolidate with any other person, firm or corporation,
or dissolve, nor change the flag, name or the port of documentation of the
Vessel, without the written consent of the Mortgagee first obtained. Any such
written consent to any one sale, merger, consolidation, transfer, mortgage or
change of flag, name or port of documentation, shall not be deemed or held to be
a waiver of this provision in respect to any subsequent sale, merger,
consolidation, transfer, mortgage or change of flag, name or port of
documentation.
(b) The Mortgagor will pay and discharge, when due and payable from time
to time, all taxes, assessments, and governmental charges, fines and penalties
lawfully imposed upon the Vessel; provided, however, that the Mortgagor may omit
to pay any such tax, assessment, governmental charge, fine or penalty, so long
as it, in good faith and by appropriate legal proceedings, shall contest the
validity thereof and the Mortgagor shall set aside on its books adequate
reserves in the opinion of the Mortgagor with respect to any such tax,
assessment, charge, fine or penalty so contested, unless and until foreclosure,
distraint, sale or other similar proceedings shall have been commenced with
respect to the property which is subject to any such tax, assessment, charge,
fine or penalty. The right of the Mortgagor to contest the validity of any claim
contemplated by this Article 12 shall in no event be construed as permitting any
libel, attachment or other seizure of the Vessel, under process or color of
legal authority to remain undissolved or undischarged for a period in excess of
30 days.
Article 13. Further Assurances. In the event that this First Preferred Ship
Mortgage, the Security Agreement, the Note, or the Guaranty, or any provision of
this First Preferred Ship Mortgage, the Security Agreement, or the Note, or the
Guaranty, is deemed invalidated, in whole or in part, by any present or future
law or court decision, the Mortgagor shall execute such other or further
instruments, as in the opinion of counsel for the Mortgagee, will carry out the
true intent and spirit of this First Preferred Ship Mortgage. From time to time,
the Mortgagor shall execute such other assurances as, in the opinion of such
counsel, may be required more effectually to subject the Vessel herein mortgaged
or intended to be mortgaged to the payment of the Note and the Guaranty secured
by this First Preferred Ship Mortgage.
Article 14. Lawful Operation. The Mortgagor covenants and agrees to comply with
all the laws, rules, and regulations of the United States of America and/or any
subdivision thereof, the United States Coast Guard, any State and other
governmental authority, pertaining to its operation. The Mortgagor will not
cause or permit the Vessel to be used in any manner contrary to law and will not
engage in any unlawful trade or carry any cargo that will expose the Vessel to
penalty,
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forfeiture, or capture, and will not do, or suffer or permit to be done,
anything which can or may injuriously affect the registration or enrollment or
flag of the Vessel under the laws and regulations of the United States.
Mortgagee does not authorize or consent to any act, failure or omission on the
part of the Mortgagor or any other person which would permit or give rise to the
risk of forfeiture of the Vessel for a violation of any law of the United States
or any other governmental authority.
Article 15. Copy of Entire Agreement. The Mortgagor acknowledges receipt from
the Mortgagee of a true copy of this First Preferred Ship Mortgage which
comprises the entire agreement between the parties respecting the mortgage of
the Vessel, and supersedes any and all other agreements respecting the Vessel,
except as otherwise specifically provided herein.
Article 16. Continuity of Provisions. All the covenants, stipulation and
agreements contained in this First Preferred Ship Mortgage shall be binding upon
and inure to the benefit of the Mortgagor, its successors and assigns, and the
Mortgagee, its successors and assigns. Throughout this First Preferred Ship
Mortgage, the singular shall include the plural.
Article 17. Applicable Law. This instrument shall be construed in accordance
with the statutory and maritime law of the United States, and, where such law is
silent or inapplicable, then under the laws of the State of California.
Article 18. Separate Discharge. Although it is not intended that this First
Preferred Ship Mortgage include any property other than the Vessel, if any
determination is made at any time that for any reason this First Preferred Ship
Mortgage does include any property other than a "Vessel" within the meaning of
Chapter 313 of title 46, United States Code, such property may be separately
discharged from the lien of this First Preferred Ship Mortgage, but only with
the consent of the Mortgagee, by the payment of .01% of the said total amount.
Article 19. Notice. Any notice required or permitted hereunder shall be
sufficient if given in the manner provided in the Security Agreement.
Article 20. Defined Terms. Any capitalized terms which are not otherwise defined
herein shall have the respective meanings, if any, assigned thereto in the
Security Agreement.
Article 21. Remedies Not Exclusive. Each and every right, power and remedy given
to the Mortgagee in this First Preferred Ship Mortgage, the Guaranty, or in the
other Loan Documents shall be cumulative and shall be in addition to every other
right, power and remedy herein specifically given or now or hereafter existing
at law, in equity, in admiralty, or by statute, and each and every right, power
and remedy whether specifically herein given or otherwise existing may be
exercised from time to time and as often and in such order as may be determined
by the Mortgagee, and the exercise or the beginning of the exercise of any
right, power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other right, power or remedy. No
delay or omission by the Mortgagee in the exercise of any right, power or remedy
shall impair any such right, power or remedy or be construed to be a waiver of
any default or to be any acquiescence therein nor shall the acceptance by the
Mortgagee or any
16
<PAGE> 17
Holder of any security or of any payment of or on account of the Note or the
Guaranty maturing after a default or of any payment on account of any past
default be construed to be a waiver of any right to take advantage of any future
default or of any past default not completely cured thereby.
IN WITNESS WHEREOF, the Mortgagor has caused these presents to be
executed and attested by its duly authorized officers as of the day and year
first above written.
Attest: FLORIDA CASINO CRUISES, INC.,
a Georgia corporation
By: /s/ By: /s/
------------------------------- --------------------------------
Print Name: Print Name:
Title: Title:
17
<PAGE> 18
ACKNOWLEDGMENT
STATE OF ______________
COUNTY OF _____________
BEFORE ME, the undersigned authority, personally appeared _____________________,
to me well known and known to be the person described in and who executed
foregoing instrument, and acknowledged to and before me that he executed said
instrument for the purpose therein expressed.
WITNESS my hand and official seal this ____ day of ________________, 1999.
_________________________________
NOTARY PUBLIC
My Commission Expires:___________
18
<PAGE> 19
EXHIBIT A
COPIES OF THE SECURITY AGREEMENT,
SECURED PROMISSORY NOTE, AND CONTINUING GUARANTY
(CONTINUED ON THE FOLLOWING PAGES)
19
<PAGE> 1
EXHIBIT 10.49
AMENDMENT NO. 1 TO LOAN DOCUMENTS
THIS AMENDMENT NO. 1 TO LOAN DOCUMENTS (this "Amendment"), is entered
into as of April 22, 1999, between FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), with a place of business located at 11111 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 90025-3333, and LEISURE TIME
CRUISE CORPORATION, a Colorado corporation ("Borrower"), with its chief
executive office located at 1284 Miller Road, Avon, Ohio 44011, with reference
to the following facts:
A. Borrower and Foothill are parties to that certain Security Agreement
dated as of October 9, 1998 (the "Security Agreement"). All initially
capitalized terms used but not defined herein shall have the meanings set forth
in the Security Agreement.
B. As of April ___, 1999, Borrower is indebted to Foothill pursuant to
the Loan Documents in the principal amount of $____________________, without
offset or defense (the "Original Term Loan"). The Original Term Loan is
evidenced by that certain Secured Promissory Note, in the original principal
amount of $3,000,000.00, dated October 9, 1998, executed by Borrower in favor of
Foothill. The Obligations under the Loan Documents are secured by the Collateral
described in the Loan Documents.
C. Borrower has requested that Foothill provide certain financing to
affiliates of Borrower's, Leisure Express Cruise, L.L.C., (the "Leisure Express
Term Loan"), and Florida Casino Cruises, Inc., (the "Florida Casino Term Loan").
(The Leisure Express Term Loan and the Florida Casino Term Loan may hereinafter
from time to time be referred to collectively as the "New Term Loans.") To
induce Foothill to make the New Term Loans, Borrower has agreed to (i) execute a
Continuing Guaranty in favor of Foothill with respect to the New Term Loans (the
"Borrower Guaranty"), and (ii) grant a security interest in the Collateral in
favor of Foothill to secure the Borrower Guaranty (in addition to continuing to
secure the Obligations described in the Security Agreement).
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained in this Amendment and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower and Foothill
hereby agree to the above Recitals and as follows:
1. AMENDMENTS TO SECURITY AGREEMENT. The Security Agreement is hereby
amended as follows:
1.1 Definitions.
1.1.1 The term "Equipment" which appears in Section 1.1 of the
Security Agreement is hereby amended to read in its entirety as follows:
1
<PAGE> 2
"Equipment" means all of Borrower's present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools,
parts, dies, jigs, goods, including, without limitation, all items of
equipment and other personal property located on the Vessels, and any
interest in any of the foregoing, and all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to
any of the foregoing, wherever located. Notwithstanding the foregoing,
"Equipment" shall not include any vessels acquired by Borrower after
the Closing Date (except to the extent such after-acquired vessel(s)
constitute proceeds of the Vessels or are vessels pertaining to the
Vessels)."
1.1.2 The term "Loan Documents" as defined in the Security
Agreement is hereby amended and supplemented to include (i) this Amendment, and
(ii) the Borrower Guaranties.
1.1.3 The term "Obligations" as defined in the Security
Agreement shall be deemed to include all obligations of Borrower now or
hereafter arising under or in connection with the Borrower Guaranties.
1.1.4 The following terms are hereby added to Section 1.1 of the
Security Agreement:
""Borrower Guaranty" means that acertain Continuing Guaranty, dated
April 22, 1999, executed by Borrower in favor of Foothill which
pertains to the Florida Casino Obligations and the Leisure Express
Obligations."
""Florida Casino" means Florida Casino Cruises, Inc., a Georgia
corporation."
""Florida Express Obligations" means all of the "Obligations"
described in that certain Security Agreement, dated April 22, 1999,
executed by Florida Casino in favor of Foothill."
""Leisure Express" means Leisure Express Cruise, L.L.C., a Colorado
limited liability company."
""Leisure Express Obligations" means all of the "Obligations"
described in that certain Security Agreement, dated April 22, 1999,
executed by Leisure Express in favor of Foothill."
1.2 References to Exhibit "A" and Exhibit "E-1". The references
to Exhibit "A" and Exhibit "E-1" in the Security Agreement shall both mean
Schedule "E-1" attached to the Security Agreement.
2
<PAGE> 3
1.3 Section 3.2. Section 3.2 of the Security Agreement is hereby
amended to read in its entirety as follows:
"3.2 Term. This Agreement shall become effective upon the execution
and delivery hereof by Borrower and Foothill and shall continue in
full force and effect until all Obligations, all Leisure Express
Obligations, and all Florida Casino Obligations have been fully and
finally discharged."
1.4 Section 4.1. Section 4.1 of the Security Agreement is hereby
amended to read in its entirety as follows:
"4.1 Grant of Security Interest. Borrower hereby grants to Foothill
a continuing security interest in all currently existing and
hereafter acquired or arising Collateral in order to secure (i)
prompt repayment of any and all Obligations, (ii) prompt repayment
of any and all "Guaranteed Obligations" described in the Borrower
Guaranty, and (iii) prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Foothill's security
interest in the Collateral shall attach to all Collateral without
further act on the part of Foothill or Borrower."
1.5 Section 5.2. Section 5.2 of the Security Agreement is hereby
amended to add the following location for Equipment:
The vessel known as the Leisure Express, United States Official No.:
594643.
1.6 Section 6.11. The following sentence is hereby added to the
end of Section 6.11 of the Security Agreement:
"In addition, Borrower shall arrange for the immediate removal of
any gaming equipment (including but not limited to all Collateral)
located on the Leisure Express if the use or possession of such
equipment on the Leisure Express is prohibited (or becomes
prohibited due to a change in law), and such equipment shall be
relocated to a place acceptable to Foothill."
1.7 Schedule "E-2". Schedule "E-2 attached to the Security
Agreement is hereby deleted.
1.8 Section 8. The word "or" which appears at the end of Section
8.11 is hereby deleted, the period (".") at the end of Section 8.12 is hereby
replaced with a semi-colon (";") and the word "or", and the following new
Section 8.13 is hereby added to the Security Agreement:
3
<PAGE> 4
"If any "default" or "Event of Default" occurs under or in
connection with the loan documents evidencing, or pertaining to, the
Leisure Express Obligations and/or the Florida Casino Obligations."
2. REIMBURSEMENT FOR COSTS AND EXPENSES. Concurrently with the
execution of this Amendment by Borrower, Borrower shall pay to Foothill an
amount equal to the costs and expenses incurred by Foothill in connection with
this Amendment (including, but not limited to, attorney's fees and costs).
3. CONDITIONS TO EFFECTIVENESS OF AMENDMENT. This Amendment shall
not be effective until the following conditions precedent have been satisfied
(as determined by Foothill in Foothill's sole and absolute discretion):
3.1 Foothill shall have received a fully executed Consent of
Guarantors, in the form attached hereto as Exhibit "A";
3.2 Borrower shall have delivered to Foothill duly executed
original copies of this Amendment and the Borrower Guaranty (in form and
substance acceptable to Foothill);
3.3 Foothill shall have received a fully executed Second
Amendment to First Preferred Ship Mortgage, in the form attached hereto as
Exhibit "B";
3.4 Borrower shall have delivered to Foothill certified
resolutions of Borrower approving (i) this Amendment (and the transactions
contemplated thereby), (ii) the execution and delivery of this Amendment and the
Borrower Guaranty, and (iii) all other Loan Documents contemplated in connection
with this Amendment;
3.5 There shall have been no deterioration in the financial
condition of Borrower after October 1, 1998; and
3.6 All other documents and legal matters in connection with the
transactions contemplated hereby shall have been delivered, executed, and/or
recorded (as appropriate) and shall be in form and substance satisfactory to
Foothill and its counsel.
4. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
that no Event of Default has occurred and is continuing under the Security
Agreement. Borrower confirms that all representations and warranties set forth
in the Security Agreement (including, but not limited to, the representations
and warranties contained in Section 5 of the Security Agreement) are true and
correct as of the date of this Amendment.
5. SECURITY AGREEMENT IN FULL FORCE; INCORPORATION OF OTHER TERMS.
The Security Agreement and all other Loan Documents executed in
4
<PAGE> 5
connection therewith, as amended and supplemented by this Amendment, shall
remain in full force and effect in accordance with their terms as amended and
supplemented by this Amendment. The terms and conditions of Sections 13, 15.2,
15.3, 15.4, 15.5, 15.6, and 15.7 of the Security Agreement are hereby
incorporated by reference, provided that all references to "Agreement" in such
sections shall mean "Amendment" for purposes of this Amendment. This Amendment
cannot be changed or terminated orally. This Amendment together with the
Security Agreement and the other Loan Documents (including the documents and
instruments executed in connection with this Amendment), reflects the entire
understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted, modified, or qualified by any other
agreement, oral or written, whether before or after the date hereof.
6. CANCELLATION OF PRIOR AMENDMENT NO. 1. In contemplation of
Foothill providing to Borrower an additional capital expenditure credit facility
of up to $325,000 (the "Proposed Capital Expenditure Line of Credit"), Foothill
prepared an Amendment No. 1 to Loan Documents, a Secured Promissory Note,
Amendment to First Preferred Ship Mortgage, and related documents, which were
signed by Borrower and delivered to Foothill (the "Proposed Capital Expenditure
Line Documents"). Borrower acknowledges and agrees that (i) Borrower elected not
to proceed with the Proposed Capital Expenditure Line of Credit and Foothill has
no obligation to provide such financing to Borrower, (ii) the Proposed Capital
Expenditure Line Documents were never accepted by Foothill and never came into
effect, and, to the extent necessary, are hereby deemed to be cancelled and of
no further force and effect, and (iii) Foothill may discard and destroy all
copies of the Proposed Capital Expenditure Line Documents.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to Loan Documents to be executed and delivered to Foothill at Foothill's offices
in Los Angeles, California.
LEISURE TIME CRUISE CORPORATION,
a Colorado corporation
By: /s/
-----------------------------------
Print Name:
Title:
Accepted and effective this
22nd day of April, 1999
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/
--------------------------------
Print Name:
Its:
6
<PAGE> 7
Exhibit "A"
[FORM OF] CONSENT OF GUARANTORS
THIS CONSENT OF GUARANTORS (this "Consent") is made as of this ____
day of April, 1999, by ALAN JOHNSON, individually, LEISURE TIME CASINOS &
RESORTS, INC., and LEISURE TIME TECHNOLOGY, INC. (collectively, the
"Guarantors"), in favor of FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), with reference to the following:
A. Foothill and LEISURE TIME CRUISE CORPORATION, a Colorado corporation
("Borrower"), entered into that certain Security Agreement dated as of October
9, 1998 (the "Security Agreement"), in connection with which Foothill agreed to
provide certain financial accommodations to Borrower. To induce Foothill to
provide such financial accommodations, the Guarantors each executed a Continuing
Guaranty in favor of Foothill, both of which are dated as of October 9, 1998
(collectively, the "Guaranties").
B. Borrower has requested that Foothill modify and amend the terms of
the Security Agreement pursuant to the terms and conditions set forth in that
certain Amendment No. 1 to Loan Documents, of even date herewith ("Amendment No.
1").
C. To induce Foothill to enter into Amendment No. 1, the Guarantors
have agreed to execute and deliver this Consent to Foothill.
NOW, THEREFORE, in consideration of the foregoing recitals (all of
which are incorporated herein) and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Guarantors
hereby agree as follows:
1. Review and Approval of Loan Documents. The Guarantors have been
provided with copies of each of the Loan Documents (including, but not limited
to, Amendment No. 1), and the Guarantors acknowledge and confirm that they have
reviewed and approved the terms of the Loan Documents and Amendment No. 1.
2. Full Force and Effect; Ratification and Reaffirmation of the
Guaranties. All provisions of the Guaranties shall remain in full force and
effect and are hereby ratified and reaffirmed by the Guarantors.
1
<PAGE> 8
IN WITNESS WHEREOF, this Consent of Guarantors is executed as of the
day and year first above mentioned.
/s/ ALAN JOHNSON
--------------------------------------------
ALAN JOHNSON, individually,
LEISURE TIME CASINOS & RESORTS, INC.
By: /s/
-----------------------------------------
Print Name:
Title:
LEISURE TIME TECHNOLOGY, INC.
By: /s/
-----------------------------------------
Print Name:
Title:
2
<PAGE> 9
Exhibit "B"
[FORM OF] SECOND AMENDMENT TO FIRST PREFERRED SHIP MORTGAGE
1
<PAGE> 1
EXHIBIT 10.50
AMENDMENT TO AND CONFIRMATION OF GUARANTY
THIS AMENDMENT TO AND CONFIRMATION OF GUARANTY (this
"Amendment") is made as of this 22nd day of April, 1999, by LEISURE TIME
TECHNOLOGY, INC., a Georgia corporation (the "Guarantor"), in favor of FOOTHILL
CAPITAL CORPORATION, a California corporation ("Foothill"), with reference to
the following:
A. Foothill and Leisure Time Cruise Corporation, a Colorado corporation
("Borrower"), entered into that certain Security Agreement dated as of October
9, 1998 ("Security Agreement"), in connection with which Foothill agreed to
provide certain financial accommodations to Borrower. To induce Foothill to
provide such financial accommodations, Guarantor executed a Continuing Guaranty
in favor of Foothill, dated as of October 9, 1998 (the "Guaranty").
B. Borrower has requested that Foothill further modify and amend the
terms of the Security Agreement pursuant to the terms and conditions set forth
in that certain Amendment No. 1 to Loan Documents, of even date herewith
("Amendment No. One"), and certain other documents and instruments executed in
connection with Amendment No. One (as described in Amendment No. One).
C. To induce Foothill to enter into Amendment No. One and to provide
(i) the Leisure Express Term Loan (referred to in Amendment No. One) to Leisure
Express Cruise, L.L.C., a Colorado limited liability company ("Leisure
Express"), and (ii) the Florida Casino Term Loan (referred to in Amendment No.
One) to Florida Casino Cruises, Inc., a Georgia corporation ("Florida Casino"),
and as a condition precedent to the effectiveness of Amendment No. One,
Guarantor has agreed to execute and deliver this Amendment to Foothill.
NOW, THEREFORE, in consideration of the foregoing recitals
(all of which are agreed to and incorporated herein) and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor hereby agrees as follows:
1. Amendments to Guaranty. The Guaranty is hereby amended as follows:
1.1 References to Borrower. All references to "Borrower" in
the Guaranty shall mean "Borrower, Florida Casino, and/or Leisure Express".
1.2 Definition of "Guaranteed Obligations". The definition of
"Guaranteed Obligations" set forth in Section 1 of the Guaranty shall be deemed
to include (a) all obligations of Leisure Express in connection with the Leisure
Express Term Loan (including,
1
<PAGE> 2
but not limited to, the Leisure Express Obligations referred to in Amendment No.
One), and (b) all obligations of Florida Casino in connection with the Florida
Casino Term Loan (including, but not limited to, the Florida Casino Obligations
referred to in Amendment No. One).
1.3 Definition of "Loan Documents". The definition of "Loan
Documents" set forth in Section 1 of the Guaranty is hereby amended to read in
its entirety as follows:
""Loan Documents"shall mean that certain Security Agreement,
of even date herewith, between Foothill and Borrower, that
certain Secured Promissory Note in the principal amount of
THREE MILLION DOLLARS ($3,000,000) issued by Borrower in
connection therewith, that certain Security Agreement, dated
April 22, 1999, between Foothill and Leisure Express Cruise,
L.L.C., that certain Secured Promissory Note, dated April 22,
1999, in the principal amount of TWO MILLION ONE HUNDRED
THOUSAND DOLLARS ($2,100,000) issued by Leisure Express
Cruise, L.L.C. in favor of Foothill, that certain Security
Agreement, dated April 22, 1999, between Foothill and Florida
Casino Cruises, Inc., that certain Secured Promissory Note,
dated April 22, 1999, in the principal amount of THREE MILLION
TWO HUNDRED TWENTY FIVE THOUSAND DOLLARS ($3,225,000) issued
by Florida Casino Cruises, Inc. in favor of Foothill, and
those documents, instruments, and agreements which either now
or in the future exist among Borrower, Guarantor, or any
affiliate of Borrower, Florida Casino Cruises, Inc., and/or
Leisure Express Cruise, L.L.C., on the one hand, and Foothill,
on the other hand, and any amendments, modifications, or
supplements to any of the foregoing."
2. Full Force and Effect; Ratification and Reaffirmation of Guaranty.
All provisions of the Guaranty not otherwise specifically amended by this
Amendment shall remain in full force and effect and are hereby ratified and
reaffirmed by Guarantor. Guarantor has no defenses or rights of offset with
respect to its obligations under the Guaranty.
3 Equipment Security Agreement. The Equipment Security Agreement, dated
October 9, 1998, executed by Guarantor in favor of Foothill shall remain in full
force and effect. The security interest granted by Guarantor in favor of
Foothill pursuant to such Equipment Security Agreement is hereby deemed to
secure the Guaranty Obligations as amended by this Amendment.
4. Review and Approval of Loan Documents. Guarantor has been provided
with copies of each of the Loan Documents (including, but not limited to,
Amendment No. One and the other documents and instruments described in Amendment
No. One), and Guarantor acknowledges and confirms that (i) it has reviewed and
approved the terms of the Loan Documents, as amended, and (ii) the Guaranty, as
amended by this Amendment, shall remain in full force and effect with respect to
the Loan Documents, as amended.
2
<PAGE> 3
5. Miscellaneous Provisions.
5.1 Binding Effect. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
5.2 Severability. Any provision in this Amendment that is
inoperative, unenforceable, or invalid in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such inoperation,
unenforceability, or invalidity without affecting the remaining provisions
hereof or affecting the operation, enforceability, or validity of such provision
in any other jurisdiction.
5.3 Interpretation. Guarantor acknowledges and agrees that it
has had the opportunity to consult with counsel and review and revise this
Amendment and that any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not apply in the interpretation
of this Amendment or any amendment hereto.
5.4 Entire Agreement; Amendment. The Guaranty as modified by
this Amendment reflects the entire agreements between the parties as to the
subject matter of the Guaranty and no alteration or amendment thereof shall be
effective unless in writing and signed by the parties sought to be charged or
bound thereby.
5.5 Choice of Law and Venue. THE VALIDITY OF THIS AMENDMENT,
ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF GUARANTOR
AND FOOTHILL, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
GUARANTOR HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AMENDMENT SHALL BE TRIED AND DETERMINED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, OR, AT THE
SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR
HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION.
5.6 Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY
LAW, GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION,
CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS AMENDMENT, OR IN ANY WAY
3
<PAGE> 4
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE DEALINGS OF GUARANTOR AND
FOOTHILL WITH RESPECT TO THIS AMENDMENT, OR THE TRANSACTIONS RELATED HERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR
HEREBY AGREES THAT ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND, OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT FOOTHILL
MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY COURT OR OTHER
TRIBUNAL AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR TO THE WAIVER OF ITS
RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, this Amendment to and Confirmation of
Guaranty is executed as of the date first above mentioned.
LEISURE TIME TECHNOLOGY, INC.,
a Georgia corporation
By: /s/
----------------------------------
Print Name:
Title:
4
<PAGE> 1
EXHIBIT 10.51
AMENDMENT TO AND CONFIRMATION OF GUARANTY
THIS AMENDMENT TO AND CONFIRMATION OF GUARANTY (this
"Amendment") is made as of this 22nd day of April, 1999, by LEISURE TIME CASINOS
& RESORTS, INC., a Colorado corporation (the "Guarantor"), in favor of FOOTHILL
CAPITAL CORPORATION, a California corporation ("Foothill"), with reference to
the following:
A. Foothill and Leisure Time Cruise Corporation, a Colorado corporation
("Borrower"), entered into that certain Security Agreement dated as of October
9, 1998 ("Security Agreement"), in connection with which Foothill agreed to
provide certain financial accommodations to Borrower. To induce Foothill to
provide such financial accommodations, Guarantor executed a Continuing Guaranty
in favor of Foothill, dated as of October 9, 1998 (the "Guaranty").
B. Borrower has requested that Foothill further modify and amend the
terms of the Security Agreement pursuant to the terms and conditions set forth
in that certain Amendment No. 1 to Loan Documents, of even date herewith
("Amendment No. One"), and certain other documents and instruments executed in
connection with Amendment No. One (as described in Amendment No. One).
C. To induce Foothill to enter into Amendment No. One and to provide
(i) the Leisure Express Term Loan (referred to in Amendment No. One) to Leisure
Express Cruise, L.L.C., a Colorado limited liability company ("Leisure
Express"), and (ii) the Florida Casino Term Loan (referred to in Amendment No.
One) to Florida Casino Cruises, Inc., a Georgia corporation ("Florida Casino"),
and as a condition precedent to the effectiveness of Amendment No. One,
Guarantor has agreed to execute and deliver this Amendment to Foothill.
NOW, THEREFORE, in consideration of the foregoing recitals
(all of which are agreed to and incorporated herein) and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor hereby agrees as follows:
1. Amendments to Guaranty. The Guaranty is hereby amended as follows:
1.1 References to Borrower. All references to "Borrower" in
the Guaranty shall mean "Borrower, Florida Casino, and/or Leisure Express".
1.2 Definition of "Guaranteed Obligations". The definition of
"Guaranteed Obligations" set forth in Section 1 of the Guaranty shall be deemed
to include (a) all obligations of Leisure Express in connection with the Leisure
Express Term Loan (including,
1
<PAGE> 2
but not limited to, the Leisure Express Obligations referred to in Amendment No.
One), and (b) all obligations of Florida Casino in connection with the Florida
Casino Term Loan (including, but not limited to, the Florida Casino Obligations
referred to in Amendment No. One).
1.3 Definition of "Loan Documents". The definition of "Loan
Documents" set forth in Section 1 of the Guaranty is hereby amended to read in
its entirety as follows:
""Loan Documents"shall mean that certain Security Agreement,
of even date herewith, between Foothill and Borrower, that
certain Secured Promissory Note in the principal amount of
THREE MILLION DOLLARS ($3,000,000) issued by Borrower in
connection therewith, that certain Security Agreement, dated
April 22, 1999, between Foothill and Leisure Express Cruise,
L.L.C., that certain Secured Promissory Note, dated April 22,
1999, in the principal amount of TWO MILLION ONE HUNDRED
THOUSAND DOLLARS ($2,100,000) issued by Leisure Express
Cruise, L.L.C. in favor of Foothill, that certain Security
Agreement, dated April 22, 1999, between Foothill and Florida
Casino Cruises, Inc., that certain Secured Promissory Note,
dated April 22, 1999, in the principal amount of THREE MILLION
TWO HUNDRED TWENTY-FIVE THOUSAND DOLLARS ($3,225,000) issued
by Florida Casino Cruises, Inc. in favor of Foothill, and
those documents, instruments, and agreements which either now
or in the future exist among Borrower, Guarantor, or any
affiliate of Borrower, Florida Casino Cruises, Inc., and/or
Leisure Express Cruise, L.L.C., on the one hand, and Foothill,
on the other hand, and any amendments, modifications, or
supplements to any of the foregoing."
2. Full Force and Effect; Ratification and Reaffirmation of Guaranty.
All provisions of the Guaranty not otherwise specifically amended by this
Amendment shall remain in full force and effect and are hereby ratified and
reaffirmed by Guarantor. Guarantor has no defenses or rights of offset with
respect to its obligations under the Guaranty.
3 Equipment Security Agreement. The Equipment Security Agreement, dated
October 9, 1998, executed by Guarantor in favor of Foothill shall remain in full
force and effect. The security interest granted by Guarantor in favor of
Foothill pursuant to such Equipment Security Agreement is hereby deemed to
secure the Guaranty Obligations as amended by this Amendment.
4. Review and Approval of Loan Documents. Guarantor has been provided
with copies of each of the Loan Documents (including, but not limited to,
Amendment No. One and the other documents and instruments described in Amendment
No. One), and Guarantor acknowledges and confirms that (i) it has reviewed and
approved the terms of the Loan Documents, as amended, and (ii) the Guaranty, as
amended by this Amendment, shall remain in full force and effect with respect to
the Loan Documents, as amended.
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<PAGE> 3
5. Miscellaneous Provisions.
5.1 Binding Effect. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
5.2 Severability. Any provision in this Amendment that is
inoperative, unenforceable, or invalid in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such inoperation,
unenforceability, or invalidity without affecting the remaining provisions
hereof or affecting the operation, enforceability, or validity of such provision
in any other jurisdiction.
5.3 Interpretation. Guarantor acknowledges and agrees that it
has had the opportunity to consult with counsel and review and revise this
Amendment and that any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not apply in the interpretation
of this Amendment or any amendment hereto.
5.4 Entire Agreement; Amendment. The Guaranty as modified by
this Amendment reflects the entire agreements between the parties as to the
subject matter of the Guaranty and no alteration or amendment thereof shall be
effective unless in writing and signed by the parties sought to be charged or
bound thereby.
5.5 Choice of Law and Venue. THE VALIDITY OF THIS AMENDMENT,
ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF GUARANTOR
AND FOOTHILL, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
GUARANTOR HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AMENDMENT SHALL BE TRIED AND DETERMINED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, OR, AT THE
SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR
HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION.
5.6 Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY
LAW, GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION,
CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS AMENDMENT, OR IN ANY WAY
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<PAGE> 4
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE DEALINGS OF GUARANTOR AND
FOOTHILL WITH RESPECT TO THIS AMENDMENT, OR THE TRANSACTIONS RELATED HERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR
HEREBY AGREES THAT ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND, OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT FOOTHILL
MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY COURT OR OTHER
TRIBUNAL AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR TO THE WAIVER OF ITS
RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, this Amendment to and Confirmation of
Guaranty is executed as of the date first above mentioned.
LEISURE TIME CASINOS & RESORTS, INC.,
a Colorado corporation
By: /s/
---------------------------------------
Print Name:
Title:
4
<PAGE> 1
EXHIBIT 10.52
AMENDMENT TO AND CONFIRMATION OF GUARANTY
THIS AMENDMENT TO AND CONFIRMATION OF GUARANTY (this
"Amendment") is made as of this 22nd day of April, 1999, by ALAN N. JOHNSON, an
individual (the "Guarantor"), in favor of FOOTHILL CAPITAL CORPORATION, a
California corporation ("Foothill"), with reference to the following:
A. Foothill and Leisure Time Cruise Corporation, a Colorado corporation
("Borrower"), entered into that certain Security Agreement dated as of October
9, 1998 ("Security Agreement"), in connection with which Foothill agreed to
provide certain financial accommodations to Borrower. To induce Foothill to
provide such financial accommodations, Guarantor executed a Continuing Guaranty
in favor of Foothill, dated as of October 9, 1998 (the "Guaranty").
B. Borrower has requested that Foothill further modify and amend the
terms of the Security Agreement pursuant to the terms and conditions set forth
in that certain Amendment No. 1 to Loan Documents, of even date herewith
("Amendment No. One"), and certain other documents and instruments executed in
connection with Amendment No. One (as described in Amendment No. One).
C. To induce Foothill to enter into Amendment No. One and to provide
(i) the Leisure Express Term Loan (referred to in Amendment No. One) to Leisure
Express Cruise, L.L.C., a Colorado limited liability company ("Leisure
Express"), and (ii) the Florida Casino Term Loan (referred to in Amendment No.
One) to Florida Casino Cruises, Inc., a Georgia corporation ("Florida Casino"),
and as a condition precedent to the effectiveness of Amendment No. One,
Guarantor has agreed to execute and deliver this Amendment to Foothill.
NOW, THEREFORE, in consideration of the foregoing recitals
(all of which are agreed to and incorporated herein) and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor hereby agrees as follows:
1. Amendments to Guaranty. The Guaranty is hereby amended as
follows:
1.1 References to Borrower. All references to "Borrower" in
the Guaranty shall mean "Borrower, Florida Casino, and/or Leisure Express".
1.2 Definition of "Guaranteed Obligations". The definition of
"Guaranteed Obligations" set forth in Section 1 of the Guaranty shall be deemed
to include (a) all obligations of Leisure Express in connection with the Leisure
Express Term Loan (including, but not limited to, the Leisure Express
Obligations referred to in Amendment No. One), and
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<PAGE> 2
(b) all obligations of Florida Casino in connection with the Florida Casino Term
Loan (including, but not limited to, the Florida Casino Obligations referred to
in Amendment No. One).
1.3 Definition of "Loan Documents". The definition of "Loan
Documents" set forth in Section 1 of the Guaranty is hereby amended to read in
its entirety as follows:
""Loan Documents"shall mean that certain Security Agreement,
of even date herewith, between Foothill and Borrower, that
certain Secured Promissory Note in the principal amount of
THREE MILLION DOLLARS ($3,000,000) issued by Borrower in
connection therewith, that certain Security Agreement, dated
April 22, 1999, between Foothill and Leisure Express Cruise,
L.L.C., that certain Secured Promissory Note, dated April 22,
1999, in the principal amount of TWO MILLION ONE HUNDRED
THOUSAND DOLLARS ($2,100,000) issued by Leisure Express
Cruise, L.L.C. in favor of Foothill, that certain Security
Agreement, dated April 22, 1999, between Foothill and Florida
Casino Cruises, Inc., that certain Secured Promissory Note,
dated April 22, 1999, in the principal amount of THREE MILLION
TWO HUNDRED TWENTY FIVE THOUSAND DOLLARS ($3,225,000) issued
by Florida Casino Cruises, Inc. in favor of Foothill, and
those documents, instruments, and agreements which either now
or in the future exist among Borrower, Guarantor, or any
affiliate of Borrower, Florida Casino Cruises, Inc., and/or
Leisure Express Cruise, L.L.C., on the one hand, and Foothill,
on the other hand, and any amendments, modifications, or
supplements to any of the foregoing."
2. Full Force and Effect; Ratification and Reaffirmation of Guaranty.
All provisions of the Guaranty not otherwise specifically amended by this
Amendment shall remain in full force and effect and are hereby ratified and
reaffirmed by Guarantor. Guarantor has no defenses or rights of offset with
respect to its obligations under the Guaranty.
3 Equipment Security Agreement. The Equipment Security Agreement, dated
October 9, 1998, executed by Guarantor in favor of Foothill shall remain in full
force and effect. The security interest granted by Guarantor in favor of
Foothill pursuant to such Equipment Security Agreement is hereby deemed to
secure the Guaranty Obligations as amended by this Amendment.
4. Review and Approval of Loan Documents. Guarantor has been provided
with copies of each of the Loan Documents (including, but not limited to,
Amendment No. One and the other documents and instruments described in Amendment
No. One), and Guarantor acknowledges and confirms that (i) it has reviewed and
approved the terms of the Loan Documents, as amended, and (ii) the Guaranty, as
amended by this Amendment, shall remain in full force and effect with respect to
the Loan Documents, as amended.
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<PAGE> 3
5. Miscellaneous Provisions.
5.1 Binding Effect. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
5.2 Severability. Any provision in this Amendment that is
inoperative, unenforceable, or invalid in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such inoperation,
unenforceability, or invalidity without affecting the remaining provisions
hereof or affecting the operation, enforceability, or validity of such provision
in any other jurisdiction.
5.3 Interpretation. Guarantor acknowledges and agrees that it
has had the opportunity to consult with counsel and review and revise this
Amendment and that any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not apply in the interpretation
of this Amendment or any amendment hereto.
5.4 Entire Agreement; Amendment. The Guaranty as modified by
this Amendment reflects the entire agreements between the parties as to the
subject matter of the Guaranty and no alteration or amendment thereof shall be
effective unless in writing and signed by the parties sought to be charged or
bound thereby.
5.5 Choice of Law and Venue. THE VALIDITY OF THIS AMENDMENT,
ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF GUARANTOR
AND FOOTHILL, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
GUARANTOR HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AMENDMENT SHALL BE TRIED AND DETERMINED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, OR, AT THE
SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR
HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION.
5.6 Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY
LAW, GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION,
CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS AMENDMENT, OR IN ANY WAY
3
<PAGE> 4
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE DEALINGS OF GUARANTOR AND
FOOTHILL WITH RESPECT TO THIS AMENDMENT, OR THE TRANSACTIONS RELATED HERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR
HEREBY AGREES THAT ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND, OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT FOOTHILL
MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY COURT OR OTHER
TRIBUNAL AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR TO THE WAIVER OF ITS
RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, this Amendment to and Confirmation of
Guaranty is executed as of the date first above mentioned.
/s/ Alan N. Johnson
------------------------------------------
Alan N. Johnson, individually
4
<PAGE> 1
EXHIBIT 10.53
SECOND AMENDMENT TO FIRST PREFERRED SHIP MORTGAGE
THIS SECOND AMENDMENT TO FIRST PREFERRED SHIP MORTGAGE (the
"Amendment") is made as of this 22nd day of April, 1999, by and between LEISURE
TIME CRUISE CORPORATION, a Colorado corporation whose address is 4258
Communications Drive, Norcross, Georgia 30093 (the "Mortgagor"), and FOOTHILL
CAPITAL CORPORATION, a California corporation whose address is 11111 Santa
Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333 (the
"Mortgagee").
RECITALS
A. Mortgagee provided a $3,000,000.00 loan to Mortgagor (the "Original
Loan").
B. The Original Loan is evidenced by that certain Secured Promissory
Note, dated October 9, 1998, executed by Mortgagor in favor of Mortgagee ("Term
Note"), and is secured by, among other collateral, the Vessel described in that
certain First Preferred Ship Mortgage, dated October 9, 1998, executed by
Mortgagor in favor of Mortgagee and filed on October 14, 1998, in the National
Documentation Center of the United States Coast Guard, Book 98-92, Page 256 (the
"Mortgage"). All initially capitalized terms not otherwise defined herein shall
have the meanings set forth in the Mortgage.
C. The Vessel covered by the Mortgagee is as follows:
Name: Leisure Lady
Official No.: 671576
Hailing Port: NEW YORK, NEW YORK
Gross Tons: 88
Net Tons: 88
Built: 1984 (Chesapeake Shipbuilding, Maryland)
Length Overall: 137.0 feet
Depth: 7.5 feet
D. At the Mortgagor's request, Mortgagee has agreed to provide (i) a
term loan to an affiliate of Mortgagor, Leisure Express Cruise, L.L.C., a
Colorado limited liability company ("Leisure Express"), in the amount of
$2,100,000.00 (the "Leisure Express Term Loan"), and (ii) a term loan to a
wholly-owned subsidiary of Mortgagor, Florida Casino Cruises, Inc., a Georgia
corporation ("Florida Casino"), in the amount of $3,225,000 (the "Florida Casino
Term Loan"). The Leisure Express Term Loan is evidenced by a Secured Promissory
Note in the original principal sum of $2,100,000.00
1
<PAGE> 2
executed by Leisure Express in favor of Mortgagee (the "Leisure Express Term
Note"), and the Florida Casino Term Loan is evidenced by a Secured Promissory
Note in the original principal sum of $3,225,000 executed by Florida Casino in
favor of Mortgagee (the "Florida Casino Term Note"). In connection with both the
Leisure Express Term Loan and the Florida Casino Term Loan, Mortgagor has
executed, or will be executing, a Continuing Guaranty in favor of Mortgagee (the
"Guaranty").
E. To induce Mortgagee to provide the Leisure Express Term Loan and the
Florida Casino Term Loan, Mortgagor has agreed that the Vessel and all other
collateral described in the Mortgage and the Security Agreement shall continue
to secure the Original Loan, and will now also secure Mortgagor's obligations
under the Guaranty.
AGREEMENT
NOW, THEREFORE, in consideration of the above-referenced facts
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Mortgagee and Mortgagor hereby agree as follows:
1. Amendments to the Mortgage. The Mortgage is hereby amended
as follows:
1.1 References to "Mortgage Amount". All references in the
Mortgage to "Mortgage Amount" or "Principal Sum" shall be deemed to mean the
Original Loan and all of the obligations of Mortgagor under the Guaranty, for a
total principal amount of $8,325,000.00.
1.2 References to "Security Agreement". All references in the
Mortgage to "Security Agreement" shall be deemed to mean the Security Agreement
as amended by (i) Amendment No. 1 to Loan Documents, executed by Mortgagor and
Mortgagee, of even date hereof, and (ii) all further amendments, modifications,
and supplements thereof entered into from time to time.
1.3 References to "Note". All references in the Mortgage to
"Note" shall be deemed to mean, collectively, the Term Note and/or the Guaranty,
as applicable in the context of the sentence in which such terms appear.
1.4 References to "Secured Obligations". All references in the
Mortgage to "Secured Obligations" shall be deemed to include (in addition to the
all of the obligations referred to in the Mortgage) all interest, monthly
service fees, all late charges, and other sums now or hereafter owing in
connection with the Guaranty. The total amount of the Mortgage, as amended
hereby, is $8,325,000.00, excluding interest, monthly service fees, expenses and
other fees. The interest of Mortgagor in the Vessel
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<PAGE> 3
is the entire 100% and the interest mortgaged covers the entire 100% interest in
the Vessel.
1.5 Other Defined Terms. All references to the defined term
"Mortgage" or "First Preferred Ship Mortgage" in the Mortgage or other Loan
Documents shall be deemed to mean the Mortgage as amended by this Amendment.
1.6 Full Force and Effect. All provisions of the Mortgage not
otherwise amended by this Amendment shall remain in full force and effect and
are hereby ratified by the Mortgagor and Mortgagee.
2. Miscellaneous Provisions.
2.1 Binding Effect. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
2.2 Counterparts. This Amendment may be executed and
acknowledged in any number of counterparts and each such counterpart shall be
deemed to be an original.
2.3 Severability. Any provision in this Amendment that is
inoperative, unenforceable, or invalid in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such inoperation,
unenforceability, or invalidity without affecting the remaining provisions
hereof or affecting the operation, enforceability, or validity of such provision
in any other jurisdiction.
2.4 Interpretation. The parties agree that each party and its
counsel have reviewed and revised this Amendment and that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not apply in the interpretation of this Amendment or any
amendment hereto or thereto or exhibits herein or therein.
2.5 Entire Agreement; Amendment. The Mortgage together with
the other Loan Documents, as amended and modified by this Amendment, reflect the
entire agreement between the parties and no alteration or amendment of any or
all thereof shall be effective unless in writing and signed by the parties
sought to be charged or bound thereby, and each and every portion of each Loan
Document shall apply to and bind the respective representatives, successors and
assigns of the parties hereto.
2.6 Applicable Law. This instrument shall be construed in
accordance with the statutory and maritime law of the United States, and, where
such law is silent or inapplicable, then under the laws of the State of
California.
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<PAGE> 4
[signatures on next page]
IN WITNESS WHEREOF, this Amendment has been executed as of the
date first written above.
"Mortgagor"
Attest: LEISURE TIME CRUISE CORPORATION,
a Colorado corporation
By: /s/ By: /s/
--------------------------- ----------------------------------
Print Name: Print Name:
Title: Title:
"Mortgagee"
Attest: FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ By: /s/
--------------------------- ----------------------------------
Print Name: Print Name:
Its: Its:
4
<PAGE> 5
ACKNOWLEDGMENT
STATE OF _______________
COUNTY OF _____________
BEFORE ME, the undersigned authority, personally appeared ____________________
____________, to me well known and known to be the person described in and who
executed foregoing instrument, and acknowledged to and before me that he
executed said instrument for the purpose therein expressed.
WITNESS my hand and official seal this_________day of_________________, 1999.
- --------------------------------
NOTARY PUBLIC
My Commission Expires:______________
ACKNOWLEDGMENT
STATE OF _______________
COUNTY OF _____________
BEFORE ME, the undersigned authority, personally appeared __________________
______________, to me well known and known to be the person described in and
who executed foregoing instrument, and acknowledged to and before me that he
executed said instrument for the purpose therein expressed.
WITNESS my hand and official seal this_________day of_________________, 1999.
- --------------------------------
NOTARY PUBLIC
My Commission Expires:_______________
5
<PAGE> 1
EXHIBIT 10.54
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of April 22, 1999 (as amended,
supplemented or otherwise modified, renewed or replaced from time to time, the
"Pledge Agreement") between (i) LEISURE EXPRESS CRUISE, L.L.C.
("Pledgor") and (ii) FOOTHILL CAPITAL CORPORATION ("Foothill").
INTRODUCTORY STATEMENT
Pursuant to a Secured Promissory Note dated as of April 22,
1999, by Pledgor in favor of Foothill, Foothill has agreed to make a loan (the
"Loan") to the Pledgor. In connection therewith, Foothill and Pledgor have
entered into a Security Agreement dated as of April 22, 1999 (the "Security
Agreement"; capitalized terms used herein and not otherwise defined, shall have
the meanings set forth in the Security Agreement).
Pursuant to the Continuing Guaranty of Pledgor in favor of
Foothill, each dated as of April 22, 1999 (the "Continuing Guaranty"), Pledgor
has agreed to guaranty the respective obligations of Florida Casino Cruises,
Inc. and Leisure Time Cruise Corporation now or hereafter owing to Foothill.
Pledgor owns beneficially and of record all of the issued and
outstanding shares of the capital stock of its subsidiaries listed on Schedule 1
hereto (being referred to herein as the "Pledged Affiliates").
In order to induce Foothill to make the Loan to Pledgor and to
secure the Obligations, the Cruise Corporation Obligations and the Florida
Casino Obligations, Pledgor is pledging to Foothill all of the issued and
outstanding capital stock of the Pledged Affiliates, all as more fully set forth
herein.
Accordingly, the parties hereto agree as follows:
1. Pledge. (a) As security for payment in full of the
Obligations and all of the "Guaranteed Obligations" described in the Continuing
Guaranty, Pledgor hereby pledges, hypothecates, assigns, transfers, sets over
and delivers unto Foothill, and grants a security interest in (i) all the
capital stock of the Pledged Affiliates which Pledgor now or hereafter owns,
(ii) all rights, options and warrants pertaining to such capital, stock, whether
now owned or hereafter acquired and (iii) all proceeds of such capital stock and
all other securities or other property at any time and from time to time
receivable or otherwise distributed in respect of or in exchange for any or all
of such capital stock or additional securities, in each case whether now
existing or hereafter arising. All items referred to in clauses (i), (ii) and
(iii) of this Section 1 are hereinafter referred to collectively as the "Pledged
Securities."
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(b) Pledgor shall deliver to Foothill the certificates
representing the Pledged Securities accompanied by undated stock powers executed
in blank and by such other instruments or documents as Foothill or its counsel
shall reasonably request.
2. Registration in Nominee Name; Denominations. Foothill shall
have the right (in its sole and absolute discretion) to hold the certificates
representing any Pledged Securities in its own name, the name of its nominee or
in the name of Pledgor, endorsed or assigned in blank or in favor of Foothill.
Upon the occurrence and during the continuation of an Event of Default, Foothill
shall have the right to exchange the certificates representing Pledged
Securities for certificates of smaller or larger denominations for any purpose
consistent with this Pledge Agreement.
3. Pledgor's Representations, Warranties and Covenants.
Pledgor hereby represents and warrants to and/or covenants and agrees with
Foothill as follows:
(i) the Pledged Securities constitute 100% of the issued and
outstanding equity securities of the Pledged Affiliates;
(ii) the Pledged Securities are duly authorized, validly
issued, fully paid and non-assessable;
(iii) there are no restrictions on the transfer of the Pledged
Securities other than as a result of the Security Agreement, this Pledge
Agreement, or applicable securities laws or the regulations promulgated
thereunder;
(iv) Pledgor has good title to the Pledged Securities;
(v) the Pledged Securities are not subject to any prior
liens, encumbrances or security interests;
(vi) Pledgor has the right to pledge the Pledged Securities
hereunder free and clear of any liens, encumbrances or security interests
without the consent of the creditors of the Pledged Affiliates or any other
person or any government agency whatsoever;
(vii) Pledgor has full power and authority to execute, deliver
and perform this Pledge Agreement and to pledge the Pledged Securities
hereunder;
(viii) Pledgor will not take any action to allow any
additional equity securities of the Pledged Affiliates to be issued or grant any
options or warrants, unless such securities are pledged to Foothill on terms
satisfactory to Foothill as security for the Obligations and the Guaranteed
Obligations;
(ix) the execution, delivery and performance of this Pledge
Agreement will not violate any provision of law, administrative regulation, any
order of any court or other agency of
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<PAGE> 3
government, any provision of any indenture, agreement or other instrument to
which Pledgor is a party, or be in conflict with, result in a material breach of
or constitute (with due notice and/or lapse of time) a material default under
any such indenture, agreement or other instrument which in the case of a
violation of any provision of or conflict with an indenture would have a
material adverse effect;
(x) there are no pending legal or governmental proceedings
to which Pledgor is a party or to which any of its properties is subject which
will materially affect Pledgor's ability to perform its obligations hereunder;
and
(xi) on the date hereof, the Pledged Securities consist of
the securities listed on Schedule 1.
4. Voting Rights; Dividends; etc. (a) Unless and until an
Event of Default shall have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and
all voting and/or consensual rights and powers accruing to the owner of the
Pledged Securities or any part thereof for any purpose not inconsistent with the
terms hereof and of the Security Agreement.
(ii) Any dividends or distributions of any kind
whatsoever prohibited by the Security Agreement and received by Pledgor, whether
resulting from a subdivision, combination, or reclassification of the
outstanding capital stock of a Pledged Affiliate or received in exchange for the
Pledged Securities or any part thereof or as a result of any merger,
consolidation, acquisition, or other exchange of assets to which a Pledged
Affiliate may be a party, or otherwise, shall be and become part of the Pledged
Securities pledged hereunder and shall immediately be delivered to Foothill to
be held subject to the terms of this Pledge Agreement.
(iii) Foothill shall execute and deliver to Pledgor,
or cause to be executed and delivered to Pledgor, all such proxies, powers of
attorney and other instruments as Pledgor may reasonably request for the purpose
of enabling Pledgor to exercise the voting and/or consensual rights and powers
which it is entitled to exercise pursuant to clause (i) above.
(b) Upon the occurrence and during the continuance of an Event
of Default, all rights of Pledgor to (i) exercise the voting and/or consensual
rights and powers which it is entitled to exercise pursuant to Section 4(a)(i)
hereof and (ii) receive and retain dividends and distributions which Pledgor
would be entitled to receive and retain pursuant to Section 4(a)(ii), if any,
shall cease and all such rights shall thereupon become vested in Foothill who
shall have the sole and exclusive right and authority to exercise such voting
and/or consensual rights; provided, however, that to the extent any governmental
consents or filings are required for the exercise by Foothill of any of the
foregoing rights and powers, Foothill shall refrain from exercising such rights
or powers until the making of such required filings, the receipt of such
consents and the expiration of all related waiting periods.
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<PAGE> 4
5. Remedies Upon Default. (a) If an Event of Default shall
have occurred and be continuing, Foothill may sell the Pledged Securities, or
any part thereof, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as Foothill
shall deem appropriate subject to the terms hereof or as otherwise provided in
the California Uniform Commercial Code. Foothill shall be authorized at any such
sale (if it deems it advisable to do so) to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are purchasing the
Pledged Securities for their own account and not with a view to the distribution
or sale thereof, and upon consummation of any such sale Foothill shall have the
right to assign, transfer, and deliver to the purchaser or purchasers thereof
the Pledged Securities so sold. Each such purchaser at any such sale shall hold
the property sold absolutely, free from any claim or right on the part of the
Pledgor.
(b) Foothill shall give the Pledgor 10 days' written notice of
Foothill's intention to make any such public or private sale, or sale at any
broker's board or on any such securities exchange, or of any other disposition
of the Pledged Securities contemplated by Section 5(a). Such notice, in the case
of public sale, shall state the time and place for such sale and, in the case of
sale at a broker's board or on a securities exchange, shall state the board or
exchange at which such sale is to be made and the day on which the Pledged
Securities, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as Foothill may fix and
shall state in the notice of such sale. At any such sale, the Pledged
Securities, or portion thereof, to be sold may be sold in one lot as an entirety
or in separate parcels, as Foothill may (in its sole and absolute discretion)
determine. Foothill shall not be obligated to make any sale of the Pledged
Securities if it shall determine not to do so, regardless of the fact that
notice of sale of the Pledged Securities may have been given. Foothill may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case the sale of all or any
part of the Pledged Securities is made on credit or for future delivery, the
Pledged Securities so sold shall be retained by Foothill until the sale price is
paid by the purchaser or purchasers thereof, but Foothill shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Pledged Securities so sold and, in case of any such failure, such
Pledged Securities may be sold again upon like notice. At any sale or sales made
pursuant to this Section 5, Foothill may bid for or purchase, free from any
claim or right of whatever kind, including any equity of redemption, of the
Pledgor, any such demand, notice, claim, right or equity being hereby expressly
waived and released, any or all of the Pledged Securities offered for sale, and
may make any payment on the account thereof by using any claim for moneys then
due and payable to Foothill by the Pledgor, Florida Casino or Cruise Corporation
(as defined in the Security Agreement) as a credit against the purchase price;
and Foothill, upon compliance with the terms of sale, may hold, retain and
dispose of the Pledged Securities without further accountability therefor to the
Pledgor or any third party. Foothill shall in any such sale make no
representations or warranties with respect to the Pledged Securities or any part
thereof, and Foothill shall not be chargeable with any of the obligations or
liabilities of the Pledgor with respect thereto. Pledgor hereby agrees (i) it
will
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<PAGE> 5
indemnify and hold Foothill harmless from and against any and all claims with
respect to the Pledged Securities asserted before the taking of actual
possession or control of the Pledged Securities by Foothill pursuant to this
Pledge Agreement or arising out of any act of, or omission to act on the part
of, any party other than Foothill prior to such taking of actual possession or
control by Foothill, or arising out of any act on the part of such Pledgor or
its agents before or after the commencement of such actual possession or control
by Foothill; and (ii) Foothill shall have no liability or obligation arising out
of any such claim. As an alternative to exercising the power of sale herein
conferred upon it, Foothill may proceed by a suit or suits at law or in equity
to foreclose this Pledge Agreement and to sell the Pledged Securities, or any
portion thereof, pursuant to a judgment or decree of a court or courts having
competent jurisdiction.
6. Application of Proceeds of Sale and Cash. The proceeds of
any sale of the Pledged Securities sold pursuant to Section 6 hereof shall be
applied by Foothill in any manner selected by Foothill, in Foothill's sole
discretion.
7. Foothill Appointed Attorney-in-Fact. Upon the occurrence of
an Event of Default and during the continuance of an Event of Default, Pledgor
hereby appoints Foothill its attorney-in-fact for the purpose of carrying out
the provisions of this Pledge Agreement and the pledge of the Pledged Securities
hereunder and taking any action and executing any instrument which Foothill may
deem necessary or advisable to accomplish the purposes hereof, which appointment
is irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, Foothill shall have the right and power to receive, endorse, and
collect all checks and other orders for the payment of money made payable to
Pledgor representing any dividend or other distribution payable in respect of
the Pledged Securities or any part thereof and to give full discharge for the
same.
8. Securities Act, etc. In view of the position of Pledgor in
relation to the Pledged Securities, or because of other present or future
circumstances, a question may arise under the Securities Act of 1933, as
amended, as now or hereafter in effect, or any similar statute hereafter enacted
analogous in purpose or effect (such Act and any such similar statute as from
time to time in effect being hereinafter called the "Federal Securities Laws"),
with respect to any disposition of the Pledged Securities permitted hereunder.
Pledgor understands that compliance with the Federal Securities Laws may very
strictly limit the course of conduct of Foothill if the Foothill were to attempt
to dispose of all or any part of the Pledged Securities, and may also limit the
extent to which or the manner in which any subsequent transferee of any Pledged
Securities may dispose of the same. Similarly, there may be other legal
restrictions or limitations affecting Foothill in any attempt to dispose of all
or any part of the Pledged Securities under applicable "Blue Sky" or other state
securities laws, or similar laws analogous in purpose or effect. To the maximum
extent permitted by applicable law, Pledgor hereby agrees that Foothill shall
not have any such general duty or obligation to it, and Pledgor will not attempt
to hold Foothill responsible for selling all or any part of the Pledged
Securities at an inadequate price, even if the Foothill shall accept the first
offer received or does not approach more than one possible purchaser. Without
limiting the generality of the foregoing, the provisions of this Section 8 would
apply if, for example, Foothill were to place all or any part of the Pledged
Securities for private placement by
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<PAGE> 6
an investment banking firm, or if such investment banking firm purchased all or
any part of the Pledged Securities for its own account, or if Foothill placed
all or any part of the Pledged Securities privately with a purchaser or
purchasers.
9. Continuation and Reinstatement. Pledgor further agrees that
its pledge hereunder shall continue to be effective or be reinstated, as the
case may be, if at any time payment, or any part thereof, of principal of or
interest on any of the Obligations or the Guaranteed Obligations is rescinded or
must otherwise be restored by Foothill upon the bankruptcy or reorganization of
Pledgor or otherwise.
10. Termination. The pledge hereunder shall terminate when all
of the Obligations, the Cruise Corporation Obligations and the Florida Casino
Obligations shall have been fully paid and performed. At such time Foothill
shall, at the sole cost and expense of Pledgor, assign and deliver to Pledgor,
or to such person or persons as Pledgor shall designate, against receipt, such
of the Pledged Securities (if any) as shall not have been sold or otherwise
applied by Foothill pursuant to the terms hereof and shall still be held by it
hereunder, together with appropriate instruments of reassignment and release.
Any such reassignment shall be without recourse upon or representation or
warranty by Foothill.
11. Further Assurances. Pledgor, at its own expense, will
execute and deliver, from time to time, any and all further, or other,
instruments, and perform such acts, as Foothill may reasonably request to effect
the purposes of this Pledge Agreement and to secure to Foothill the benefits of
all rights, authorities, and remedies conferred upon Foothill by the terms of
this Pledge Agreement.
12. Notices. Notices and other communication provided for or
permitted herein shall be given as set forth in the Security Agreement.
13. Non-Waiver of Rights and Remedies. No delay or failure on
the part of Foothill in the exercise of any right or remedy shall operate as a
waiver thereof, no single or partial exercise by Foothill of any right or remedy
shall preclude other or further exercise thereof or the exercise of any other
right or remedy and no course of dealing between the parties shall operate as a
waiver of any right or remedy of Foothill.
14. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. THE VALIDITY
OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE
RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED
AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER
COURT
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<PAGE> 7
IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF PLEDGOR AND
FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH
MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 14. PLEDGOR
AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. PLEDGOR AND
FOOTHILL REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
15. Severability. This Pledge Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Pledge Agreement shall be prohibited by or invalidated under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Pledge Agreement and the parties hereto
agree to negotiate in good faith a provision to replace the ineffective
provision, such provision to be as similar in effect and intent as the
ineffective provision as permissible.
16. Amendments. This Pledge Agreement may not be amended
except by a writing signed by the parties hereto.
17. Successors and Assigns. This Pledge Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
18. Counterparts. This Pledge Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall
constitute an original for all purposes, but all such counterparts taken
together shall constitute the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed as of the day and year first above written.
LEISURE EXPRESS CRUISE, L.L.C.
By: Leisure Time Cruise Corporation, its
Managing Member
By: /s/
-------------------------------------
Name:
Title:
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<PAGE> 8
FOOTHILL CAPITAL CORPORATION
By: /s/
-------------------------------------
Name:
Title:
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<PAGE> 9
SCHEDULE 1
Pledged Securities
<TABLE>
<CAPTION>
================================================================================================================================
Stock Certificate No. of
Pledged Affiliate No. Shares Owner of Stock
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Florida Casino Cruises, Inc. Leisure Express Cruise, L.L.C.
================================================================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.55
CONTINUING GUARANTY
THIS CONTINUING GUARANTY ("Guaranty"), dated as of April 22, 1999, is
executed and delivered by LEISURE TIME CRUISE CORPORATION, a Colorado
corporation ("Guarantor"), in favor of FOOTHILL CAPITAL CORPORATION, a
California corporation ("Foothill"), with reference to the following:
RECITALS
A. Leisure Express Cruise, L.L.C., a Colorado limited liability
company ("Leisure Express") and Florida Casino Cruises, Inc., a Georgia
corporation ("Florida Casino"; Leisure Express and Florida Casino are sometimes
referred to herein individually as a "Borrower" and collectively as the
"Borrowers"), are each contemporaneously herewith, entering into certain Loan
Documents (as defined below) with Foothill; and
B. In order to induce Foothill to extend financial accommodations to
Borrowers pursuant to the applicable Loan Documents, and in consideration
thereof, and in consideration of any loans or other financial accommodations
heretofore or hereafter extended by Foothill to Borrowers, whether pursuant to
the Loan Documents or otherwise, Guarantor has agreed to guarantee the
Guaranteed Obligations (defined below).
NOW, THEREFORE, in consideration of the foregoing, Guarantor hereby
agrees, in favor of Foothill, as follows:
1. Definitions and Construction.
(a) Definitions. The following terms, as used in this Guaranty,
shall have the following meanings:
"Bankruptcy Code" means The Bankruptcy Reform Act of 1978
(11 U.S.C. Sections 101-1330), as amended or supplemented from time to time, and
any successor statute, and any and all rules issued or promulgated in
connection therewith.
"Florida Casino Documents" shall mean that certain Security
Agreement, of even date herewith, between Foothill and Florida Casino, that
certain Secured Promissory Note in the principal amount of THREE MILLION TWO
HUNDRED TWENTY FIVE THOUSAND DOLLARS ($3,225,000) issued by Florida Casino in
connection therewith, that certain First Preferred Ship Mortgage by Florida
Casino in favor of Foothill, and those documents, instruments, and agreements
which either now or in the future exist among Florida Casino, Guarantor, or any
affiliate of Florida Casino, on the one hand, and Foothill, on the other hand,
and any amendments, modifications, or supplements to any of the foregoing.
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<PAGE> 2
"Guaranteed Obligations" means any and all obligations,
indebtedness, or liabilities of any kind or character owed by each Borrower to
Foothill including all such obligations, indebtedness, or liabilities, whether
for principal, interest (including any interest which, but for the application
of the provisions of the Bankruptcy Code, would have accrued on such amounts),
premium, reimbursement obligations, fees, costs, expenses (including,
attorneys' fees), or indemnity obligations, whether heretofore, now, or
hereafter made, incurred, or created, whether voluntarily or involuntarily
made, incurred, or created, whether secured or unsecured (and if secured,
regardless of the nature or extent of the security), whether absolute or
contingent, liquidated or unliquidated, determined or indeterminate, whether
such Borrower is liable individually or jointly with others, and whether
recovery is or hereafter becomes barred by any statute of limitations or
otherwise becomes unenforceable for any reason whatsoever, including any act or
failure to act by Foothill.
"Leisure Express Documents" shall mean that certain Security
Agreement, of even date herewith, between Foothill and Leisure Express, that
certain Secured Promissory Note in the principal amount of TWO MILLION ONE
HUNDRED THOUSAND DOLLARS ($2,100,000) issued by Leisure Express in connection
therewith, that certain Pledge Agreement by Leisure Express in favor of
Foothill, and those documents, instruments, and agreements which either now or
in the future exist among Leisure Express, Guarantor, or any affiliate of
Leisure Express, on the one hand, and Foothill, on the other hand, and any
amendments, modifications, or supplements to any of the foregoing.
"Loan Documents" shall mean, collectively, the Leisure Express
Documents and the Florida Casino Documents.
(b) Construction. Unless the context of this Guaranty clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, and the term "including" is not limiting.
The words "hereof," "herein," "hereby," "hereunder," and other similar terms
refer to this Guaranty as a whole and not to any particular provision of this
Guaranty. Any reference herein to any of the Loan Documents includes any and
all alterations, amendments, extensions, modifications, renewals, or
supplements thereto or thereof, as applicable. Neither this Guaranty nor any
uncertainty or ambiguity herein shall be construed or resolved against Foothill
or Guarantor, whether under any rule of construction or otherwise. On the
contrary, this Guaranty has been reviewed by Guarantor, Foothill, and their
respective counsel, and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of Foothill and Guarantor.
2. Guaranteed Obligations. Guarantor hereby irrevocably and
unconditionally guarantees to Foothill, as and for its own debt, until final
and indefeasible payment thereof has been made, (a) payment of the Guaranteed
Obligations, in each case when and as the same shall become due and payable,
whether at maturity, pursuant to a mandatory
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<PAGE> 3
prepayment requirement, by acceleration, or otherwise; it being the intent of
Guarantor that the guaranty set forth herein shall be a guaranty of payment and
not a guaranty of collection; and (b) the punctual and faithful performance,
keeping, observance, and fulfillment by each Borrower of all of the agreements,
conditions, covenants, and obligations of such Borrower contained in the Loan
Documents.
3. Continuing Guaranty. This Guaranty includes Guaranteed Obligations
arising under successive transactions continuing, compromising, extending,
increasing, modifying, releasing, or renewing the Guaranteed Obligations,
changing the interest rate, payment terms, or other terms and conditions
thereof, or creating new or additional Guaranteed Obligations after prior
Guaranteed Obligations have been satisfied in whole or in part. To the maximum
extent permitted by law, Guarantor hereby waives any right to revoke this
Guaranty as to future indebtedness. If such a revocation is effective
notwithstanding the foregoing waiver, Guarantor acknowledges and agrees that
(a) no such revocation shall be effective until written notice thereof has been
received by Foothill, (b) no such revocation shall apply to any Guaranteed
Obligations in existence on such date (including, any subsequent continuation,
extension, or renewal thereof, or change in the interest rate, payment terms,
or other terms and conditions thereof), (c) no such revocation shall apply to
any Guaranteed Obligations made or created after such date to the extent made
or created pursuant to a legally binding commitment of Foothill in existence on
the date of such revocation, (d) no payment by Guarantor, a Borrower, or from
any other source, prior to the date of such revocation shall reduce the maximum
obligation of Guarantor hereunder, and (e) any payment by a Borrower or from
any source other than Guarantor, subsequent to the date of such revocation,
shall first be applied to that portion of the Guaranteed Obligations as to
which the revocation is effective and which are not, therefore, guaranteed
hereunder, and to the extent so applied shall not reduce the maximum obligation
of Guarantor hereunder.
4. Performance Under This Guaranty. In the event that a Borrower fails
to make any payment of any Guaranteed Obligations on or before the due date
thereof, or if a Borrower shall fail to perform, keep, observe, or fulfill any
other obligation referred to in clause (b) of Section 2 hereof in the manner
provided in the Loan Documents, Guarantor immediately shall cause such payment
to be made or each of such obligations to be performed, kept, observed, or
fulfilled.
5. Primary Obligations. This Guaranty is a primary and original
obligation of Guarantor, is not merely the creation of a surety relationship,
and is an absolute, unconditional, and continuing guaranty of payment and
performance which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity or
irregularity with respect to the Loan Documents. Guarantor agrees that it is
directly, jointly and severally with any other guarantor of the Guaranteed
Obligations, liable to Foothill, that the obligations of Guarantor hereunder
are independent of the obligations of Borrowers or any other guarantor, and
that a separate action may be brought against Guarantor whether such action is
brought against a Borrower or any other guarantor or whether such
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<PAGE> 4
Borrower or any such other guarantor is joined in such action. Guarantor agrees
that its liability hereunder shall be immediate and shall not be contingent
upon the exercise or enforcement by Foothill of whatever remedies it may have
against a Borrower or any other guarantor, or the enforcement of any lien or
realization upon any security Foothill may at any time possess. Guarantor
agrees that any release which may be given by Foothill to a Borrower or any
other guarantor shall not release Guarantor. Guarantor consents and agrees that
Foothill shall be under no obligation to marshal any assets of Borrowers or any
other guarantor in favor of Guarantor, or against or in payment of any or all
of the Guaranteed Obligations.
6. Waivers.
(a) To the maximum extent permitted by law, Guarantor hereby
waives: (1) notice of acceptance hereof; (2) notice of any loans or other
financial accommodations made or extended under the Loan Documents or the
creation or existence of any Guaranteed Obligations; (3) notice of the amount
of the Guaranteed Obligations, subject, however, to Guarantor's right to make
inquiry of Foothill to ascertain the amount of the Guaranteed Obligations at
any reasonable time; (4) notice of any adverse change in the financial
condition of either Borrower or of any other fact that might increase
Guarantor's risk hereunder; (5) notice of presentment for payment, demand,
protest, and notice thereof as to any promissory notes or other instruments
among the Loan Documents; (6) notice of any event of default under the Loan
Documents; and (7) all other notices (except if such notice is specifically
required to be given to Guarantor hereunder or under any Loan Document to which
Guarantor is a party) and demands to which Guarantor might otherwise be
entitled.
(b) To the maximum extent permitted by law, Guarantor hereby
waives the right by statute or otherwise to require Foothill to institute suit
against a Borrower or to exhaust any rights and remedies which Foothill has or
may have against such Borrower. In this regard, Guarantor agrees that it is
bound to the payment of all Guaranteed Obligations, whether now existing or
hereafter accruing, as fully as if such Guaranteed Obligations were directly
owing to Foothill by Guarantor. Guarantor further waives any defense arising by
reason of any disability or other defense (other than the defense that the
Guaranteed Obligations shall have been fully and finally performed and
indefeasibly paid) of a Borrower or by reason of the cessation from any cause
whatsoever of the liability of such Borrower in respect thereof.
(c) To the maximum extent permitted by law, Guarantor hereby
waives: (1) any rights to assert against Foothill any defense (legal or
equitable), set-off, counterclaim, or claim which Guarantor may now or at any
time hereafter have against a Borrower or any other party liable to Foothill;
(2) any defense, set-off, counterclaim, or claim, of any kind or nature,
arising directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed Obligations or any
security therefor; (3) any defense based upon or arising out of an election of
remedies by Foothill including any defense based upon an election of remedies
by Foothill under the
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<PAGE> 5
provisions of Sections 580d and 726 of the California Code of Civil Procedure,
or any similar law of California or any other jurisdiction; (4) the benefit of
any statute of limitations affecting Guarantor's liability hereunder or the
enforcement thereof, and any act which shall defer or delay the operation of
any statute of limitations applicable to the Guaranteed Obligations shall
similarly operate to defer or delay the operation of such statute of
limitations applicable to Guarantor's liability hereunder; (5) all rights and
defenses arising out of an election of remedies by Foothill, even though that
election of remedies, such as nonjudicial foreclosure with respect to security
for the Guaranteed Obligations, has destroyed the Guarantors' rights of
subrogation and reimbursement against a Borrower by the operation of Section
580d of the California Code of Civil Procedure or otherwise; and (6) all rights
and defenses that Guarantor may have because the Guaranteed Obligations are
secured by real property or an estate for years. As to clause "(6)" of this
paragraph 6(c), this waiver means, among other things: (i) Foothill may collect
from Guarantor without first foreclosing on any real or personal property
collateral pledged by a Borrower; and (ii) if Foothill forecloses on any real
property (or an estate for years) pledged by such Borrower: (A) the amount of
the Guaranteed Obligations may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if the collateral is worth
more than the sale price, and (B) Foothill may collect from Guarantor even if
Foothill, by foreclosing on the real property collateral, has destroyed any
right Guarantor may have to collect from such Borrower. The waiver in clause
"(6)" of this paragraph 6(c) is an unconditional and irrevocable waiver of any
rights and defenses that Guarantor may have because either Borrower's debt is
secured by real property or an estate for years. These rights and defenses
include, but are not limited to, any rights or defenses based upon Section
580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
(d) To the maximum extent permitted by law, Guarantor hereby
waives any right of subrogation or reimbursement Guarantor has or may have as
against Borrowers with respect to the Guaranteed Obligations. In addition,
Guarantor hereby waives any right to proceed against either Borrower, now or
hereafter, for contribution, indemnity, reimbursement, and any other suretyship
rights and claims, whether direct or indirect, liquidated or contingent,
whether arising under express or implied contract or by operation of law, which
Guarantor may now have or hereafter have as against such Borrower with respect
to the Guaranteed Obligations. Guarantor also hereby waives any rights to
recourse to or with respect to any asset of either Borrower. Guarantor agrees
that in light of the immediately foregoing waivers, the execution of this
Guaranty shall not be deemed to make Guarantor a "creditor" of either Borrower,
and that for purposes of Sections 547 and 550 of the Bankruptcy Code Guarantor
shall not be deemed a "creditor" of either Borrower.
(e) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY WAIVES, TO THE MAXIMUM
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHTS, BENEFITS, SANCTIONS, OR DEFENSES
ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE
SECTIONS 2787 TO 2855, INCLUSIVE, CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS
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580a, 580b, 580c, 580d, AND 726, AND CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA
CIVIL CODE.
7. Releases. Guarantor consents and agrees that, without notice to
or by Guarantor and without affecting or impairing the obligations of Guarantor
hereunder, Foothill may, by action or inaction:
(a) compromise, settle, extend the duration or the time for
the payment of, or discharge the performance of, or may refuse to or otherwise
not enforce the Loan Documents;
(b) release all or any one or more parties to any one or more
of the Loan Documents or grant other indulgences to either Borrower in respect
thereof;
(c) amend or modify in any manner and at any time (or from
time to time) any of the Loan Documents;
(d) increase or decrease at any time (or from time to time)
the amount of the Guaranteed Obligations, the amount or rate of interest
applicable thereto, and/or the amount of fees or other charges imposed in
connection therewith; or
(e) release or substitute any other guarantor, if any, of the
Guaranteed Obligations, or enforce, exchange, release, or waive any security
for the Guaranteed Obligations or any other guaranty of the Guaranteed
Obligations, or any portion thereof.
8. No Election. Foothill shall have the right to seek recourse against
Guarantor to the fullest extent provided for herein, and no election by
Foothill to proceed in one form of action or proceeding, or against any party,
or on any obligation, shall constitute a waiver of Foothill's right to proceed
in any other form of action or proceeding or against other parties unless
Foothill has expressly waived such right in writing. Specifically, but without
limiting the generality of the foregoing, no action or proceeding by Foothill
under any document or instrument evidencing the Guaranteed Obligations shall
serve to diminish the liability of Guarantor under this Guaranty except to the
extent that Foothill finally and unconditionally shall have realized
indefeasible payment by such action or proceeding.
9. Indefeasible Payment. The Guaranteed Obligations shall not be
considered indefeasibly paid for purposes of this Guaranty unless and until all
payments to Foothill are no longer subject to any right on the part of any
person, including each Borrower, a Borrower as a debtor in possession, or any
trustee (whether appointed under the Bankruptcy Code or otherwise) of either
Borrower's assets to invalidate or set aside such payments or to seek to recoup
the amount of such payments or any portion thereof, or to declare same to be
fraudulent or preferential. Until such full and final performance and
indefeasible payment of
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the Guaranteed Obligations whether by Guarantor or a Borrower, Foothill shall
have no obligation whatsoever to transfer or assign its interest in the Loan
Documents to Guarantor. In the event that, for any reason, any portion of such
payments to Foothill is set aside or restored, whether voluntarily or
involuntarily, after the making thereof, then the obligation intended to be
satisfied thereby shall be revived and continued in full force and effect as if
said payment or payments had not been made, and Guarantor shall be liable for
the full amount Foothill is required to repay plus any and all costs and
expenses (including attorneys' fees) paid by Foothill in connection therewith.
10. Financial Condition of Borrowers. Guarantor represents and
warrants to Foothill that Guarantor is currently informed of the financial
condition of each Borrower and of all other circumstances which a diligent
inquiry would reveal and which bear upon the risk of nonpayment of the
Guaranteed Obligations. Guarantor further represents and warrants to Foothill
that Guarantor has read and understands the terms and conditions of the Loan
Documents. Guarantor hereby covenants that Guarantor will continue to keep
informed of each Borrower's financial condition, the financial condition of
other guarantors, if any, and of all other circumstances which bear upon the
risk of nonpayment or nonperformance of the Guaranteed Obligations.
11. Subordination. Guarantor hereby agrees that any and all present
and future indebtedness of each Borrower owing to Guarantor is postponed in
favor of and subordinated to payment, in full, in cash, of the Guaranteed
Obligations. In this regard, no payment of any kind whatsoever shall be made
with respect to such indebtedness until the Guaranteed Obligations have been
indefeasibly paid in full.
12. Payments; Application. All payments to be made hereunder by
Guarantor shall be made in lawful money of the United States of America at the
time of payment, shall be made in immediately available funds, and shall be
made without deduction (whether for taxes or otherwise) or offset. All payments
made by Guarantor hereunder shall be applied as follows: first, to all costs
and expenses (including attorneys' fees) incurred by Foothill in enforcing this
Guaranty or in collecting the Guaranteed Obligations; second, to all accrued
and unpaid interest, premium, if any, and fees owing to Foothill constituting
Guaranteed Obligations; and third, to the balance of the Guaranteed
Obligations.
13. Attorneys' Fees and Costs. Guarantor agrees to pay, on demand,
all reasonable attorneys' fees and all other costs and expenses which may be
incurred by Foothill in the enforcement of this Guaranty or in any way arising
out of, or consequential to the protection, assertion, or enforcement of the
Guaranteed Obligations (or any security therefor), whether or not suit is
brought.
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14. Indemnification. Guarantor agrees to indemnify Foothill and hold
Foothill harmless against all obligations, demands, or liabilities asserted by
any party and against all losses in any way suffered, incurred, or paid by
Foothill as a result of or in any way arising out of, following, or
consequential to Foothill's transactions with either Borrower.
15. Notices. All notices or demands by Guarantor or Foothill to the
other relating to this Guaranty shall be in writing and either personally
served or sent by registered or certified mail, postage prepaid, return receipt
requested, or by prepaid telex, telefacsimile, or telegram, and shall be deemed
to be given for purposes of this Guaranty on the day that such writing is
received by the party to whom it is sent. Unless otherwise specified in a
notice sent or delivered in accordance with the provisions of this section,
such writing shall be sent, if to Guarantor, at Guarantor's address set forth
on the signature page hereof, and if to Foothill, then as follows:
Foothill Capital Corporation
11111 Santa Monica Boulevard, Suite 1500
Los Angeles, California 90025-3333
Attn: Small Business Lending Division
16. Cumulative Remedies. No remedy under this Guaranty or under any
Loan Document is intended to be exclusive of any other remedy, but each and
every remedy shall be cumulative and in addition to any and every other remedy
given hereunder or under any Loan Document, and those provided by law or in
equity. No delay or omission by Foothill to exercise any right under this
Guaranty shall impair any such right nor be construed to be a waiver thereof.
No failure on the part of Foothill 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.
17. Books and Records. Guarantor agrees that Foothill's books and
records showing the account between Foothill and either Borrower shall be
admissible in any action or proceeding and shall be binding upon Guarantor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof.
18. Severability of Provisions. Any provision of this Guaranty which
is prohibited or unenforceable under applicable law, shall be ineffective to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
19. Entire Agreement; Amendments. This Guaranty constitutes the entire
agreement between Guarantor and Foothill pertaining to the subject matter
contained herein. This Guaranty may not be altered, amended, or modified, nor
may any provision hereof be waived or noncompliance therewith consented to,
except by means of a writing executed by both Guarantor and Foothill. Any such
alteration, amendment, modification, waiver, or
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consent shall be effective only to the extent specified therein and for the
specific purpose for which given. No course of dealing and no delay or waiver
of any right or default under this Guaranty shall be deemed a waiver of any
other, similar or dissimilar right or default or otherwise prejudice the rights
and remedies hereunder.
20. Successors and Assigns. The death of Guarantor shall not
terminate this Guaranty. This Guaranty shall be binding upon Guarantor's heirs,
executors, administrators, representatives, successors, and assigns and shall
inure to the benefit of the successors and assigns of Foothill; provided,
however, Guarantor shall not assign this Guaranty or delegate any of its duties
hereunder without Foothill's prior written consent. Any assignment without the
consent of Foothill shall be absolutely void. In the event of any assignment or
other transfer of rights by Foothill, the rights and benefits herein conferred
upon Foothill shall automatically extend to and be vested in such assignee or
other transferee.
21. Separate Property. Any married individual who signs this Guaranty
in his or her individual capacity hereby expressly agrees that recourse may be
had against his or her separate property for all Guaranteed Obligations
hereunder.
22. Choice of Law and Venue. THE VALIDITY OF THIS GUARANTY, ITS
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF GUARANTOR AND
FOOTHILL, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR HEREBY
AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS GUARANTY
SHALL BE TRIED AND DETERMINED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN
THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, OR, AT THE SOLE OPTION OF
FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR HEREBY
EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION.
23. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION,
CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS GUARANTY, OR IN ANY WAY CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
DEALINGS OF GUARANTOR AND FOOTHILL WITH RESPECT TO THIS GUARANTY, OR THE
TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT, OR
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OTHERWISE. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR HEREBY AGREES THAT
ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING SHALL BE DECIDED
BY A COURT TRIAL WITHOUT A JURY AND THAT FOOTHILL MAY FILE AN ORIGINAL
COUNTERPART OF THIS SECTION WITH ANY COURT OR OTHER TRIBUNAL AS WRITTEN
EVIDENCE OF THE CONSENT OF GUARANTOR TO THE WAIVER OF ITS RIGHT TO TRIAL BY
JURY.
24. Obligations Secured. Guarantor acknowledges and confirms that it
has executed in favor of Foothill a Security Agreement, dated October 9, 1998
(the "Security Agreement"). Guarantor hereby grants a security interest in the
"Collateral" described in the Security Agreement to Foothill to secure all of
its obligations now existing or hereafter arising under this Guaranty (the
"Security Interest"). The Security Interest shall be governed by the terms and
conditions of the Security Agreement.
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date set forth in the first paragraph hereof.
LEISURE TIME CRUISE CORPORATION,
a Colorado corporation
By: /s/
-----------------------------------
Print Name:
Title:
Guarantor's
Address: 1284 Miller Road
Avon, Ohio 44011
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EXHIBIT 10.56
CONTINUING GUARANTY
THIS CONTINUING GUARANTY ("Guaranty"), dated as of April 22,
1999, is executed and delivered by FLORIDA CASINO CRUISES, INC., a Georgia
corporation ("Guarantor"), in favor of FOOTHILL CAPITAL CORPORATION, a
California corporation ("Foothill"), with reference to the following:
RECITALS
A. Leisure Time Cruise Corporation, a Colorado corporation
("Cruise Corporation"), and Foothill have previously entered into certain Loan
Documents (as defined below);
B. Leisure Express Cruise, L.L.C., a Colorado limited
liability company ("Leisure Express"; Cruise Corporation and Leisure Express are
sometimes referred to herein individually as a "Borrower" and collectively as
the "Borrowers"), is contemporaneously herewith, entering into the Leisure
Express Documents (as defined below) with Foothill; and
C. In order to induce Foothill to extend financial
accommodations to Borrowers pursuant to the Loan Documents, and in consideration
thereof, and in consideration of any loans or other financial accommodations
heretofore or hereafter extended by Foothill to Borrowers, whether pursuant to
the Loan Documents or otherwise, Guarantor has agreed to guarantee the
Guaranteed Obligations (defined below).
NOW, THEREFORE, in consideration of the foregoing, Guarantor
hereby agrees, in favor of Foothill, as follows:
1. Definitions and Construction.
(a) Definitions. The following terms, as used in this
Guaranty, shall have the following meanings:
"Bankruptcy Code" means The Bankruptcy Reform Act
of 1978 (11 U.S.C. Sections 101-1330), as amended or supplemented from time to
time, and any successor statute, and any and all rules issued or promulgated in
connection therewith.
"Cruise Corporation Documents" shall mean that
certain Security Agreement, dated October 9, 1998, as amended, between Foothill
and Cruise Corporation, that certain Secured Promissory Note in the principal
amount of THREE MILLION DOLLARS ($3,000,000) issued by Cruise Corporation in
connection therewith, and those documents, instruments, and agreements which
either now or in the future exist among Cruise Corporation, Guarantor, or any
affiliate of Cruise Corporation, on the one hand, and Foothill,
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on the other hand, and any amendments, modifications, or supplements to any of
the foregoing.
"Guaranteed Obligations" means any and all
obligations, indebtedness, or liabilities of any kind or character owed by each
Borrower to Foothill including all such obligations, indebtedness, or
liabilities, whether for principal, interest (including any interest which, but
for the application of the provisions of the Bankruptcy Code, would have accrued
on such amounts), premium, reimbursement obligations, fees, costs, expenses
(including, attorneys' fees), or indemnity obligations, whether heretofore, now,
or hereafter made, incurred, or created, whether voluntarily or involuntarily
made, incurred, or created, whether secured or unsecured (and if secured,
regardless of the nature or extent of the security), whether absolute or
contingent, liquidated or unliquidated, determined or indeterminate, whether
such Borrower is liable individually or jointly with others, and whether
recovery is or hereafter becomes barred by any statute of limitations or
otherwise becomes unenforceable for any reason whatsoever, including any act or
failure to act by Foothill.
"Leisure Express Documents" shall mean that
certain Security Agreement, of even date herewith, between Foothill and Leisure
Express, that certain Secured Promissory Note in the principal amount of TWO
MILLION ONE HUNDRED THOUSAND DOLLARS ($2,100,000) issued by Leisure Express in
connection therewith, and those documents, instruments, and agreements which
either now or in the future exist among Leisure Express, Guarantor, or any
affiliate of Leisure Express, on the one hand, and Foothill, on the other hand,
and any amendments, modifications, or supplements to any of the foregoing.
"Loan Documents" shall mean, collectively, the
Cruise Corporation Documents and the Leisure Express Documents.
(b) Construction. Unless the context of this
Guaranty clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, and the term
"including" is not limiting. The words "hereof," "herein," "hereby,"
"hereunder," and other similar terms refer to this Guaranty as a whole and not
to any particular provision of this Guaranty. Any reference herein to any of the
Loan Documents includes any and all alterations, amendments, extensions,
modifications, renewals, or supplements thereto or thereof, as applicable.
Neither this Guaranty nor any uncertainty or ambiguity herein shall be construed
or resolved against Foothill or Guarantor, whether under any rule of
construction or otherwise. On the contrary, this Guaranty has been reviewed by
Guarantor, Foothill, and their respective counsel, and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of Foothill and Guarantor.
2. Guaranteed Obligations. Guarantor hereby irrevocably and
unconditionally guarantees to Foothill, as and for its own debt, until final and
indefeasible payment thereof has been made, (a) payment of the Guaranteed
Obligations, in each case when
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and as the same shall become due and payable, whether at maturity, pursuant to a
mandatory prepayment requirement, by acceleration, or otherwise; it being the
intent of Guarantor that the guaranty set forth herein shall be a guaranty of
payment and not a guaranty of collection; and (b) the punctual and faithful
performance, keeping, observance, and fulfillment by each Borrower of all of the
agreements, conditions, covenants, and obligations of such Borrower contained in
the Loan Documents.
3. Continuing Guaranty. This Guaranty includes Guaranteed
Obligations arising under successive transactions continuing, compromising,
extending, increasing, modifying, releasing, or renewing the Guaranteed
Obligations, changing the interest rate, payment terms, or other terms and
conditions thereof, or creating new or additional Guaranteed Obligations after
prior Guaranteed Obligations have been satisfied in whole or in part. To the
maximum extent permitted by law, Guarantor hereby waives any right to revoke
this Guaranty as to future indebtedness. If such a revocation is effective
notwithstanding the foregoing waiver, Guarantor acknowledges and agrees that (a)
no such revocation shall be effective until written notice thereof has been
received by Foothill, (b) no such revocation shall apply to any Guaranteed
Obligations in existence on such date (including, any subsequent continuation,
extension, or renewal thereof, or change in the interest rate, payment terms, or
other terms and conditions thereof), (c) no such revocation shall apply to any
Guaranteed Obligations made or created after such date to the extent made or
created pursuant to a legally binding commitment of Foothill in existence on the
date of such revocation, (d) no payment by Guarantor, a Borrower, or from any
other source, prior to the date of such revocation shall reduce the maximum
obligation of Guarantor hereunder, and (e) any payment by Borrower or from any
source other than Guarantor, subsequent to the date of such revocation, shall
first be applied to that portion of the Guaranteed Obligations as to which the
revocation is effective and which are not, therefore, guaranteed hereunder, and
to the extent so applied shall not reduce the maximum obligation of Guarantor
hereunder.
4. Performance Under This Guaranty. In the event that a
Borrower fails to make any payment of any Guaranteed Obligations on or before
the due date thereof, or if a Borrower shall fail to perform, keep, observe, or
fulfill any other obligation referred to in clause (b) of Section 2 hereof in
the manner provided in the Loan Documents, Guarantor immediately shall cause
such payment to be made or each of such obligations to be performed, kept,
observed, or fulfilled.
5. Primary Obligations. This Guaranty is a primary and
original obligation of Guarantor, is not merely the creation of a surety
relationship, and is an absolute, unconditional, and continuing guaranty of
payment and performance which shall remain in full force and effect without
respect to future changes in conditions, including any change of law or any
invalidity or irregularity with respect to the Loan Documents. Guarantor agrees
that it is directly, jointly and severally with any other guarantor of the
Guaranteed Obligations, liable to Foothill, that the obligations of Guarantor
hereunder are independent of the obligations of Borrowers or any other
guarantor, and that a separate action may be brought against Guarantor
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whether such action is brought against a Borrower or any other guarantor or
whether such Borrower or any such other guarantor is joined in such action.
Guarantor agrees that its liability hereunder shall be immediate and shall not
be contingent upon the exercise or enforcement by Foothill of whatever remedies
it may have against a Borrower or any other guarantor, or the enforcement of any
lien or realization upon any security Foothill may at any time possess.
Guarantor agrees that any release which may be given by Foothill to a Borrower
or any other guarantor shall not release Guarantor. Guarantor consents and
agrees that Foothill shall be under no obligation to marshal any assets of
Borrowers or any other guarantor in favor of Guarantor, or against or in payment
of any or all of the Guaranteed Obligations.
6. Waivers.
(a) To the maximum extent permitted by law,
Guarantor hereby waives: (1) notice of acceptance hereof; (2) notice of any
loans or other financial accommodations made or extended under the Loan
Documents or the creation or existence of any Guaranteed Obligations; (3) notice
of the amount of the Guaranteed Obligations, subject, however, to Guarantor's
right to make inquiry of Foothill to ascertain the amount of the Guaranteed
Obligations at any reasonable time; (4) notice of any adverse change in the
financial condition of either Borrower or of any other fact that might increase
Guarantor's risk hereunder; (5) notice of presentment for payment, demand,
protest, and notice thereof as to any promissory notes or other instruments
among the Loan Documents; (6) notice of any event of default under the Loan
Documents; and (7) all other notices (except if such notice is specifically
required to be given to Guarantor hereunder or under any Loan Document to which
Guarantor is a party) and demands to which Guarantor might otherwise be
entitled.
(b) To the maximum extent permitted by law, Guarantor
hereby waives the right by statute or otherwise to require Foothill to institute
suit against a Borrower or to exhaust any rights and remedies which Foothill has
or may have against such Borrower. In this regard, Guarantor agrees that it is
bound to the payment of all Guaranteed Obligations, whether now existing or
hereafter accruing, as fully as if such Guaranteed Obligations were directly
owing to Foothill by Guarantor. Guarantor further waives any defense arising by
reason of any disability or other defense (other than the defense that the
Guaranteed Obligations shall have been fully and finally performed and
indefeasibly paid) of a Borrower or by reason of the cessation from any cause
whatsoever of the liability of such Borrower in respect thereof.
(c) To the maximum extent permitted by law, Guarantor
hereby waives: (1) any rights to assert against Foothill any defense (legal or
equitable), set-off, counterclaim, or claim which Guarantor may now or at any
time hereafter have against a Borrower or any other party liable to Foothill;
(2) any defense, set-off, counterclaim, or claim, of any kind or nature, arising
directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed Obligations or any
security therefor; (3) any defense based upon or arising out of an election of
remedies by Foothill including any defense based upon an election of remedies by
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Foothill under the provisions of Sections 580d and 726 of the California Code of
Civil Procedure, or any similar law of California or any other jurisdiction; (4)
the benefit of any statute of limitations affecting Guarantor's liability
hereunder or the enforcement thereof, and any act which shall defer or delay the
operation of any statute of limitations applicable to the Guaranteed Obligations
shall similarly operate to defer or delay the operation of such statute of
limitations applicable to Guarantor's liability hereunder; (5) all rights and
defenses arising out of an election of remedies by Foothill, even though that
election of remedies, such as nonjudicial foreclosure with respect to security
for the Guaranteed Obligations, has destroyed the Guarantors' rights of
subrogation and reimbursement against a Borrower by the operation of Section
580d of the California Code of Civil Procedure or otherwise; and (6) all rights
and defenses that Guarantor may have because the Guaranteed Obligations are
secured by real property or an estate for years. As to clause "(6)" of this
paragraph 6(c), this waiver means, among other things: (i) Foothill may collect
from Guarantor without first foreclosing on any real or personal property
collateral pledged by a Borrower; and (ii) if Foothill forecloses on any real
property (or an estate for years) pledged by such Borrower: (A) the amount of
the Guaranteed Obligations may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if the collateral is worth more
than the sale price, and (B) Foothill may collect from Guarantor even if
Foothill, by foreclosing on the real property collateral, has destroyed any
right Guarantor may have to collect from such Borrower. The waiver in clause
"(6)" of this paragraph 6(c) is an unconditional and irrevocable waiver of any
rights and defenses that Guarantor may have because either Borrower's debt is
secured by real property or an estate for years. These rights and defenses
include, but are not limited to, any rights or defenses based upon Section 580a,
580b, 580d, or 726 of the California Code of Civil Procedure.
(d) To the maximum extent permitted by law, Guarantor
hereby waives any right of subrogation or reimbursement Guarantor has or may
have as against Borrowers with respect to the Guaranteed Obligations. In
addition, Guarantor hereby waives any right to proceed against either Borrower,
now or hereafter, for contribution, indemnity, reimbursement, and any other
suretyship rights and claims, whether direct or indirect, liquidated or
contingent, whether arising under express or implied contract or by operation of
law, which Guarantor may now have or hereafter have as against either Borrower
with respect to the Guaranteed Obligations. Guarantor also hereby waives any
rights to recourse to or with respect to any asset of either Borrower. Guarantor
agrees that in light of the immediately foregoing waivers, the execution of this
Guaranty shall not be deemed to make Guarantor a "creditor" of either Borrower,
and that for purposes of Sections 547 and 550 of the Bankruptcy Code Guarantor
shall not be deemed a "creditor" of either Borrower.
(e) WITHOUT LIMITING THE GENERALITY OF ANY OTHER
WAIVER OR OTHER PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY WAIVES,
TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY AND ALL RIGHTS, BENEFITS, SANCTIONS,
OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA
CIVIL CODE SECTIONS
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2787 TO 2855, INCLUSIVE, CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 580a, 580b,
580c, 580d, AND 726, AND CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL CODE.
7. Releases. Guarantor consents and agrees that, without
notice to or by Guarantor and without affecting or impairing the obligations of
Guarantor hereunder, Foothill may, by action or inaction:
(a) compromise, settle, extend the duration or the
time for the payment of, or discharge the performance of, or may refuse to or
otherwise not enforce the Loan Documents;
(b) release all or any one or more parties to any one
or more of the Loan Documents or grant other indulgences to either Borrower in
respect thereof;
(c) amend or modify in any manner and at any time
(or from time to time) any of the Loan Documents;
(d) increase or decrease at any time (or from time
to time) the amount of the Guaranteed Obligations, the amount or rate of
interest applicable thereto, and/or the amount of fees or other charges imposed
in connection therewith; or
(e) release or substitute any other guarantor, if
any, of the Guaranteed Obligations, or enforce, exchange, release, or waive any
security for the Guaranteed Obligations or any other guaranty of the Guaranteed
Obligations, or any portion thereof.
8. No Election. Foothill shall have the right to seek recourse
against Guarantor to the fullest extent provided for herein, and no election by
Foothill to proceed in one form of action or proceeding, or against any party,
or on any obligation, shall constitute a waiver of Foothill's right to proceed
in any other form of action or proceeding or against other parties unless
Foothill has expressly waived such right in writing. Specifically, but without
limiting the generality of the foregoing, no action or proceeding by Foothill
under any document or instrument evidencing the Guaranteed Obligations shall
serve to diminish the liability of Guarantor under this Guaranty except to the
extent that Foothill finally and unconditionally shall have realized
indefeasible payment by such action or proceeding.
9. Indefeasible Payment. The Guaranteed Obligations shall not
be considered indefeasibly paid for purposes of this Guaranty unless and until
all payments to Foothill are no longer subject to any right on the part of any
person, including each Borrower, a Borrower as a debtor in possession, or any
trustee (whether appointed under the Bankruptcy Code or otherwise) of either
Borrower's assets to invalidate or set aside such payments or to seek to recoup
the amount of such payments or any portion thereof, or to declare same to be
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fraudulent or preferential. Until such full and final performance and
indefeasible payment of the Guaranteed Obligations whether by Guarantor or a
Borrower, Foothill shall have no obligation whatsoever to transfer or assign its
interest in the Loan Documents to Guarantor. In the event that, for any reason,
any portion of such payments to Foothill is set aside or restored, whether
voluntarily or involuntarily, after the making thereof, then the obligation
intended to be satisfied thereby shall be revived and continued in full force
and effect as if said payment or payments had not been made, and Guarantor shall
be liable for the full amount Foothill is required to repay plus any and all
costs and expenses (including attorneys' fees) paid by Foothill in connection
therewith.
10. Financial Condition of Borrowers. Guarantor represents and
warrants to Foothill that Guarantor is currently informed of the financial
condition of each Borrower and of all other circumstances which a diligent
inquiry would reveal and which bear upon the risk of nonpayment of the
Guaranteed Obligations. Guarantor further represents and warrants to Foothill
that Guarantor has read and understands the terms and conditions of the Loan
Documents. Guarantor hereby covenants that Guarantor will continue to keep
informed of each Borrower's financial condition, the financial condition of
other guarantors, if any, and of all other circumstances which bear upon the
risk of nonpayment or nonperformance of the Guaranteed Obligations.
11. Subordination. Guarantor hereby agrees that any and all
present and future indebtedness of each Borrower owing to Guarantor is postponed
in favor of and subordinated to payment, in full, in cash, of the Guaranteed
Obligations. In this regard, no payment of any kind whatsoever shall be made
with respect to such indebtedness until the Guaranteed Obligations have been
indefeasibly paid in full.
12. Payments; Application. All payments to be made hereunder
by Guarantor shall be made in lawful money of the United States of America at
the time of payment, shall be made in immediately available funds, and shall be
made without deduction (whether for taxes or otherwise) or offset. All payments
made by Guarantor hereunder shall be applied as follows: first, to all costs and
expenses (including attorneys' fees) incurred by Foothill in enforcing this
Guaranty or in collecting the Guaranteed Obligations; second, to all accrued and
unpaid interest, premium, if any, and fees owing to Foothill constituting
Guaranteed Obligations; and third, to the balance of the Guaranteed Obligations.
13. Attorneys' Fees and Costs. Guarantor agrees to pay, on
demand, all reasonable attorneys' fees and all other costs and expenses which
may be incurred by Foothill in the enforcement of this Guaranty or in any way
arising out of, or consequential to the protection, assertion, or enforcement of
the Guaranteed Obligations (or any security therefor), whether or not suit is
brought.
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14. Indemnification. Guarantor agrees to indemnify Foothill
and hold Foothill harmless against all obligations, demands, or liabilities
asserted by any party and against all losses in any way suffered, incurred, or
paid by Foothill as a result of or in any way arising out of, following, or
consequential to Foothill's transactions with either Borrower.
15. Notices. All notices or demands by Guarantor or Foothill
to the other relating to this Guaranty shall be in writing and either personally
served or sent by registered or certified mail, postage prepaid, return receipt
requested, or by prepaid telex, telefacsimile, or telegram, and shall be deemed
to be given for purposes of this Guaranty on the day that such writing is
received by the party to whom it is sent. Unless otherwise specified in a notice
sent or delivered in accordance with the provisions of this section, such
writing shall be sent, if to Guarantor, at Guarantor's address set forth on the
signature page hereof, and if to Foothill, then as follows:
Foothill Capital Corporation
11111 Santa Monica Boulevard, Suite 1500
Los Angeles, California 90025-3333
Attn: Small Business Lending Division
16. Cumulative Remedies. No remedy under this Guaranty or
under any Loan Document is intended to be exclusive of any other remedy, but
each and every remedy shall be cumulative and in addition to any and every other
remedy given hereunder or under any Loan Document, and those provided by law or
in equity. No delay or omission by Foothill to exercise any right under this
Guaranty shall impair any such right nor be construed to be a waiver thereof. No
failure on the part of Foothill 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.
17. Books and Records. Guarantor agrees that Foothill's books
and records showing the account between Foothill and either Borrower shall be
admissible in any action or proceeding and shall be binding upon Guarantor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof.
18. Severability of Provisions. Any provision of this Guaranty
which is prohibited or unenforceable under applicable law, shall be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
19. Entire Agreement; Amendments. This Guaranty constitutes
the entire agreement between Guarantor and Foothill pertaining to the subject
matter contained herein. This Guaranty may not be altered, amended, or modified,
nor may any provision hereof be waived or noncompliance therewith consented to,
except by means of a writing executed by both Guarantor and Foothill. Any such
alteration, amendment, modification, waiver, or
8
<PAGE> 9
consent shall be effective only to the extent specified therein and for the
specific purpose for which given. No course of dealing and no delay or waiver of
any right or default under this Guaranty shall be deemed a waiver of any other,
similar or dissimilar right or default or otherwise prejudice the rights and
remedies hereunder.
20. Successors and Assigns. The death of Guarantor shall not
terminate this Guaranty. This Guaranty shall be binding upon Guarantor's heirs,
executors, administrators, representatives, successors, and assigns and shall
inure to the benefit of the successors and assigns of Foothill; provided,
however, Guarantor shall not assign this Guaranty or delegate any of its duties
hereunder without Foothill's prior written consent. Any assignment without the
consent of Foothill shall be absolutely void. In the event of any assignment or
other transfer of rights by Foothill, the rights and benefits herein conferred
upon Foothill shall automatically extend to and be vested in such assignee or
other transferee.
21. Separate Property. Any married individual who signs this
Guaranty in his or her individual capacity hereby expressly agrees that recourse
may be had against his or her separate property for all Guaranteed Obligations
hereunder.
22. Choice of Law and Venue. THE VALIDITY OF THIS GUARANTY,
ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF GUARANTOR
AND FOOTHILL, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
GUARANTOR HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS GUARANTY SHALL BE TRIED AND DETERMINED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, OR, AT THE
SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR
HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION.
23. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY
LAW, GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION,
CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS GUARANTY, OR IN ANY WAY CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
DEALINGS OF GUARANTOR AND FOOTHILL WITH RESPECT TO THIS GUARANTY, OR THE
TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT, OR
9
<PAGE> 10
OTHERWISE. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR HEREBY AGREES THAT
ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING SHALL BE DECIDED
BY A COURT TRIAL WITHOUT A JURY AND THAT FOOTHILL MAY FILE AN ORIGINAL
COUNTERPART OF THIS SECTION WITH ANY COURT OR OTHER TRIBUNAL AS WRITTEN EVIDENCE
OF THE CONSENT OF GUARANTOR TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
24. Obligations Secured. Guarantor acknowledges and confirms
that it has executed in favor of Foothill a Security Agreement, dated October 9,
1998 (the "Security Agreement"). Guarantor hereby grants a security interest in
the "Collateral" described in the Security Agreement to Foothill to secure all
of its obligations now existing or hereafter arising under this Guaranty (the
"Security Interest"). The Security Interest shall be governed by the terms and
conditions of the Security Agreement.
IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty as of the date set forth in the first paragraph hereof.
FLORIDA CASINO CRUISES, INC.,
a Georgia corporation
By: /s/
-------------------------------------
Print Name:
Title:
Guarantor'
Address: 2077 Pine Ridge Road
Naples, Florida 34109
10
<PAGE> 1
EXHIBIT 10.57
AMENDMENT TO AND CONFIRMATION OF GUARANTY
THIS AMENDMENT TO AND CONFIRMATION OF GUARANTY (this
"Amendment") is made as of this 22nd day of April, 1999, by ALAN N. JOHNSON, an
individual (the "Guarantor"), in favor of FOOTHILL CAPITAL CORPORATION, a
California corporation ("Foothill"), with reference to the following:
A. Foothill and Leisure Time Cruise Corporation, a Colorado corporation
(ABorrower@), entered into that certain Security Agreement dated as of October
9, 1998 (ASecurity Agreement@), in connection with which Foothill agreed to
provide certain financial accommodations to Borrower. To induce Foothill to
provide such financial accommodations, Guarantor executed a Continuing Guaranty
in favor of Foothill, dated as of October 9, 1998 (the AGuaranty@).
B. Borrower has requested that Foothill further modify and amend the
terms of the Security Agreement pursuant to the terms and conditions set forth
in that certain Amendment No. 1 to Loan Documents, of even date herewith
("Amendment No. One"), and certain other documents and instruments executed in
connection with Amendment No. One (as described in Amendment No. One).
C. To induce Foothill to enter into Amendment No. One and to provide
(i) the Leisure Express Term Loan (referred to in Amendment No. One) to Leisure
Express Cruise, L.L.C., a Colorado limited liability company (ALeisure
Express@), and (ii) the Florida Casino Term Loan (referred to in Amendment No.
One) to Florida Casino Cruises, Inc., a Georgia corporation (AFlorida Casino@),
and as a condition precedent to the effectiveness of Amendment No. One,
Guarantor has agreed to execute and deliver this Amendment to Foothill.
NOW, THEREFORE, in consideration of the foregoing recitals
(all of which are agreed to and incorporated herein) and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor hereby agrees as follows:
1. Amendments to Guaranty. The Guaranty is hereby amended as
follows:
1.1 References to Borrower. All references to ABorrower@ in
the Guaranty shall mean ABorrower, Florida Casino, and/or Leisure Express@.
1.2 Definition of "Guaranteed Obligations". The definition of
"Guaranteed Obligations" set forth in Section 1 of the Guaranty shall be deemed
to include (a) all obligations of Leisure Express in connection with the Leisure
Express Term Loan (including, but not limited to, the Leisure Express
Obligations referred to in Amendment No. One), and (b) all obligations of
Florida Casino in connection with the Florida Casino Term Loan
1
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(including, but not limited to, the Florida Casino Obligations referred to in
Amendment No. One).
1.3 Definition of "Loan Documents". The definition of "Loan
Documents" set forth in Section 1 of the Guaranty is hereby amended to read in
its entirety as follows:
""Loan Documents" shall mean that certain Security Agreement,
of even date herewith, between Foothill and Borrower, that
certain Secured Promissory Note in the principal amount of
THREE MILLION DOLLARS ($3,000,000) issued by Borrower in
connection therewith, that certain Security Agreement, dated
April 22, 1999, between Foothill and Leisure Express Cruise,
L.L.C., that certain Secured Promissory Note, dated April 22,
1999, in the principal amount of TWO MILLION ONE HUNDRED
THOUSAND DOLLARS ($2,100,000) issued by Leisure Express
Cruise, L.L.C. in favor of Foothill, that certain Security
Agreement, dated April 22, 1999, between Foothill and Florida
Casino Cruises, Inc., that certain Secured Promissory Note,
dated April 22, 1999, in the principal amount of THREE MILLION
TWO HUNDRED TWENTY FIVE THOUSAND DOLLARS ($3,225,000) issued
by Florida Casino Cruises, Inc. in favor of Foothill, and
those documents, instruments, and agreements which either now
or in the future exist among Borrower, Guarantor, or any
affiliate of Borrower, Florida Casino Cruises, Inc., and/or
Leisure Express Cruise, L.L.C., on the one hand, and Foothill,
on the other hand, and any amendments, modifications, or
supplements to any of the foregoing."
2. Full Force and Effect; Ratification and Reaffirmation of
Guaranty. All provisions of the Guaranty not otherwise specifically amended by
this Amendment shall remain in full force and effect and are hereby ratified and
reaffirmed by Guarantor. Guarantor has no defenses or rights of offset with
respect to its obligations under the Guaranty.
3. Equipment Security Agreement. The Equipment Security
Agreement, dated October 9, 1998, executed by Guarantor in favor of Foothill
shall remain in full force and effect. The security interest granted by
Guarantor in favor of Foothill pursuant to such Equipment Security Agreement is
hereby deemed to secure the Guaranty Obligations as amended by this Amendment.
4. Review and Approval of Loan Documents. Guarantor has been
provided with copies of each of the Loan Documents (including, but not limited
to, Amendment No. One and the other documents and instruments described in
Amendment No. One), and Guarantor acknowledges and confirms that (i) it has
reviewed and approved the terms of the Loan Documents, as amended, and (ii) the
Guaranty, as amended by this Amendment, shall remain in full force and effect
with respect to the Loan Documents, as amended.
2
<PAGE> 3
5. Miscellaneous Provisions.
5.1 Binding Effect. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
5.2 Severability. Any provision in this Amendment that is
inoperative, unenforceable, or invalid in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such inoperation,
unenforceability, or invalidity without affecting the remaining provisions
hereof or affecting the operation, enforceability, or validity of such provision
in any other jurisdiction.
5.3 Interpretation. Guarantor acknowledges and agrees that it
has had the opportunity to consult with counsel and review and revise this
Amendment and that any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not apply in the interpretation
of this Amendment or any amendment hereto.
5.4 Entire Agreement; Amendment. The Guaranty as modified by
this Amendment reflects the entire agreements between the parties as to the
subject matter of the Guaranty and no alteration or amendment thereof shall be
effective unless in writing and signed by the parties sought to be charged or
bound thereby.
5.5 Choice of Law and Venue. THE VALIDITY OF THIS AMENDMENT,
ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF GUARANTOR
AND FOOTHILL, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
GUARANTOR HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AMENDMENT SHALL BE TRIED AND DETERMINED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, OR, AT THE
SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR
HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION.
5.6 Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY
LAW, GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION,
CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS AMENDMENT, OR IN ANY WAY
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<PAGE> 4
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE DEALINGS OF GUARANTOR AND
FOOTHILL WITH RESPECT TO THIS AMENDMENT, OR THE TRANSACTIONS RELATED HERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR
HEREBY AGREES THAT ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND, OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT FOOTHILL
MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY COURT OR OTHER
TRIBUNAL AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR TO THE WAIVER OF ITS
RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, this Amendment to and Confirmation of
Guaranty is executed as of the date first above mentioned.
/s/ Alan N. Johnson
--------------------------------------
Alan N. Johnson, individually
4
<PAGE> 1
EXHIBIT 10.58
MASTER LEASE TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 1 Reference Data
Section 1.1 Reference Information
Section 1.2 Exhibits
Section 2 Premises and Term
Section 2.1 Premises
Section 2.2 Term
Section 2.3 Option to Extend Term
Section 3 Non-divisibility of Marina and Dockside Leases
Section 3.1 Non-divisibility of Marina and Dockside Leases
Section 4 Rent
Section 4.1 Annual Rent
Section 4.2 Extension Rent
Section 4.3 Extension Rent Terms
Section 5 Passenger Fees
Section 5.1 Passenger Fees
Section 5.2 Accuracy of Passenger Count
Section 6 Right of First Refusal
Section 6.1 Right of First Refusal
Section 7 Miscellaneous
Section 7.1 Site Review
Section 7.2 Earnest Money
Section 7.3 Hotel Packages and Marketing
Section 7.4 Exclusivity
</TABLE>
1
<PAGE> 2
MASTER AGREEMENT AND LEASE
SECTION 1
Reference Data
Section 1.1. Reference Information. Reference in this Lease to any of the
following shall have the meaning set forth below:
Date of This Lease: April 29, 1999
Facility: The maritime/commercial real property located at the Dockside
Restaurant and dock facilities attached thereto at 53 South Street and
110 School Street, Hyannis, Massachusetts, described in Exhibit I.
Premises: Those portions of the Facility described in Exhibit II,
Property Lease; and Exhibit III, Marina Lease.
Landlord: Shoestring Properties Limited Partnership, "SP"
Address of Landlord: 297 North Street, Hyannis, Massachusetts 02601
Tenant: Leisure Time Cruise Corporation
Address of Tenant: 1284 Miller Road, Avon, Ohio 44011; and
4258 Communications Drive, Norcross, GA 30093
Vessel: Any Vessel(s) owned or chartered by Tenant or Affiliates
Berth: That portion of the Premises designated for the Vessel in
Exhibit III, Marina Lease.
Landlord's Representative: Stuart A. Bornstein
Tenant's Representative: Leisure Lady Cruise, LLC
Brokers: Mark Doran, and Edward O'Sullivan
Term Commencement Date: May 1, 1999
Extension Term: Five two-year extensions
Permitted Uses: The Premises are to be used for the purpose of berthing
the Vessel for port to port and excursion cruises and operating a
restaurant and ancillary activities and for no other use or purpose.
2
<PAGE> 3
Section 1.2. Exhibits. The following Exhibits are attached to and
incorporated in this Lease:
Exhibit I Property Description
Exhibit II Property Lease
Exhibit III Marina Lease
SECTION 2
Premises and Term
Section 2.1. Premises. Landlord hereby leases and demises the Premises
to Tenant and Tenant hereby leases the Premises from Landlord, subject to any
and all existing encumbrances and other matters of record and subject to the
terms and provisions of this Lease.
Section 2.2. Term. TO HAVE AND TO HOLD for a term beginning on the
"Term Commencement Date", and continuing until April 30, 2000, unless sooner
terminated as herein provided.
Section 2.3. Option to Extend Term. Tenant shall have the option to
extend the term of this Lease for the Extension Term, provided (i) no material
default in the obligations of Tenant under this Lease shall exist at the time
such option is exercised and (ii) Tenant shall give written notice to Landlord
of its exercise of such option at least sixty (60) days of the prior term's
expiration date. All of the terms and provisions of this Lease shall be
applicable during the Extension Term except that (a) Tenant shall have no option
to extend the term of the Lease beyond the Extension Term and (b) Annual Rent
for the Extension Term shall be Extension Rent, as defined in Section 4.2, as of
the first day of the Extension Term but in no event less than the Annual Rent in
effect in the last year of the original term.
SECTION 3
Non-divisibility of Marina and Dockside Leases
Section 3.1 Non-divisibility of Marina and Dockside Leases. This Master
Lease is comprised of two parts, a Marina lease and a Dockside lease. The Marina
lease and the Dockside lease are indivisible and to be treated as one lease. The
terms of both the Marina lease and the Dockside lease shall apply to the other
and shall be legally binding on both. All rights and remedies given under either
the Marina lease or the Dockside lease shall apply to both leases. A default of
the terms on either the Marina lease or the Dockside lease shall be treated by
the Landlord as a default on both leases. Under no condition shall one lease
continue after the other lease has terminated.
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<PAGE> 4
SECTION 4
Rent
Section 4.1. The Rent. Tenant shall pay rent to Landlord at the Address
of Landlord or at such other place or to such other person or entity as Landlord
may by written notice to Tenant from time to time direct.
The first year's rent for the Dockside Restaurant and the Marina and
facilities shall be TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00).
Dock rentals from the Marina shall be paid to Landlord immediately upon
receipt and will eventually be applied towards rent. Deduction of all dock
rental fees from the balance of the rent shall occur on July 15, 1999. A fee of
FIVE PERCENT (5%) shall be paid to the dock-master for collection of rents. The
dock-master fee shall not be applied towards rent. The Lessor estimates the dock
rentals will be between $60,000.00 and $80,000.00 per year.
Rent shall be paid in four installments due on April 15, May 15, June
15, and July 15 of each year. The first year's rent shall be $25,000.00 on April
15, 1999; $25,000.00 on May 15, 1999; $25,000.00 on June 15, 1999; and the
balance of the rent less dock rental fees on July 15, 1999.
Section 4.2. Extension Rent. "Extension Rent" shall be computed as of
the date of the commencement of the extension term. Tenant must notify Landlord
in writing of intention to extend lease or not to extend lease at least sixty
(60) days prior to the expiration of the previous Lease term. If such written
notice is not given at least sixty (60) days prior to the expiration of the
previous Lease term Landlord may exercise right not to grant extension. If
Tenant sends notice of intention to extend rent, such notice shall legally bind
Tenant to a new rent term. If during the first term the Tenant does not exercise
the right to extend the Lease, Tenant shall vacate and "Yield Up" the premises
on March 1, 2000.
Section 4.3. Extension Rent Terms. Tenant shall have the right to
extend the term of the lease by five two-year extensions. The five two-year
extensions shall be at the rate of TWO HUNDRED THOUSAND AND NO/100 DOLLARS
($200,000.00) per year. If anytime during the first year of any two year
extension the Tenant is unable to operate its excursion cruises out of the
Premise's facilities, due to intervention by any governmental authority;
Landlord shall terminate the second year of the two-year lease, if written
notice of said intervention is given to Landlord sixty (60) days prior to the
commencement of the second year of the two-year extension. If such written
notice is not given sixty (60) days prior to the commencement of the second year
of the two-year extension tenant shall remain responsible for all rents due on
the second year of the extension lease.
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<PAGE> 5
SECTION 5
Passenger Fees
Section 5.1. Passenger Fees. Passenger fees are in addition to all
rents paid. Tenant shall pay passenger fees to Landlord at the Address of
Landlord or at such other place or to such other person or entity as Landlord
may by written notice to Tenant from time to time direct. Passenger fees apply
to any Vessel owned or chartered by Tenant or Affiliates.
For the first year of the lease, annual passenger fees shall be $3.00
per passenger for the first 50,000 passengers; after 50,000 passengers, the fee
will be $3.25 per passenger; after 100,000 passengers the fee will go to $4.00
per passenger. Tenant's minimum payment is for 50,000 passengers per year. If in
the first year of the lease Tenant and Affiliates do not disembark a total of
50,000 passengers because they were shut down by governmental authorities;
Tenant shall pay TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($25,0000) and
passenger fees on the passengers it did disembark in the first year at $3.00 per
passenger up to ONE HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS
($125,000.00).
For the five two-year terms covered under the "Lease Extension", annual
passenger fees shall be $3.00 per passenger for the first 50,000 passengers;
after 50,000 passengers, the fee will be $3.50 per passenger; after 100,000
passengers the fee will go to $4.00 per passenger. Lessee's minimum payment is
to be calculated at SEVENTY-FIVE (75%) of the previous year's passenger count,
or 50,000 passengers per year; whichever is greater.
Annual passenger count shall be calculated each year beginning with the
commencement date of the original lease. The Tenant shall maintain a daily
ledger containing a running total of the passenger count beginning on the
commencement date of the original lease. Passenger fees shall be paid to
Landlord according to this running total on a monthly basis. After three years,
if the annual passenger count does not exceed 100,000 the Landlord has the right
to terminate the lease or negotiate a new lease at Landlord's option.
Section 5.2. Accuracy of Passenger Count. If the passenger count is off
by three (3%) there shall be a $2.00 per passenger penalty for that monthly
passenger count in addition to the normal passenger count rate. Tenant shall pay
any passenger fee penalty to Landlord at the Address of Landlord or at such
other place or to such other person or entity as Landlord may by written notice
to Tenant from time to time direct.
SECTION 6
Right of First Refusal
Section 6.1 Right of First Refusal. Lessee shall have the right of
first refusal to purchase the property if the property is to be sold for less
than SEVEN MILLION AND NO/100 DOLLARS ($7,000,000.00).
5
<PAGE> 6
SECTION 7
Miscellaneous
Section 7.1. Site Review. Lessor shall exercise due diligence to
provide information for Site Review.
Section 7.2. Earnest Money. Lessee shall pay FIVE THOUSAND AND NO/100
DOLLARS ($5,000.00) earnest money. If lease is signed the $5,000.00 in earnest
money shall be applied to the first month's rent. If the lease is not signed,
then the earnest money shall be retained by the Lessor.
Section 7.3 Hotel Packages and Marketing. Tenant shall designate a
hotel of Landlord's choice as the "Recommended Hotel of Choice" for Tenant's
operations on Cape Cod. Landlord shall be granted the right of first refusal for
SEVENTY PERCENT (70%) of annual hotel package arrangements in conjunction with
Tenant's operations on Cape Cod. Landlord retains the exclusive right to control
all hotel marketing on the leased property.
Section 7.4. Exclusivity. During the term of this Lease, the Tenant
shall have the right of first refusal on any lease space offered by the Landlord
to anyone engaged in the same business as the Vessel.
WITNESS the execution hereof under seal as of the day and year first
above written.
LANDLORD.
Shoestring Properties Limited Partnership
BY: /s/
--------------------------------------
TENANT
Leisure Time Cruise Corporation
BY: /s/
--------------------------------------
6
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EXHIBIT I
PROPERTY DESCRIPTION
PARCEL I
The land with the buildings and improvements thereon, situated in Barnstable
(Hyannis), Barnstable County, Massachusetts as follows:
SOUTHERLY by Lewis Bay
WESTERLY by School Street
NORTHERLY by South Street; and
EASTERLY by land now or late of Isabel Crowell, widow of
Alphonso Crowell.
Parcel 1 being the same premises shown on a plan of land entitled "Plan of Land
in Hyannis-Barnstable, Mass. Belonging to Lewis Bay Lodge, Inc., Scale 1 in. =
50 ft. Dec 20, 1961, John C. O'Toole, Surveyor" and recorded with said Deeds in
Plan Book 167 Page 41, to which plan reference is made for a more particular
description of the said parcel.
Together with all littoral rights appurtenant thereto.
Together with all rights over the streets and ways as shown on said plan in
common with all others lawfully entitle to use the same, for all purposes for
which streets or ways are commonly used in the Town of Barnstable,
Massachusetts.
PARCEL II
The land located in Barnstable (Hyannis) bounded and described as follows:
BEGINNING at a point in the southerly line of South Street. Said point being a
Land Court Bound found at the northwesterly corner of the herein described
premises;
THENCE S. 82 degrees 01'00"E., by the southerly line of South Street
seventy-seven and seventy-one hundredths (77.71) feet to a concrete bound found
at the beginning of a curve which connects said line of South Street to the
westerly line of School Street;
THENCE easterly, southeasterly and southerly by said line of School Street and a
curve to the right having a radius of twenty and sixty-two hundredths (20.62)
feet an arc distance of thirty-one and seventy-six hundredths (31.76) feet to a
point;
THENCE S. 06 degrees 13'31" W, by said line of School Street, two hundred
twenty-two and twelve hundredths (222.12) feet to a concrete bound found at land
now or formerly of Elaine Karath;
THENCE N. 83 degrees 46' 29" W., by said line of Karath one hundred eleven and
fifty hundredths (111.50) feet to a point at the land now or formerly of Woods
Hole, Martha's Vineyard & Nantucket Steamship Authority;
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THENCE N. 12 degrees 45' 01"E., by land of said Steamship Authority, eighty-two
and eighty-nine hundredths (82.89) feet to a Land Court Bound found at a point;
THENCE N. 07 degrees 45' 53" E., by land of said Steamship Authority, one
hundred sixty-two and sixty-four (162.64) feet to the point of the beginning.
Containing by calculation, 24,819 square feet of land and being delineated as
Parcel A on a plan entitled "Land in Hyannis, Massachusetts, owned by Lewis Bay
Motel, Restaurant & Marina, Inc." dated January 24, 1992 and prepared for filing
with the Barnstable Registry of Deeds in Plan Book 485, Page 93, by Bouley
Brother, Inc. Registered Land Surveyors, Worcester, Massachusetts.
8
<PAGE> 1
EXHIBIT 10.59
MARINA LEASE TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 1 Reference Data
Section 1.1 Reference Information
Section 1.2 Exhibits
Section 2 Premises and Term
Section 2.1 Premises
Section 2.2 Term
Section 2.3 Option to Extend Term
Section 2.4 Other Maritime Uses
Section 3 Improvements
Section 3.1 Condition of Premises
Section 3.2 General Provisions Applicable to Construction
Section 3.3 Representatives
Section 4 Annual Rent
Section 4.1 The Rent
Section 4.2 Extension Rent
Section 4.3 Extension Rent Terms
Section 5 Additional Rent
Section 5.1 Real Estate Taxes
Section 5.2 Direct Expenses
Section 5.3 Passenger Fees
Section 5.4 Accuracy of Passenger Count
Section 5.5 Subleases and Passenger Count
Section 6 Insurance
Section 6.1 Tenant's Insurance
Section 6.2 Landlord's Insurance
Section 6.3 Tenant Reimbursement of Certain insurance Costs
Section 6.4 Requirements Applicable to Insurance Policies
Section 6.5 Waiver of Subrogation
Section 7 Landlord's Covenants
Section 7.1 Quiet Enjoyment
Section 7.2 Exterior Common Areas and Facilities
Section 7.3 Electricity
Section 7.4 Interruptions
Section 7.5 Exclusivity
Section 8 Tenants Covenants
Section 8.1 Use
Section 8.2 Repair and Maintenance
Section 8.3 Compliance with Law and
Section 8.4 Tenant's Work
Section 8.5 Indemnity
Section 8.6 Landlord's Right to Enter
Section 8.7 Personal Property at Tenant's Risk
Section 8.8 Payment of Landlord's Cost of Enforcement
Section 8.9 Yield up
</TABLE>
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Section 8.10 Estoppel Certificate Insurance Requirements
Section 8.11 Landlord's Expenses Re Consents
Section 8.12 Rules and Regulations
Section 8.13 Holding over
Section 8.14 Assignment and Subletting
Section 8.15 Overloading and Nuisance
Section 8.16 Indemnification
Section 8.17 Signage
Section 9 Casualty or Taking
Section 9.1 Termination
Section 9.2 Restoration
Section 9.3 Award
Section 10 Default
Section 10.1 Events of Default
Section 10.2 Remedies
Section 10.3 Remedies Cumulative
Section 10.4 Landlord's Right to Cure Defaults
Section 10.5 Effect of Waivers of Default
Section 10.6 No Accord and Satisfaction
Section 10.7 Interest on Overdue Sums
Section 11 Mortgages
Section 11.1 Subordination
Section 11.2 Nondisturbance and Attornment Agreement with Tenant
Section 12 Miscellaneous Provisions
Section 12.1 Notices from One Party to the Other
Section 12.2 Quiet Enjoyment
Section 12.3 Lease Not to Be Recorded; Notice of Lease
Section 12.4 Bind and Inure; Limitation of Landlord's Liability
Section 12.5 Acts of God
Section 12.6 Landlord's Default
Section 12.7 Indemnification by Landlord
Section 12.8 Brokerage
Section 12.9 Retention of Docking Space
Section 12.10 Miscellaneous
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MARINA LEASE
SECTION 1
Reference Data
Section 1.1. Reference Information. Reference in this Agreement and Marina Lease
to any of the following shall have the meaning set forth below:
Date of This Lease: April 29, 199
Facility: The maritime/commercial real property located at the Dockside
Restaurant and dock facilities attached thereto at 110 School Street,
Hyannis, Massachusetts, described in Exhibit A.
Premises: Those portions of the Facility described and/or shown in
Exhibit B.
Landlord: Shoestring Properties Limited Partnership, "SP"
Address of Landlord: 297 North Street, Hyannis, Massachusetts 02601
Tenant: Leisure Time Cruise Corporation
Address of Tenant: 1284 Miller Road, Avon, Ohio 44011; and
4258 Communications Drive, Norcross, GA 30093
Vessel: Any Vessel(s) owned or chartered by Tenant or Affiliates
Berth: That portion of the Premises designated for the Vessel in
Exhibit A.
Landlord's Representative: Stuart A. Bornstein
Tenant's Representative: Leisure Lady Cruise, LLC
Brokers: Mark Doran, and Edward O'Sullivan
Term Commencement Date: May 1, 1999.
Extension Term: Five two-year extensions
Permitted Uses: The Premises are to be used for the purpose of berthing
the Vessel for port to port and excursion cruises and operating a
restaurant and ancillary activities and for no other use or purpose.
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Section 1.2. Exhibits. The following Exhibits are attached to and
incorporated in this Lease:
Exhibit A Facility Description
Exhibit B Premises Description
SECTION 2
Premises and Term
Section 2.1. Premises. Landlord hereby leases and demises the Premises
to Tenant and Tenant hereby leases the Premises from Landlord, subject to any
and all existing encumbrances and other matters of record and subject to the
terms and provisions of this Lease.
Section 2.2. Term. TO HAVE AND TO HOLD for a term beginning on the
"Term Commencement Date", and continuing until April 30, 2000, unless sooner
terminated as herein provided.
Section 2.3. Option to Extend Term. Tenant shall have the option to
extend the term of this Lease for the Extension Term, provided (i) no material
default in the obligations of Tenant under this Lease shall exist at the time
such option is exercised and (ii) Tenant shall give written notice to Landlord
of its exercise of such option within sixty (60) days of the prior term's
expiration date. All of the terms and provisions of this Lease shall be
applicable during the Extension Term except that (a) Tenant shall have no option
to extend the term of the Lease beyond the Extension Term and (b) Annual Rent
for the Extension Term shall be Extension Rent, as defined in Section 4.2, as of
the first day of the Extension Term but in no event less than the Annual Rent in
effect in the last year of the original term.
Section 2.4. Other Maritime Uses. Landlord shall control, manage, and
collect dock rental fees to be applied to rent during the first year's rent
term. Under any term extension to this lease the Tenant shall control, manage,
and collect dock rental fees. Dock rental fees shall be paid to landlord as they
are collected, and applied to rent. Tenant's use shall not unreasonably
interfere with such other activities, including retention of a docking space for
a 25-foot boat designated by the Landlord. Such other activities shall be
carried on in a manner so as not to unreasonably interfere with Tenant's use.
SECTION 3
Improvements
Section 3.1. Condition of Premises. Tenant agrees to accept the
Premises in its present "as is" condition. Landlord's only representation is
that the premises are presently structurally sound and in reasonably good
working order. Landlord shall have no obligation to perform any work or
construction. If Tenant shall desire to perform any work or construction, the
same shall be done only in accordance with this Lease.
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Lessor will bring the electrical system up to code at the marina. If
the cost for electrical work exceeds FIVE THOUSAND DOLLARS ($5,000.00) Landlord
shall pay any amounts in excess of FIVE THOUSAND DOLLARS ($5,000.00) to bring
system back to its normal operating capacity. Landlord will not pay for any
improvements or enlargement of the electrical system that Tenant may deem
necessary to operate his business. Lessee will be responsible for paying all
electrical use fees at the Marina.
Section 3.2. General Provisions Applicable to Construction. All
construction work required or permitted by this Lease, whether performed by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws, ordinances1 regulations, codes and orders
of any governmental authority. Either party may inspect the work of the other at
reasonable times and shall give notice of observed defects.
Section 3.3. Representatives. Each party authorizes the other to rely
in connection with plans and construction upon written approval and other
actions on the party's behalf by any Representative of the party named in
Section 1.1 or any person hereafter designated in substitution or addition by
written notice to the party relying.
SECTION 4
Annual Rent
Section 4.1. The Rent. Tenant shall pay rent to Landlord at the Address
of Landlord or at such other place or to such other person or entity as Landlord
may by written notice to Tenant from time to time direct.
The first year's rent for the Dockside Restaurant and the Marina and
facilities shall be TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00).
Dock rentals from the Marina shall be paid to Landlord immediately upon
receipt and will eventually be applied towards rent. Deduction of all dock
rental fees from the balance of the rent shall occur on July 15, 1999. A fee of
FIVE PERCENT (5%) shall be paid to the dock-master for collection of rents. The
dock-master fee shall not be applied towards rent. The Lessor estimates the dock
rentals will be between $60,000.00 and $80,000.00 per year.
Rent shall be paid in four installments due on April 15, May 15, June
15, and July 15 of each year. The first year's rent shall be $25,000.00 on April
15, 1999; $25,000.00 on May 15, 1999; $25,000.00 on June 15, 1999; and the
balance of the rent less dock rental fees on July 15, 1999.
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Section 4.2. Extension Rent. "Extension Rent" shall be computed as of
the date of the commencement of the extension term. Tenant must notify Landlord
in writing of intention to extend lease or not to extend lease at least sixty
(60) days prior to the expiration of the previous Lease term. If such written
notice is not given at least sixty (60) days prior to the expiration of the
previous Lease term Landlord may exercise right not to grant extension. If
Tenant sends notice of intention to extend rent, such notice shall legally bind
Tenant to a new rent term. If during the first term the Tenant does not exercise
the right to extend the Lease, Tenant shall vacate and "Yield Up" the premises
on March 1, 2000.
Section 4.3. Extension Rent Terms. Tenant shall have the right to
extend the term of the lease by five two-year extensions. The five two two-year
extensions shall be at the rate of TWO HUNDRED THOUSAND AND NO/100 DOLLARS
($200,000.00) per year. Section 4.2. Extension Rent. "Extension Rent" shall be
computed as of the date of the commencement of the extension term. Tenant must
notify Landlord in writing of intention to extend lease or not to extend lease
at least sixty (60) days prior to the expiration of the previous Lease term. If
such written notice is not given at least sixty (60) days prior to the
expiration of the previous Lease term Landlord may exercise right not to grant
extension. If Tenant sends notice of intention to extend rent, such notice shall
legally bind Tenant to a new rent term. If during the first term the Tenant does
not exercise the right to extend the Lease, Tenant shall vacate and "Yield Up"
the premises on March 1, 2000.
If anytime during the first year of any two year extension the Tenant
is unable to operate its excursion cruises out of the Premise's facilities, due
to intervention by any governmental authority; Landlord shall terminate the
second year of the two-year lease, if written notice of said intervention is
given to Landlord at least sixty (60) days prior to the commencement of the
second year of the two-year extension. If such written notice is not given at
least sixty (60) days prior to the commencement of the second year of the
two-year extension tenant shall remain responsible for all rents due on the
second year of the extension lease.
SECTION 5
Additional Rent
Section 5.1. Real Estate Taxes. Landlord shall pay real estate taxes on
the leased property equal to the 1998 tax rate. Tenant shall be responsible for
all real estate taxes on the property covered by this Lease in excess of the
1998 tax rate on the property, including but not limited to any increases in
real estate taxes due during any extension of the rent period covered under 4.2.
The term "real estate taxes" as used herein shall mean all taxes, assessments
(special, betterment or otherwise), levies, fees, water and sewer rents and
charges, and all other government levies and charges, general and special,
ordinary and extraordinary, foreseen and unforeseen, which are allocable to the
term hereof and imposed or levied upon or assessed against the Facility or
Premises or any rent or other sums payable by any tenants or occupants thereof.
Real estate taxes shall not include any income taxes, excess profits taxes,
excise taxes, franchise taxes, estate, succession, inheritance or transfer
taxes, provided, however, that if at any time during the term the present system
of ad valorem taxation of real property shall be changed so that in lieu of the
whole or any part of the ad valorem tax on real property, or in lieu of
increases therein, there shall be assessed on Landlord a capital levy or other
tax on the gross
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rents received with respect to the Facility or Premises or a federal, state,
county, municipal, or other local income, franchise, excise or similar tax,
assessment, levy or charge (distinct from any now in effect) measured by or
based, in whole or in part, upon gross rents, then any and all of such taxes,
assessments, levies or charges, to the extent so measured or based ("Substitute
Taxes"), shall be included as real estate taxes hereunder, provided, however,
that Substitute Taxes shall be limited to the amount thereof as computed at the
rates that would be payable if the Facility or Premises were the only property
of Landlord.
Notwithstanding any other provision of this Section 5.11 if the Term
shall expire or shall terminate as of a date other than the last day of a
calendar year, then for such fraction of a calendar year at the end of the Term,
Tenant's last payment to Landlord under this Section 5.1 shall be made on the
basis of Landlord's best estimate of such amounts and shall be made on or before
the later of (a) ten (10) days after Landlord delivers such estimate to Tenant
or (b) the last day of the Term, with an appropriate payment or refund to be
made upon Landlord's submission of a statement of actual amounts.
Section 5.2. Direct Expenses. (a) Tenant shall provide and pay for its
own security for the Premises, Vessel, and its operations; (b) Tenant shall pay
all utility charges related to its operations, including electricity, phone and
water.
Section 5.3. Passenger Fees. Passenger fees are in addition to all
rents paid. Tenant shall pay passenger fees to Landlord at the Address of
Landlord or at such other place or to such other person or entity as Landlord
may by written notice to Tenant from time to time direct.
For the first year of the lease, annual passenger fees shall be $3.00
per passenger for the first 50,000 passengers; after 50,000 passengers, the fee
will be $3.25 per passenger; after 100,000 passengers the fee will go to $4.00
per passenger. Tenant's minimum payment is for 50,000 passengers per year. If in
the first year of the lease Tenant and Affiliates do not disembark a total of
50,000 passengers because they were shut down by governmental authorities;
Tenant shall pay TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($25,0000) and
passenger fees on the passengers it did disembark in the first year at $3.00 per
passenger up to ONE HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS
($125,000.00).
For the five two-year terms covered under the "Lease Extension", annual
passenger fees shall be $3.00 per passenger for the first 50,000 passengers;
after 50,000 passengers, the fee will be $3.50 per passenger; after 100,000
passengers the fee will go to $4.00 per passenger. Lessee's minimum payment is
to be calculated at SEVENTY-FIVE (75%) of the previous year's passenger count,
or 50,000 passengers per year; whichever is greater.
Annual passenger count shall be calculated each year beginning with the
commencement date of the original lease. The Tenant shall maintain a daily
ledger containing a running total of the passenger count beginning on the
commencement date of the original lease. Passenger fees shall be paid to
Landlord according to this running total on a monthly basis. After three years,
if the annual passenger count does not exceed 100,000 the Landlord has the right
to terminate the lease or negotiate a new lease at Landlord's option.
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Section 5.4. Accuracy of Passenger Count. If the passenger count is off
by three (3%) there shall be a $2.00 per passenger penalty for that monthly
passenger count in addition to the normal passenger count rate. Tenant shall pay
any passenger fee penalty to Landlord at the Address of Landlord or at such
other place or to such other person or entity as Landlord may by written notice
to Tenant from time to time direct.
Section 5.5. Subleases and Passenger Count. Any sublease of the
premises to any like or similar business operation shall not be deemed to
eliminate or impair Landlord's right to collect Passenger Fees, and other rents
on the same terms as this agreement.
SECTION 6
Insurance
Section 6.1. Tenant's Insurance. Tenant shall, as Additional Rent,
maintain throughout the Term the following insurance:
(a) Comprehensive General Liability insurance for any injury or damage
to a person or property occurring on the Premises, naming as an Additional
Insured the Landlord and such persons as Landlord shall designate from time to
time, in amounts which shall, at the beginning of the Term, be at least equal to
$10,000,000 per occurrence, and, from time to time during the term shall be for
such higher limits as are reasonably required by Landlord; and (b) Workers'
Compensation Insurance (including but not limited to Employer's liability) with
statutory limits covering all of Tenant's employees working at the Premises; and
(c) Vessel Pollution Liability coverage (purchased from the Water
Quality Insurance Syndicate or its equivalent) in an amount not less than
$10,000,000; and
(d) Protection & Indemnity coverage for the vessel, crew and passengers
naming as an additional insured the Landlord and such persons or entities as
Landlord shall designate from time to time, in amounts which shall, at the
beginning of the term, be at least $10,000,000 per occurrence and, from time to
time during the term, shall be for such higher limits as are reasonably required
by Landlord; and
(e) Auto Liability coverage for vehicles owned or leased by the Tenant
naming as an additional insured the Landlord and such persons or entities as
Landlord shall designate from time to time, in amounts which shall at the
beginning of the term be at least $1,000,000 CSL per occurrence and, from time
to time during the term, shall be for such higher limits as are reasonably
required by Landlord.
Section 6.2. Landlord's Insurance. All Risk Building insurance on a
replacement cost basis, and, if Landlord so elects, flood coverage to the extent
that same is available, insuring the Facility, with such deductibles, if any, as
Landlord shall consider appropriate.
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Section 6.3. Tenant Reimbursement of Certain Insurance Costs. Tenant
shall reimburse Landlord for all of Landlord's costs incurred in providing such
insurance to the extent attributable to any special endorsement or increase in
premium resulting from the business or operations of Tenant or any special or
extraordinary hazards resulting therefrom, provided that Landlord shall give
written notice to Tenant of such potential costs and Tenant shall have 20 days
to obtain or otherwise provide for such coverage to Landlord's satisfaction.
Section 6.4. Requirements Applicable to Insurance Policies. All
policies for insurance required under the provisions of Section 6.1 shall be
obtained from responsible companies qualified to do business in the Commonwealth
of Massachusetts and in good standing therein, which companies and the amount of
insurance allocated thereto shall be subject to Landlord's approval. Tenant
agrees to furnish Landlord with Certificates of Insurance for all such insurance
required by section 6.1 and copies of the policies therefor prior to the
beginning of the Term hereof and of each renewal policy at least thirty (30)
days prior to the expiration of the policy. Each such policy shall be
non-cancellable with respect to the interest of Landlord and such mortgagees
without at least sixty-(60) days' prior written notice thereto. Tenant's
insurance may be by Lloyds of London, and this provider has been approved by
Landlord.
Section 6.5. Waiver of Subrogation. All insurance which is carried by
either party with respect to the Premises or to furniture, furnishings, fixtures
or equipment therein or alterations or improvements thereto, whether or not
required hereunder, shall include provisions which either designate the other
party as one of the insureds or deny to the insurer acquisition by subrogation
of rights of recovery against the other party to the extent such rights have
been waived by the insured party prior to occurrence of loss or injury, insofar
as and to the extent that such provisions may be effective without making it
impossible to obtain insurance coverage from responsible companies qualified to
do business in the Commonwealth of Massachusetts (even though extra premium may
result therefrom) and without voiding the insurance coverage in force between
the insurer and the insured party. On reasonable request, each party shall be
entitled to have duplicates of Certificates of insurance containing such
provisions. Each party hereby waives all rights of recovery against the other
for loss or injury against which the waiving party is protected by insurance
containing such provisions, reserving, however, any rights with respect to any
excess of loss or injury over the amount recovered by such insurance.
SECTION 7
Landlord's Covenants
Section 7.1. Quiet Enjoyment. Tenant, on paying the rent and performing
its obligations hereunder, shall peacefully and quietly have, hold and enjoy the
Premises throughout the Term without any manner of hindrance or molestation from
Landlord or anyone claiming under Landlord, subject, however, to all the terms
and provisions hereof.
Section 7.2. Exterior Common Areas and Facilities. Tenant shall
promptly remove all refuse or waste resulting from its operations. Tenant shall
clean, maintain and provide snowplowing for all parking areas, walks and
driveways on the Facility, subject to the provisions of Section 9.
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Section 7.3. Electricity. Electricity furnished to the Tenant shall be
separately metered and all charges for electricity consumed on the Premises will
be billed directly to, and paid by, Tenant. The cost of any such electric meter
and the cost of installation, repair and replacement thereof shall be borne by
Tenant who shall pay such cost directly or reimburse Landlord for the cost
thereof within thirty (30) days after receipt of a statement therefor. Landlord
shall not in any way be liable or responsible to Tenant for any loss, damage or
expense which Tenant may sustain or incur if the quantity, character, or supply
of electricity is changed or is no longer available or suitable for Tenant's
requirements.
Section 7.4. Interruptions. Landlord shall not be liable to Tenant for
any compensation or reduction of rent by reason of inconvenience or annoyance or
for loss of business arising from power losses or shortages or from the
necessity of Landlord's entering the Premises for any of the purposes authorized
by this Lease or for repairing constructing, reconstructing, demolishing or
other activities on the Premises or any portion of the Facility. In case
Landlord is reasonably prevented or delayed from making any repairs, alterations
or improvements, or furnishing any service or performing any other obligation to
be performed on Landlord's part, Landlord shall not be liable to Tenant
therefor, nor shall Tenant be entitled to any abatement or reduction of rent by
reason thereof nor shall the same give rise to any claim by Tenant that such
failure constitutes actual or constructive, total or partial, eviction from the
Premises.
Landlord reserves the right to stop any service or utility system when
necessary by reason of accident or emergency or until necessary repairs have
been completed. Except in case of emergency repairs, Landlord will give Tenant
reasonable advance notice of any contemplated stoppage and will use reasonable
efforts to avoid unnecessary inconvenience to Tenant by reason thereof.
Landlord also reserves the right to institute such policies, programs
and measures as may be necessary or required to comply with applicable codes,
rules, regulations or standards. In so doing, Landlord shall make reasonable
efforts to avoid unnecessary inconvenience to Tenant by reason thereof.
Section 7.5. Exclusivity. During the term of this Lease, the Tenant
shall have the right of first refusal on any lease space offered by the Landlord
to anyone engaged in the same business as the Vessel.
SECTION 8
Tenant's Covenants
Section 8.1. Use. Tenant shall use the Premises only for the Permitted
Uses and shall from time to time procure all licenses and permits necessary
therefor at Tenant's sole expense. Tenant shall not at any time allow any
supplier, vendor, subcontractor or other person or entity providing goods or
services to the Vessel (including but not limited to fuel suppliers) to enter
upon or make use of the Premises or Facility without such person or entity first
having made suitable contractual arrangements with Landlord and provided
certificates of insurance in amounts and coverages acceptable to Landlord.
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Section 8.2. Repair and Maintenance. Except as otherwise provided in
Sections 7 and 9, Tenant shall keep the Premises in good order, condition, and
repair and in at least as good order, condition and repair as they are in on the
Commencement Date or may be put in during the term, reasonable use and wear only
excepted. Tenant shall make all repairs and replacements and do all other work
necessary for the foregoing purposes whether the same may be ordinary or
extraordinary, foreseen or unforeseen. Tenant shall keep in a safe, secure and
sanitary condition all trash and rubbish temporarily stored at the Premises.
Section 8.3. Compliance with Law and Insurance Requirements. Tenant
shall be solely responsible for compliance with all applicable law, whether
Federal, State or municipal, in connection with its business and with its use of
the Facility and Berth and any installation Tenant may make of floats or ramps.
Landlord shall cooperate with Tenant in local licensing applications and issues.
Tenant shall make all repairs, alterations, additions or replacements to the
Premises required by any law or ordinance or any order or regulation of any
public authority arising from Tenant's use of the Premises and shall keep the
Premises equipped with all safety appliances so required. Tenant shall not dump,
flush, or in any way introduce any hazardous substances or any other toxic
substances into the septic, sewage or other waste disposal system serving the
Premises, or generate, store or dispose of hazardous substances in or on the
Premises or dispose of hazardous substances from the Premises to any other
location without the prior written consent of Landlord and then only in
compliance with the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
Section 6901 et seq., the Massachusetts Hazardous Waste Management Act, M.G.L.
c.21C, the Massachusetts Oil and Hazardous Material Release Prevention and
Response Act, M.G.L. c.21 E, and all other applicable codes, regulations,
ordinances and laws. Tenant shall notify Landlord of any incident which would
require the filing of a notice under Chapter 232 of the Acts of 1982 and shall
comply with the orders and regulations of all governmental authorities with
respect to zoning, building, fire, health and other codes, regulations,
ordinances or laws applicable to the Premises. "Hazardous substances" as used in
this Section shall mean "hazardous substances" as defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 et seq. and regulations adopted pursuant to such Act.
Landlord may, if it so elects, make any of the repairs, alterations,
additions or replacements referred to in this Section and Tenant shall reimburse
Landlord for the cost thereof on demand.
Tenant will provide Landlord, from time to time upon Landlord's
request, with all records and information regarding any hazardous substance
maintained on the Premises by Tenant.
Landlord shall have the right to make such inspections as Landlord
shall reasonably elect from time to time to determine if Tenant is complying
with this Section.
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Tenant shall comply promptly with the reasonable recommendations of any
insurer, foreseen or unforeseen, ordinary as well as extraordinary, which may be
applicable to the Premises by reason of Tenant's use thereof. In no event shall
any activity be conducted by Tenant on the Premises which may give rise to any
cancellation of any insurance policy or make any insurance unobtainable. Tenant
shall have the right to contest any such recommendation at Tenant's sole cost
and risk.
Section 8.4. Tenant's Work. Tenant shall not make any installations,
alterations, additions or improvements in or to the Premises without on each
occasion obtaining the prior written consent of Landlord, not to be unreasonably
withheld. Any such work so consented to by Landlord shall be performed only in
accordance with plans and specifications therefor approved by Landlord. Tenant
shall procure at Tenant's sole expense all necessary permits and licenses before
under-taking any work on the Premises and shall perform all such work in a good
and workmanlike manner employing materials of good quality and so as to conform
with all applicable zoning, building, fire, health and other codes, regulations,
ordinances and laws and with all applicable insurance requirements. (If
requested by Landlord, Tenant shall furnish to Landlord prior to the
commencement of any such work a bond or other security acceptable to Landlord
assuring that any work by Tenant will be completed in accordance with the
approved plans and specifications. Tenant shall keep the Premises at all times
free of liens for labor and materials. Tenant shall employ for such work only
contractors reasonably approved by Landlord and shall require all contractors
employed by Tenant to carry workers' compensation insurance in accordance with
statutory requirements and comprehensive general liability insurance covering
such contractors, and naming Landlord and Tenant as additional insureds, on or
about the Premises in amounts at least equal to the limits set forth in Section
I and to submit certificates evidencing such coverage to Landlord prior to the
commencement of such work. Tenant shall save Landlord harmless and indemnified
from all injury, loss, claims or damage to any person or property occasioned by
or growing out of such work. Landlord may inspect the work of Tenant at
reasonable times and give notice of observed defects.
Section 8.5. Indemnity. Tenant shall defend, with counsel approved by
Landlord, all actions against Landlord, any partner, trustee, stockholder,
officer, director, employee or beneficiary of Landlord, holders of mortgages
secured by the Facility and any other party having an interest in the Premises
("Indemnified Parties") with respect to, and shall pay, protect, indemnity and
save harmless, to the extent permitted by law, all Indemnified Parties from and
against, any and all liabilities, losses, damages, costs, expenses (including
reasonable attorneys' fees and expenses), causes of action, suits, claims,
demands or judgments of any nature arising from (a) injury to or death of any
person, or damage to or loss of property, occurring in the Premises or connected
with the use, condition or occupancy of any thereof unless caused by the
negligence or willful misconduct of Landlord or its servants or agents, (b)
violation of this Lease by Tenant or (c) any act, fault, omission, or other
misconduct of Tenant or its agents, contractors, licensees, sublessees or
invitees.
Section 8.6. Landlord's Right to Enter. Tenant shall permit Landlord
and its agents to enter into the Premises at reasonable times and upon
reasonable notice (except that in emergencies no notice shall be required) to
examine the Premises, make such repairs, replacements or construction as
Landlord may elect, without however any obligation to do so, or show the
Premises to prospective purchasers and lenders, and, during the last year of the
term, to show the Premises to prospective tenants and to keep affixed in
suitable places notices of availability of the Premises.
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Section 8.7. Personal Property at Tenant's Risk. The Vessel and all
furnishings, fixtures, equipment, effects and property of every kind of Tenant
and of all persons claiming by, through or under Tenant which may be on the
Premises or the Vessel shall be at the sole risk and hazard of Tenant and if the
whole or any part thereof shall be destroyed or damaged by fire, water or
otherwise, by theft or from any other cause, no part of such loss or damage
shall be charged to or to be borne by Landlord. Tenant shall insure Tenant's
personal property.
Section 8.8. Payment of Landlord's Cost of Enforcement. Tenant shall
pay, on demand, Landlord's expenses, including reasonable attorneys' fees,
incurred in the successful enforcement of any obligation of Tenant under this
Lease or in curing any material default by Tenant under this Lease as provided
in Section 10.4.
Section 8.9. Yield up. At the expiration of the term or earlier
termination of this Lease, Tenant shall surrender all keys to the Premises,
remove all of its trade fixtures and personal property in the Premises, remove
such installations and improvements made by Tenant as Landlord may request and
all Tenant's signs wherever located, repair all damage caused by such removal
and yield up the Premises (including all installations and improvements made by
Tenant which Landlord shall not request Tenant to remove) broom-clean and in the
same good order and repair in which Tenant is obliged to keep and maintain the
Premises under this Lease. Any property not so removed shall be deemed abandoned
and may be removed and disposed of by Landlord in such manner as Landlord shall
determine, and Tenant shall pay Landlord the entire cost and expense incurred by
it in effecting such removal and disposition and in making any incidental
repairs and replacements to the Premises and for use and occupancy during the
period after the expiration of the term and prior to Tenant's performance of its
obligations under this Section 8.9.
Section 8.10. Estoppel Certificate. Upon not less than fifteen (15)
business days prior notice by Landlord, Tenant shall execute, acknowledge and
deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect and that, except as stated therein,
Tenant has no knowledge of any defenses, offsets or counterclaims against its
obligations to pay the Annual Rent and Additional Rent and any other charges and
to perform its other covenants under this Lease (or, if there have been any
modifications that the same is in full force and effect as modified and stating
the modifications and, if there are any defenses, offsets or counterclaims,
setting them forth in reasonable detail), the dates to which the Annual Rent and
Additional Rent and other charges have been paid and a statement that Landlord
is not in default hereunder (or if in default, the nature of such default, in
reasonable detail). Any such statement delivered pursuant to this Section 8.10
may be relied upon by any prospective purchaser or mortgagee of the Facility.
Section 8.11. Landlord's Expenses Re Consents. Tenant shall reimburse
Landlord promptly on demand for all reasonable legal and other expenses incurred
by Landlord in connection with all requests by Tenant for consent or approval
hereunder.
Section 8.12. Rules and Regulations. Tenant shall comply with such
reasonable Rules and Regulations as may be adopted from time to time by
Landlord.
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Section 8.13. Holding over. Tenant shall vacate the Premises
immediately upon the expiration or sooner termination of this Lease. If Tenant
shall retain possession of the Premises or any part thereof after the
termination of the term without Landlord's express consent, Tenant shall pay
Landlord rent at triple the monthly rate specified in Section I for the time
Tenant so remains in possession and, in addition thereto, shall pay Landlord for
all damages, consequential as well as direct, sustained by reason of Tenant's
retention of possession. The provisions of this Section shall not exclude
Landlord's rights of reentry or any other right hereunder, including, without
limitation, the right to remove Tenant through summary proceedings for holding
over beyond the expiration of the term of this Lease.
Section 8.14. Assignment and Subletting. The Tenant shall not assign or
sublet the whole or any part of the Leased Premises without Landlord's prior
written consent, which consent shall not be unreasonably withheld.
Notwithstanding such consent, Tenant shall remain liable for the payment of all
rent and for full performance of the covenants and conditions of this Lease.
Any attempted assignment, transfer, mortgage, pledge grant of security
interest, sublease or other encumbrance, except with the prior written consent
thereto by Landlord, shall be void. No assignment, transfer, mortgage, grant of
security interest, sublease or other encumbrance, whether or not consented to,
and no indulgence granted by Landlord to any assignee or sublessee, shall in any
way impair the continuing primary liability (which after an assignment shall be
joint and several with the assignee) of Tenant hereunder, and no consent in a
particular instance shall be deemed to be a waiver of the obligation to obtain
Landlord's consent in any other case.
If for any assignment or sublease Tenant shall receive rent or other
consideration, either initially or over the term of the assignment or sublease,
in excess of the rent called for hereunder (or in the case of the sublease of
part, in excess of such rent allocable to the part) after appropriate
adjustments to assure that all other payments called for hereunder are taken
into account, Tenant shall pay to Landlord, as Additional Rent, fifty percent
(50%) of any amounts in excess of FOUR DOLLARS ($4.00) per passenger of such
payment of rent or other consideration received by Tenant, promptly after its
receipt.
Section 8.15. Overloading and Nuisance. Tenant shall not injure,
overload, deface or otherwise harm the Premises, commit any nuisance, permit the
emission of any objectionable noise, vibration or odor, not in the ordinary
course of business or ordinary cruise ship use, make, allow or suffer any waste
or make any use of the Premises which is improper, offensive or contrary to any
law or ordinance or which will invalidate any of Landlord's insurance.
Section 8.16. Indemnification, Environmental Liability Notwithstanding
the existence of any insurance provided for in this Agreement, and without
regard to the policy limits of any such insurance, Tenant will protect,
indemnify, save harmless and defend SP (with counsel acceptable to SP) from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable attorneys'
fees and expenses), to the extent permitted by law, imposed upon or incurred by
or asserted against SP by reason of (a) any accident, injury to or death of
persons or loss of or damage to property occurring on or about the
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Premises or the Vessel for which Landlord is not at fault, (b) any use, misuse,
nonuse, condition, maintenance or repair by Tenant of the Premises and (c) any
failure on the part of Tenant to perform or comply with any of the terms of this
Agreement. Any amounts which become payable by Tenant under this Paragraph shall
be paid within thirty (30) days after liability therefor on the part of SP is
determined by litigation or otherwise. Tenant, at its expense, shall contest,
resist and defend any such claim, action or proceeding asserted or instituted
against SP or may compromise or otherwise dispose of the same as Tenant sees
fit. Nothing herein shall be construed as indemnifying SP against its own
negligence or willful misconduct.
Landlord represents and warrants to Tenant, to the best of his
knowledge as of the date hereof and throughout the Term of this Agreement, that
(a) no Hazardous Substances have been or are being generated, stored, utilized,
heated, released, transported, or otherwise managed or disposed of on, under or
from the Premises by Landlord (whether or not in reportable quantities), (b)
Landlord has not received any notice from the Massachusetts Department of
Environmental Protection, the United States Environmental Protection Agency or
any other federal, state or local governmental agency or authority claiming that
(i) the Premises or any use thereof violates or (ii) Landlord has violated any
environmental law, (c) Landlord has not incurred any liability to the
Commonwealth of Massachusetts, the United States of America or any other
federal, state and/or local governmental agency or authority under any
environmental law, and (d) no lien on the Premises has arisen under any
environmental law.
Tenant further covenants that Tenant (a) shall not release, or permit
any release or threat of release, of any Hazardous Substances Substances or
Petroleum Product on the Premises, (b) shall not generate or permit any
Hazardous Substances to be generated on the Premises, (c) shall not store or
utilize or permit any Hazardous Substances to be stored or utilized on the
Premises, (d) shall not dispose of or permit any Hazardous Substances Substances
or Petroleum Product to be disposed of on the Premises, (e) shall not permit any
lien under any environmental law to attach to the Premises and (vi) shall use
the Premises and/or shall cause the Premises to be used in accordance with the
environmental laws and all other legal requirements.
Without limiting any other indemnification agreement contained in this
Agreement or any other documents between the parties, Tenant shall and hereby
agrees to indemnity, exonerate, defend (with counsel acceptable to SP) and hold
SP harmless from and against any claim, liability, loss, cost, damage or
expense, including, without limitation, environmental consultants' fees and
expenses and attorneys' fees and expenses, arising out of any breach of any of
the representations, warranties, conditions and covenants of this paragraph
(whether before or after foreclosure proceedings are commenced or entry for the
purpose of foreclosure is made) and in connection with the enforcement of the
aforesaid indemnification agreement. Notwithstanding the foregoing, SP shall
have the option of conducting its defense with counsel of SP's choice. So long
as this Agreement shall remain in force and effect, SP shall have the right, but
not the obligation, to enter upon the Premises, to expend funds to perform
environmental testing and to cure any breach by Tenant of the representations,
warranties, conditions and covenants of this Paragraph, and any amounts paid or
advanced by SP and all costs and expenses incurred in connection therewith
(including, without limitation, environmental consultants' fees and expenses and
attorneys' fees and expenses), with interest thereon at the Wall Street Journal
Prime Rate, shall be a demand obligation of Tenant to SP, to the extent
permitted by law.
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Tenant shall provide SP with prompt written notice (a) upon Tenant's
becoming aware of any release or threat of release of any Hazardous Substances
or Petroleum Product upon, under or from the Premises (whether or not caused by
Tenant), (b) upon Tenant's receipt of any notice, including, without limitation,
any notice of violation, from any federal, state, municipal or other
governmental agency or authority pursuant to the provisions of any environmental
law and (c) upon Tenant's obtaining knowledge of any incurrence of any expense
by any governmental authority in connection with the assessment, containment or
removal of any Hazardous Substances Substances or Petroleum Product (i) located
upon or under the Premises, (ii) emanating from the Premises or (iii) improperly
stored, transported, disposed of or released by Tenant (whether or not on, from
or about the Premises).
SP shall indemnify, save harmless and defend Tenant from and against
all liabilities, obligations, claims, damages, penalties, causes of action,
costs and expenses imposed upon or incurred by or asserted against Tenant as a
result of the negligence or willful misconduct of SP. Tenant's or SP's liability
under the provisions of this Paragraph arising during the Term hereof shall
survive any termination of this Agreement. Tenant shall have no responsibility
or liability for any conditions existing at the Facility at the Term
Commencement Date or which do not arise out of Tenant's conduct.
All dock slips leases at the Marina shall include a hazardous waste indemnity.
The dock slip lessees shall be responsible for any hazardous substance or
petroleum product releases caused by them, and that is not in association with
any negligent or willful acts of the Tenant.
Section 8.17. Signage. Tenant shall have the right subject to the
approval of the City of Barnstable and Landlord to construct at Tenant's cost
and expense mutually acceptable signage at the Facility.
SECTION 9
Casualty or Taking
Section 9.1. Termination. In the event that greater than twenty-five
percent (25%) of the Premises shall be taken by any public authority or for any
public use or destroyed by the action of any public authority (a "Taking") then
this Lease may be terminated by either Landlord or Tenant effective on the
effective date of the Taking In the event that the Premises shall be destroyed
or damaged by fire or casualty (a "Casualty") and if Landlord's architect,
engineer or contractor shall determine that it will require in excess of one
hundred eighty (180) days from the date of the Casualty to restore the Premises,
this Lease may be terminated by either Landlord or Tenant by notice to the other
within thirty (30) days after the casualty. In the case of a Taking, such
election, which may be made notwithstanding the fact that Landlord's entire
interest may have been divested, shall be made by the giving of notice by
Landlord or Tenant to the other within thirty (30) days after Landlord or
Tenant, as the case may be, shall receive notice of the Taking.
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Section 9.2. Restoration. In the event of a Taking or a Casualty,
unless Landlord or Tenant shall exercise an election to terminate provided in
Section 9.1, this Lease shall continue in force and a just proportion of the
Annual Rent and other charges hereunder, according to the nature and extent of
the damages sustained by the Premises, shall be abated until the Premises, or
what may remain thereof shall be put by Landlord in proper condition for use
subject to zoning and building laws or ordinances then in existence, which,
unless Landlord or Tenant has exercised its option to terminate pursuant to
Section 9.1, Landlord covenants to do with reasonable diligence at Landlord's
expense. Landlord's obligations with respect to restoration shall not require
Landlord to expend more than the net proceeds of insurance recovered or damages
awarded for such Casualty or Taking and made available for restoration by
Landlord's mortgagees. "Net proceeds of insurance recovered or damages awarded"
refers to the gross amount of such insurance or damages less the reasonable
expenses of Landlord in connection with the collection of the same, including,
without limitation, fees and expenses for legal and appraisal services.
Section 9.3. Award. Irrespective of the form in which recovery may be
had by law, all rights to damages or compensation shall belong to Landlord in
all cases. Tenant hereby grants to Landlord all of Tenant's rights to such
damages and compensation and covenants to deliver such further assignments
thereof as Landlord may from time to time request. Nothing contained herein
shall be construed to prevent Tenant from prosecuting a claim for the value of
any of Tenant's fixtures or personal property and for relocation expenses.
Tenant shall maintain the right to any damages related to its business
or operations that Landlord can not claim, and do not diminish any of the
Landlord's claims for damages.
SECTION 10
Default
Section 10.1. Events of Default.
If:
(a) Tenant shall default in the performance of any of its obligations to pay the
Annual Rent, Additional Rent or any other sum payable hereunder and if such
default shall continue for five (5) days after written notice from Landlord
designating such default;
(b) within fifteen (15) days after written notice from Landlord to Tenant
specifying any other default or defaults Tenant has not commenced diligently to
correct the default or defaults so specified or has not thereafter diligently
pursued such correction to completion;
(c) any assignment for the benefit of creditors shall be made by Tenant;
(d) Tenant's leasehold interest shall be taken on execution or other process of
law in any action against Tenant;
(e) a lien or other involuntary encumbrance is filed against Tenant's leasehold
interest and is not discharged or efforts undertaken and diligently pursued,
within ten (10) days thereafter;
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(f) a petition is filed by Tenant for liquidation, or for reorganization or an
arrangement or any other relief under any provision of the Bankruptcy Code as
then in force and effect; or
(g) an involuntary petition under any of the provisions of said Bankruptcy Code
is filed against Tenant and such involuntary petition is not dismissed within
thirty (30) days thereafter; or
(h) Tenant shall abandon the berth or vacate the berth for more than twenty (20)
days without prior written notice to Landlord other than for winter lay-up or
winter use elsewhere; then, and in any of such cases, Landlord and the agents
and servants of Landlord lawfully may, in addition to and not in derogation of
any remedies for any preceding breach of covenant, immediately or at any time
thereafter and without demand or notice and with or without process of law
(forcibly, if necessary) enter into and upon the Premises or any part thereof in
the name of the whole, or mail a notice of termination addressed to Tenant, and
repossess the same as of Landlord's former estate and expel Tenant and those
claiming through or under Tenant and remove its and their effects without being
deemed guilty of any manner of trespass and without prejudice to any remedies
which might otherwise be used for arrears of rent or prior breach of covenant,
and upon such entry or mailing as aforesaid this Lease shall terminate, Tenant
hereby waiving all statutory rights (including, without limitation, rights of
redemption, if any) to the extent such rights may be lawfully waived. Landlord,
without notice to Tenant, may store Tenant's effects, and those of any person
claiming through or under Tenant at the expense and risk of Tenant, and, if
Landlord so elects, may sell such effects at public auction or private sale and
apply the net proceeds to the payment of all sums due to Landlord from Tenant,
if any, and pay over the balance, if any, to Tenant.
Section 10.2. Remedies. In the event that this Lease is terminated
under any of the provisions contained in Section 10.1, Tenant shall pay
forthwith to Landlord, as compensation, the excess of the total rent reserved
for the residue of the Term over the fair market rental value of the Premises
for the residue of the term. In calculating the rent reserved there shall be
included, in addition to the Annual Rent and Additional Rent, the value of all
other considerations agreed to be paid or performed by Tenant during the
residue. As additional and cumulative obligations after any such termination,
Tenant shall also pay punctually to Landlord all the sums and shall perform all
the obligations which Tenant covenants in this Lease to pay and to perform in
the same manner and to the same extent and at the same time as if this Lease had
not been terminated. In calculating the amounts to be paid by Tenant pursuant to
the preceding sentence, Tenant shall be credited with any amount paid to
Landlord pursuant to the first sentence of this Section 10.2 and also with the
net proceeds of any rent obtained by Landlord by reletting the Premises, after
deducting all Landlord's reasonable expenses in connection with such reletting,
including, without limitation, all repossession costs, brokerage commissions,
fees for legal services and expenses of preparing the Premises for such
reletting, it being agreed by Tenant that Landlord may (i) relet the Premises or
any part or parts thereof for a term or terms which may at Landlord's option be
equal to or less than or exceed the period which would otherwise have
constituted the balance of the term hereof and may grant such concessions as
Landlord in its reasonable judgment considers advisable or necessary to relet
the same and (ii)
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make such alterations and repairs as Landlord in its reasonable judgment
considers advisable or necessary to relet the same, and no action of Landlord in
accordance with the foregoing or failure to relet or to collect rent under
reletting shall operate or be construed to release or reduce Tenant's liability
as aforesaid.
Section 10.3. Remedies Cumulative. Except as otherwise expressly
provided herein, any and all rights and remedies which Landlord may have under
this Lease and at law and equity shall be cumulative and shall not be deemed
inconsistent with each other, and any two or more of all such rights and
remedies may be exercised at the same time to the greatest extent permitted by
law.
Section 10.4. Landlord's Right to Cure Defaults. At any time following
ten (10) days' prior written notice to Tenant (except in cases of emergency when
no notice shall be required), Landlord may (but shall not be obligated to) cure
any default by Tenant under this Lease, and whenever Landlord so elects, all
costs and expenses incurred by Landlord, including reasonable attorneys' fees,
in curing a default shall be paid by Tenant to Landlord as Additional Rent on
demand, together with interest thereon at the rate provided in Section 10.7 from
the date incurred by Landlord to the date of payment by Tenant.
Section 10.5. Effect of Waivers of Default. Any consent or permission
by Landlord to any act or omission which otherwise would be a breach of any
covenant or condition herein, or any waiver by Landlord of the breach of any
covenant or condition herein, shall not in any way be held or construed (unless
expressly so declared) to operate so as to impair the continuing obligation of
any covenant or condition herein, or otherwise operate to permit the same or
similar acts or omissions except as to the specific instance. The failure of
Landlord to seek redress for violation of or to insist upon the strict
performance of any covenant or condition of this Lease shall not be deemed a
waiver of such violation nor prevent a subsequent act, which would have
originally constituted a violation, from having all the force and effect of an
original violation. The receipt by Landlord of rent with knowledge of the breach
of any covenant of this Lease shall not be deemed to have been a waiver of such
breach by Landlord or of any of Landlord's remedies on account thereof,
including its right of termination for such default.
Section 10.6. No Accord and Satisfaction. No acceptance by Landlord of
a lesser sum than the Annual Rent, Additional Rent or any other sum then due
shall be deemed to be other than on account of the earliest installment of such
rent or charge due, unless Landlord elects by notice to Tenant to credit such
sum against the most recent installment due. Any endorsement or statement on any
check or any letter accompanying any check or payment as rent or other charge
shall not be deemed an accord and satisfaction, and Landlord may accept such
check or payment without prejudice to Landlord's right to recover the balance of
such installment or pursue any other remedy under this Lease or otherwise.
Section 10.7. Interest on Overdue Sums. If Tenant shall fail to pay
Annual Rent, Additional Rent or other sums payable by Tenant to Landlord by the
due date thereof (i.e., the due date disregarding any requirement of notice from
Landlord or any period of grace allowed to Tenant), the amount so unpaid shall
bear interest at a rate (the "Delinquency Rage") of 1-1/2% charge per month on
overdue accounts of thirty (30) days which is an annual rate of eighteen
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(18%) percent from time to time in effect commencing with the due date and
continuing through the day on which payment of such delinquent payment with
interest thereon is paid. If such rate is in excess of any maximum interest rate
permissible under applicable law, the Delinquency Rate shall be the maximum
interest rate permissible under applicable law.
SECTION 11
Mortgages
Section 11.1. Subordination. Unless the holder of any such mortgage
otherwise elects at any time, this Lease is subject and subordinate to any
mortgages and to all renewals, modifications, consolidations, replacements and
extensions of any of the foregoing or of substitutions therefor or any other
forms or methods of financing or refinancing which may now or hereafter affect
the Facility whether now in use or not and any instruments executed for such
purposes or hereafter executed by the owners of the Facility. Tenant agrees upon
demand to execute, acknowledge and deliver to the owners of the Facility,
without expense to them, any instruments that may be necessary or proper to
confirm this subordination of this Lease and of all of the rights herein
contained to the lien or liens created by any such instruments. If Tenant shall
fail at any time to execute and deliver any such subordination instruments upon
request, the mortgagors in any such new mortgage or mortgages or the obligors in
any form of refinancing as provided above, in addition to any other remedies
available to them in consequence of such default, may execute, acknowledge, and
deliver such subordination instruments as the attorney-in fact of Tenant and in
Tenant's name, place and stead, and Tenant hereby makes, constitutes and
irrevocably appoints such mortgagors or obligors as its attorney-in-fact for
that purpose. Any secured lender as aforesaid may, at its option, elect to make
this Lease superior to its mortgage or other instrument referred to herein by
written notice thereof to Tenant. No such subordination provided for herein
shall be valid without the consent of all prior lien owners, if there be any.
Upon request of Tenant, Landlord agrees to request of any mortgagee that it
enter into a Subordination, Nondisturbance and Attornment Agreement with Tenant.
Tenant agrees to execute such agreement in the customary form required by such
mortgagee.
Section 11.2. Nondisturbance and Attornment Agreement with Tenant.
Tenant agrees to execute such agreement in the customary form required by such
mortgagee.
SECTION 12
Miscellaneous Provisions
Section 12.1. Notices from One Party to the Other. All notices required
or permitted hereunder shall be in writing and addressed, if to Tenant, at the
Address of Tenant or such other address as Tenant shall have last designated by
notice in writing to Landlord and, if to Landlord, at the Address of Landlord or
such other address as Landlord shall have last designated by notice in writing
to Tenant. Any notice shall be deemed duly given when mailed, by registered or
certified mail, postage and registration or certification charges prepaid,
addressed as above.
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Section 12.2. Quiet Enjoyment. Landlord agrees that upon Tenant's
paying the rent and performing and observing the terms, covenants, conditions
and provisions on its part to be performed and observed, Tenant shall and may
peaceably and quietly have, hold and enjoy the Premises during the term without
any manner of hindrance or molestation from Landlord or anyone claiming under
Landlord, subject, however, to the terms of this Lease.
Section 12.3. Lease Not to Be Recorded; Notice of Lease. Tenant agrees
that it will not record this Lease. If the Term of this Lease, including
options, exceeds seven (7) years, Landlord and Tenant agree that, on the request
of either, they will execute and record a notice of lease in form reasonably
acceptable to Landlord.
Section 12.4. Bind and Inure; Limitation of Landlord's Liability. The
obligations of this Lease shall run with the land, and this Lease shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. No owner of the Premises shall be liable under this
Lease except for breaches of Landlord's obligations occurring while owner of the
Premises. The obligations of Landlord shall be binding upon the assets of
Landlord which comprise the Premises but not upon other assets of Landlord. No
individual partner, trustee, stockholder, officer, director, employee or
beneficiary of Landlord shall be personally liable under this Lease and Tenant
shall look solely to Landlord's interest in the Premises in pursuit of its
remedies upon an event of default hereunder, and the general assets of Landlord
and its partners, trustees, stockholders, officers, employees or beneficiaries
of Landlord shall not be subject to levy, execution or other enforcement
procedure for the satisfaction of the remedies of Tenant.
Section 12.5. Acts of God. In any case where either party hereto is
required to do any act, delays caused by or resulting from acts of God, war,
civil commotion, fire, flood or other casualty. labor difficulties, shortages of
labor, materials or equipment, government regulations, unusually severe weather,
or other causes beyond such party's reasonable control shall not be counted in
determining the time during which work shall be completed, whether such time be
designated by a fixed date, a fixed time or a "reasonable time, "and such time
shall be deemed to be extended by the period of such delay.
Section 12.6. Landlord's Default. Landlord shall not be deemed to be in
default in the performance of any of its obligations hereunder unless it shall
fail to perform such obligations and unless within thirty (30) days after notice
from Tenant to Landlord specifying such default Landlord has not commenced
diligently to correct the default so specified, refused to perform, or has not
thereafter diligently pursued such correction to completion. Tenant shall have
no right, for any default by Landlord, to offset or counterclaim against any
rent due hereunder.
Section 12.7. Indemnification by Landlord. Landlord agrees to indemnity
and hold Tenant harmless from and against, and to reimburse Tenant with respect
to, any and all claims, demands, causes of action, losses, damages, liabilities,
costs, and expenses (including reasonable attorneys' fees and court costs)
asserted against or incurred by Tenant by reason of or arising out of (a) the
failure of Landlord to perform any material obligation required by this Lease to
be performed by Landlord or (b) any liability to any third party arising from
the act or neglect of Landlord.
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Section 12.8. Brokerage. Tenant warrants and represents to Landlord
that it has had no dealings with any broker or agent in connection with this
Lease other than the Broker(s) set forth in Section I and covenants to defend
with counsel approved by Landlord, hold harmless and indemnity Landlord from and
against any and all costs, expenses (including attorneys' fees) or liability
arising from any compensation, commissions and charges claimed by any broker or
agent other than the Broker(s) set forth in Section 1. Tenant shall not be
obligated to pay any fees to Mark Doran. Tenant shall be obligated to pay
certain fees to Edward O'Sullivan.
Section 12.9. Retention of Docking Space. Landlord shall retain a
docking space for a 25-foot boat designated by the Landlord. No docking fee or
other fee will be charged for retention of this docking space during the lease
of the property, or extension thereof.
Section 12.10. Miscellaneous. This Lease shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts.
There are no prior oral or written agreements between Landlord and Tenant
affecting this Lease.
WITNESS the execution hereof under seal as of the day and year first
above written.
LANDLORD.
Shoestring Properties Limited Partnership
BY: /s/
-----------------------------------------
TENANT
Leisure Express Cruise, LLC.
BY: /s/
-----------------------------------------
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Exhibit A
Facility Description
The land located in Barnstable (Hyannis) bounded and described as follows:
BEGINNING at a point in the southerly line of South Street. Said point being a
Land Court Bound found at the northwesterly corner of the herein described
premises;
THENCE S. 82 (degrees) 01' 00" E., by the southerly line of South Street
seventy-seven and seventy-one hundredths (77.71) feet to a concrete bound found
at the beginning of a curve which connects said line of South Street to the
westerly line of School Street;
THENCE easterly, southeasterly and southerly by said line of School Street and a
curve to the right having a radius of twenty and sixty-two hundredths (20.62)
feet an arc distance of thirty-one and seventy-six hundredths (31.76) feet to a
point;
THENCE S. 06 (degrees) 13' 31" W., by said line of School Street, two hundred
twenty-two and twelve hundredths (222.12) feet to a concrete bound found at land
now or formerly of Elaine Karath;
THENCE N. 83 (degrees) 46' 29" W., by said line of Karath one hundred eleven and
fifty hundredths (111.50) feet to a point at the land now or formerly of Woods
Hole, Martha's Vineyard & Nantucket Steamship Authority;
THENCE N. 12 (degrees) 45' 01" E., by land of said Steamship Authority,
eighty-two and eighty-nine hundredths (82.89) feet to a Land Court Bound found
at a point;
THENCE N. 07 (degrees) 45' 53" E., by land of said Steamship Authority, one
hundred sixty-two and sixty-four (162.64) feet to the point of the beginning.
Containing by calculation, 24,819 square feet of land and being delineated as
Parcel A on a plan entitled "Land in Hyannis, Massachusetts, owned by Lewis Bay
Motel, Restaurant & Marina, Inc." dated January 24, 1992 and prepared for filing
with the Barnstable Registry of Deeds in Plan Book 485, Page 93, by Bouley
Brother, Inc. Registered Land Surveyors, Worcester, Massachusetts, subject to
any and all encumbrances and other matters of record and the rights of others
entitled thereto. See also plan recorded in Plan Book 315 as Plan 1 in said
Registry.
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Exhibit B
Premises Description
The Premises consist of all facilities and docks at the Marina. Tenant
acknowledges that other boats will have docking slips on the premises. Tenant's
use shall not unreasonably interfere with such other activities. Such other
activities shall be carried on in a manner so as not to unreasonably interfere
with Tenant's use.
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EXHIBIT 10.60
DOCKSIDE LEASE TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 1 Reference Data
Section 1.1 Reference Information
Section 1.2 Exhibits
Section 2 Premises and Term
Section 2.1 Premises
Section 2.2 Term
Section 2.3 Option to Extend Term
Section 3 Improvements
Section 3.1 Condition of Premises
Section 3.2 General Provisions Applicable to Construction
Section 3.3 Representatives
Section 4 Annual Rent
Section 4.1 The Rent
Section 4.2 Extension Rent
Section 4.3 Extension Rent Terms
Section 5 Additional Rent
Section 5.1 Real Estate Taxes
Section 5.2 Direct Expenses
Section 6 Insurance
Section 6.1 Tenant's Insurance
Section 6.2 Landlord's Insurance
Section 6.3 Tenant Reimbursement of Certain insurance Costs
Section 6.4 Requirements Applicable to Insurance Policies
Section 6.5 Waiver of Subrogation
Section 7 Landlord's Covenants
Section 7.1 Quiet Enjoyment
Section 7.2 Exterior Common Areas and Facilities
Section 7.3 Electricity
Section 7.4 Interruptions
Section 7.5 Electricity
Section 8 Tenants Covenants
Section 8.1 Use
Section 8.2 Repair and Maintenance
Section 8.3 Compliance with Law and
Section 8.4 Tenant's Work
Section 8.5 Indemnity
Section 8.6 Landlord's Right to Enter
Section 8.7 Personal Property at Tenant's Risk
Section 8.8 Payment of Landlord's Cost of Enforcement
Section 8.9 Yield up
Section 8.10 Estoppel Certificate Insurance Requirements
</TABLE>
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<PAGE> 2
<TABLE>
<S> <C>
Section 8.11 Landlord's Expenses Re Consents
Section 8.12 Rules and Regulations
Section 8.13 Holding over
Section 8.14 Assignment and Subletting
Section 8.15 Overloading and Nuisance
Section 8.16 Indemnification
Section 8.17 Signage
Section 9 Casualty or Taking
Section 9.1 Termination
Section 9.2 Restoration
Section 9.3 Award
Section 10 Default
Section 10.1 Events of Default
Section 10.2 Remedies
Section 10.3 Remedies Cumulative
Section 10.4 Landlord's Right to Cure Defaults
Section 10.5 Effect of Waivers of Default
Section 10.6 No Accord and Satisfaction
Section 10.7 Interest on Overdue Sums
Section 11 Mortgages
Section 11.1 Subordination
Section 11.2 Nondisturbance and Attornment Agreement with Tenant
Section 12 Miscellaneous Provisions
Section 12.1 Notices from One Party to the Other
Section 12.2 Quiet Enjoyment
Section 12.3 Lease Not to Be Recorded; Notice of Lease
Section 12.4 Bind and Inure; Limitation of Landlord's Liability
Section 12.5 Acts of God
Section 12.6 Landlord's Default
Section 12.7 Indemnification by Landlord
Section 12.8 Brokerage
Section 12.9 Miscellaneous
</TABLE>
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<PAGE> 3
DOCKSIDE LEASE
SECTION 1
Reference Data
Section 1.1. Reference Information. Reference in this Lease to any of the
following shall have the meaning set forth below:
Date of This Lease: April 29, 1999
Facility: The maritime/commercial real property located at the
Dockside Restaurant at 53 South Street, Hyannis, Massachusetts,
described in Exhibit A.
Premises: Those portions of the Facility described and/or shown in
Exhibit B.
Landlord: Shoestring Properties Limited Partnership, "SP"
Address of Landlord: 297 North Street, Hyannis, Massachusetts 02601
Tenant: Leisure Time Cruise Corporation
Address of Tenant: 1284 Miller Road, Avon, Ohio 44011; and
4258 Communications Drive, Norcross, GA 30093
Landlord's Representative: Stuart A. Bornstein
Tenant's Representative: Leisure Lady Cruise, LLC
Brokers: Mark Doran, and Edward O'Sullivan
Term Commencement Date: May 1, 1999.
Extension Term: Five two-year extensions
Permitted Uses: The Premises are to be used for the purpose of
operating a restaurant and ancillary activities and for no other use
or purpose.
Section 1.2. Exhibits. The following Exhibits are attached to and
incorporated in this Lease:
Exhibit A Facility Description
Exhibit B Premises Description
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<PAGE> 4
SECTION 2
Premises and Term
Section 2.1. Premises. Landlord hereby leases and demises the Premises
to Tenant and Tenant hereby leases the Premises from Landlord, subject to any
and all existing encumbrances and other matters of record and subject to the
terms and provisions of this Lease.
Section 2.2. Term. TO HAVE AND TO HOLD for a term beginning on the
"Term Commencement Date", and continuing until April 30, 2000, unless sooner
terminated as herein provided.
Section 2.3. Option to Extend Term. Tenant shall have the option to
extend the term of this Lease for the Extension Term, provided (i) no material
default in the obligations of Tenant under this Lease shall exist at the time
such option is exercised and (ii) Tenant shall give written notice to Landlord
of its exercise of such option at least sixty (60) days of the prior term's
expiration date. All of the terms and provisions of this Lease shall be
applicable during the Extension Term except that (a) Tenant shall have no
option to extend the term of the Lease beyond the Extension Term and (b) Annual
Rent for the Extension Term shall be Extension Rent, as defined in Section 4.2,
as of the first day of the Extension Term but in no event less than the Annual
Rent in effect in the last year of the original term.
SECTION 3
Improvements
Section 3.1. Condition of Premises. Tenant agrees to accept the
Premises in its present "as is" condition. Landlord's only representation is
that the premises are presently structurally sound and in reasonably good
working order. Landlord shall have no obligation to perform any work or
construction. If Tenant shall desire to perform any work or construction, the
same shall be done only in accordance with this Lease.
Section 3.2. General Provisions Applicable to Construction. All
construction work required or permitted by this Lease, whether performed by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws, ordinances, regulations, codes and orders
of any governmental authority. Either party may inspect the work of the other
at reasonable times and shall give notice of observed defects.
Section 3.3. Representatives. Each party authorizes the other to rely
in connection with plans and construction upon written approval and other
actions on the party's behalf by any Representative of the party named in
Section 1.1 or any person hereafter designated in substitution or addition by
written notice to the party relying.
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<PAGE> 5
SECTION 4
Annual Rent
Section 4.1. The Rent. Tenant shall pay rent to Landlord at the
Address of Landlord or at such other place or to such other person or entity as
Landlord may by written notice to Tenant from time to time direct.
The first year's rent for the Dockside Restaurant and the Marina and
facilities shall be TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00).
Dock rentals from the Marina shall be paid to Landlord immediately
upon receipt and will eventually be applied towards rent. Deduction of all dock
rental fees from the balance of the rent shall occur on July 15, 1999. A fee of
FIVE PERCENT (5%) shall be paid to the dock-master for collection of rents. The
dock-master fee shall not be applied towards rent. The Lessor estimates the
dock rentals will be between $60,000.00 and $80,000.00 per year.
Rent shall be paid in four installments due on April 15, May 15, June
15, and July 15 of each year. The first year's rent shall be $25,000.00 on
April 15, 1999; $25,000.00 on May 15, 1999; $25,000.00 on June 15, 1999; and
the balance of the rent less dock rental fees on July 15, 1999.
Section 4.2. Extension Rent. "Extension Rent" shall be computed as of
the date of the commencement of the extension term. Tenant must notify Landlord
in writing of intention to extend lease or not to extend lease at least sixty
(60) days prior to the expiration of the previous Lease term. If such written
notice is not given at least sixty (60) days prior to the expiration of the
previous Lease term Landlord may exercise right not to grant extension. If
Tenant sends notice of intention to extend rent, such notice shall legally bind
Tenant to a new rent term. If during the first term the Tenant does not
exercise the right to extend the Lease, Tenant shall vacate and "Yield Up" the
premises on March 1, 2000.
Section 4.3. Extension Rent Terms. Tenant shall have the right to
extend the term of the lease by five two-year extensions. The five two-year
extensions shall be at the rate of TWO HUNDRED THOUSAND AND NO/100 DOLLARS
($200,000.00) per year. If anytime during the first year of any two year
extension the Tenant is unable to operate its excursion cruises out of the
Premise's facilities, due to intervention by any governmental authority;
Landlord shall terminate the second year of the two-year lease, if written
notice of said intervention is given to Landlord at least sixty (60) days prior
to the commencement of the second year of the two-year extension. If such
written notice is not given at least sixty (60) days prior to the commencement
of the second year of the two-year extension tenant shall remain responsible
for all rents due on the second year of the extension lease.
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<PAGE> 6
SECTION 5
Additional Rent
Section 5.1. Real Estate Taxes. Landlord shall pay real estate taxes
on the leased property equal to the 1998 tax rate. Tenant shall be responsible
for all real estate taxes on the property covered by this Lease in excess of
the 1998 tax rate on the property, including but not limited to any increases
in real estate taxes due during any extension of the rent period covered under
4.2. The term "real estate taxes" as used herein shall mean all taxes,
assessments (special, betterment or otherwise), levies, fees, water and sewer
rents and charges, and all other government levies and charges, general and
special, ordinary and extraordinary, foreseen and unforeseen, which are
allocable to the term hereof and imposed or levied upon or assessed against the
Facility or Premises or any rent or other sums payable by any tenants or
occupants thereof. Real estate taxes shall not include any income taxes, excess
profits taxes, excise taxes, franchise taxes, estate, succession, inheritance
or transfer taxes, provided, however, that if at any time during the term the
present system of ad valorem taxation of real property shall be changed so that
in lieu of the whole or any part of the ad valorem tax on real property, or in
lieu of increases therein, there shall be assessed on Landlord a capital levy
or other tax on the gross rents received with respect to the Facility or
Premises or a federal, state, county, municipal, or other local income,
franchise, excise or similar tax, assessment, levy or charge (distinct from any
now in effect) measured by or based, in whole or in part, upon gross rents,
then any and all of such taxes, assessments, levies or charges, to the extent
so measured or based ("Substitute Taxes"), shall be included as real estate
taxes hereunder, provided, however, that Substitute Taxes shall be limited to
the amount thereof as computed at the rates that would be payable if the
Facility or Premises were the only property of Landlord.
Notwithstanding any other provision of this Section 5.11 if the Term
shall expire or shall terminate as of a date other than the last day of a
calendar year, then for such fraction of a calendar year at the end of the
Term, Tenant's last payment to Landlord under this Section 5.1 shall be made on
the basis of Landlord's best estimate of such amounts and shall be made on or
before the later of (a) ten (10) days after Landlord delivers such estimate to
Tenant or (b) the last day of the Term, with an appropriate payment or refund
to be made upon Landlord's submission of a statement of actual amounts.
Section 5.2. Direct Expenses. Tenant shall pay all utility charges
related to its operations, including electricity, phone and water.
SECTION 6
Insurance
Section 6.1. Tenant's Insurance. Tenant shall, as Additional Rent,
maintain throughout the Term the following insurance:
(a) Comprehensive General Liability insurance for any injury or damage
to a person or property occurring on the Premises, naming as an Additional
Insured the Landlord and such persons as Landlord shall designate from time to
time, in amounts which shall, at the beginning
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of the Term, be at least equal to $10,000,000 per occurrence, and, from time to
time during the term shall be for such higher limits as are reasonably required
by Landlord; and (b) Workers' Compensation Insurance (including but not limited
to Employer's liability) with statutory limits covering all of Tenant's
employees working at the Premises; and
(b) Auto Liability coverage for vehicles owned or leased by the
Tenant naming as an additional insured the Landlord and such persons or
entities as Landlord shall designate from time to time, in amounts which shall
at the beginning of the term be at least $1,000,000 CSL per occurrence and,
from time to time during the term, shall be for such higher limits as are
reasonably required by Landlord.
Section 6.2. Landlord's Insurance. All Risk Building insurance on a
replacement cost basis, and, if Landlord so elects, flood coverage to the
extent that same is available, insuring the Facility, with such deductibles, if
any, as Landlord shall consider appropriate.
Section 6.3. Tenant Reimbursement of Certain Insurance Costs. Tenant
shall reimburse Landlord for all of Landlord's costs incurred in providing such
insurance to the extent attributable to any special endorsement or increase in
premium resulting from the business or operations of Tenant or any special or
extraordinary hazards resulting therefrom, provided that Landlord shall give
written notice to Tenant of such potential costs and Tenant shall have 20 days
to obtain or otherwise provide for such coverage to Landlord's satisfaction.
Section 6.4. Requirements Applicable to Insurance Policies. All
policies for insurance required under the provisions of Section 6.1 shall be
obtained from responsible companies qualified to do business in the
Commonwealth of Massachusetts and in good standing therein, which companies and
the amount of insurance allocated thereto shall be subject to Landlord's
approval. Tenant agrees to furnish Landlord with Certificates of Insurance for
all such insurance required by section 6.1 and copies of the policies therefor
prior to the beginning of the Term hereof and of each renewal policy at least
thirty (30) days prior to the expiration of the policy. Each such policy shall
be non-cancellable with respect to the interest of Landlord and such mortgagees
without at least sixty-(60) days' prior written notice thereto. Tenant's
insurance may be by Lloyds of London and this provider has been approved by
Landlord.
Section 6.5. Waiver of Subrogation. All insurance which is carried by
either party with respect to the Premises or to furniture, furnishings,
fixtures or equipment therein or alterations or improvements thereto, whether
or not required hereunder, shall include provisions which either designate the
other party as one of the insureds or deny to the insurer acquisition by
subrogation of rights of recovery against the other party to the extent such
rights have been waived by the insured party prior to occurrence of loss or
injury, insofar as and to the extent that such provisions may be effective
without making it impossible to obtain insurance coverage from responsible
companies qualified to do business in the Commonwealth of Massachusetts (even
though extra premium may result therefrom) and without voiding the insurance
coverage in force between the insurer and the insured party. On reasonable
request, each party shall be entitled to have duplicates of Certificates of
insurance containing such provisions. Each party hereby waives all rights of
recovery against the other for loss or injury against which the waiving party
is protected by insurance containing such provisions, reserving, however, any
rights with respect to any excess of loss or injury over the amount recovered
by such insurance.
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<PAGE> 8
SECTION 7
Landlord's Covenants
Section 7.1. Quiet Enjoyment. Tenant, on paying the rent and
performing its obligations hereunder, shall peacefully and quietly have, hold
and enjoy the Premises throughout the Term without any manner of hindrance or
molestation from Landlord or anyone claiming under Landlord, subject, however,
to all the terms and provisions hereof.
Section 7.2. Exterior Common Areas and Facilities. Tenant shall
promptly remove all refuse or waste resulting from its operations. Tenant shall
clean, maintain and provide snowplowing for all parking areas, walks and
driveways on the Facility, subject to the provisions of Section 9.
Section 7.3. Electricity. Electricity furnished to the Tenant shall
be separately metered and all charges for electricity consumed on the Premises
will be billed directly to, and paid by, Tenant. The cost of any such electric
meter and the cost of installation, repair and replacement thereof shall be
borne by Tenant who shall pay such cost directly or reimburse Landlord for the
cost thereof within thirty (30) days after receipt of a statement therefor.
Landlord shall not in any way be liable or responsible to Tenant for any loss,
damage or expense which Tenant may sustain or incur if the quantity, character,
or supply of electricity is changed or is no longer available or suitable for
Tenant's requirements.
Section 7.4. Interruptions. Landlord shall not be liable to Tenant for
any compensation or reduction of rent by reason of inconvenience or annoyance
or for loss of business arising from power losses or shortages or from the
necessity of Landlord's entering the Premises for any of the purposes
authorized by this Lease or for repairing constructing, reconstructing,
demolishing or other activities on the Premises or any portion of the Facility.
In case Landlord is reasonably prevented or delayed from making any repairs,
alterations or improvements, or furnishing any service or performing any other
obligation to be performed on Landlord's part, Landlord shall not be liable to
Tenant therefor, nor shall Tenant be entitled to any abatement or reduction of
rent by reason thereof nor shall the same give rise to any claim by Tenant that
such failure constitutes actual or constructive, total or partial, eviction
from the Premises.
Landlord reserves the right to stop any service or utility system when
necessary by reason of accident or emergency or until necessary repairs have
been completed. Except in case of emergency repairs, Landlord will give Tenant
reasonable advance notice of any contemplated stoppage and will use reasonable
efforts to avoid unnecessary inconvenience to Tenant by reason thereof.
Landlord also reserves the right to institute such policies, programs
and measures as may be necessary or required to comply with applicable codes,
rules, regulations or standards. In so doing, Landlord shall make reasonable
efforts to avoid unnecessary inconvenience to Tenant by reason thereof.
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SECTION 8
Tenant's Covenants
Section 8.1. Use. Tenant shall use the Premises only for the Permitted
Uses and shall from time to time procure all licenses and permits necessary
therefor at Tenant's sole expense. Tenant shall not at any time allow any
supplier, vendor, subcontractor or other person or entity providing goods to
enter upon or make use of the Premises or Facility without such person or
entity first having made suitable contractual arrangements with Landlord and
provided certificates of insurance in amounts and coverages acceptable to
Landlord.
Section 8.2. Repair and Maintenance. Except as otherwise provided in
Sections 7 and 9, Tenant shall keep the Premises in good order, condition, and
repair and in at least as good order, condition and repair as they are in on
the Commencement Date or may be put in during the term, reasonable use and wear
only excepted. Tenant shall make all repairs and replacements and do all other
work necessary for the foregoing purposes whether the same may be ordinary or
extraordinary, foreseen or unforeseen. Tenant shall keep in a safe, secure and
sanitary condition all trash and rubbish temporarily stored at the Premises.
Section 8.3. Compliance with Law and Insurance Requirements. Tenant
shall be solely responsible for compliance with all applicable law, whether
Federal, State or municipal, in connection with its business and with its use of
the Facility and Berth and any installation Tenant may make of floats or ramps.
Landlord shall cooperate with Tenant in local licensing applications and issues.
Tenant shall make all repairs, alterations, additions or replacements to the
Premises required by any law or ordinance or any order or regulation of any
public authority arising from Tenant's use of the Premises and shall keep the
Premises equipped with all safety appliances so required. Tenant shall not dump,
flush, or in any way introduce any hazardous substances or any other toxic
substances into the septic, sewage or other waste disposal system serving the
Premises, or generate, store or dispose of hazardous substances in or on the
Premises or dispose of hazardous substances from the Premises to any other
location without the prior written consent of Landlord and then only in
compliance with the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
Section 6901 et seq., the Massachusetts Hazardous Waste Management Act, M.G.L.
c.21C, the Massachusetts Oil and Hazardous Material Release Prevention and
Response Act, M.G.L. c.21 E, and all other applicable codes, regulations,
ordinances and laws. Tenant shall notify Landlord of any incident which would
require the filing of a notice under Chapter 232 of the Acts of 1982 and shall
comply with the orders and regulations of all governmental authorities with
respect to zoning, building, fire, health and other codes, regulations,
ordinances or laws applicable to the Premises. "Hazardous substances" as used in
this Section shall mean "hazardous substances" as defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 et seq. and regulations adopted pursuant to such Act.
Landlord may, if it so elects, make any of the repairs, alterations,
additions or replacements referred to in this Section and Tenant shall
reimburse Landlord for the cost thereof on demand.
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Tenant will provide Landlord, from time to time upon Landlord's
request, with all records and information regarding any hazardous substance
maintained on the Premises by Tenant.
Landlord shall have the right to make such inspections as Landlord
shall reasonably elect from time to time to determine if Tenant is complying
with this Section.
Tenant shall comply promptly with the reasonable recommendations of
any insurer, foreseen or unforeseen, ordinary as well as extraordinary, which
may be applicable to the Premises by reason of Tenant's use thereof. In no
event shall any activity be conducted by Tenant on the Premises which may give
rise to any cancellation of any insurance policy or make any insurance
unobtainable. Tenant shall have the right to contest any such recommendation at
Tenant's sole cost and risk.
Section 8.4. Tenant's Work. Tenant shall not make any installations,
alterations, additions or improvements in or to the Premises without on each
occasion obtaining the prior written consent of Landlord, not to be
unreasonably withheld. Any such work so consented to by Landlord shall be
performed only in accordance with plans and specifications therefor approved by
Landlord. Tenant shall procure at Tenant's sole expense all necessary permits
and licenses before undertaking any work on the Premises and shall perform
all such work in a good and workmanlike manner employing materials of good
quality and so as to conform with all applicable zoning, building, fire, health
and other codes, regulations, ordinances and laws and with all applicable
insurance requirements. (If requested by Landlord, Tenant shall furnish to
Landlord prior to the commencement of any such work a bond or other security
acceptable to Landlord assuring that any work by Tenant will be completed in
accordance with the approved plans and specifications. Tenant shall keep the
Premises at all times free of liens for labor and materials. Tenant shall
employ for such work only contractors reasonably approved by Landlord and shall
require all contractors employed by Tenant to carry workers compensation
insurance in accordance with statutory requirements and comprehensive general
liability insurance covering such contractors, and naming Landlord and Tenant
as additional insureds, on or about the Premises in amounts at least equal to
the limits set forth in Section I and to submit certificates evidencing such
coverage to Landlord prior to the commencement of such work. Tenant shall save
Landlord harmless and indemnified from all injury, loss, claims or damage to
any person or property occasioned by or growing out of such work. Landlord may
inspect the work of Tenant at reasonable times and give notice of observed
defects.
Section 8.5. Indemnity. Tenant shall defend, with counsel approved by
Landlord, all actions against Landlord, any partner, trustee, stockholder,
officer, director, employee or beneficiary of Landlord, holders of mortgages
secured by the Facility and any other party having an interest in the Premises
("Indemnified Parties") with respect to, and shall pay, protect, indemnity and
save harmless, to the extent permitted by law, all Indemnified Parties from and
against, any and all liabilities, losses, damages, costs, expenses (including
reasonable attorneys' fees and expenses), causes of action, suits, claims,
demands or judgments of any nature arising from (a) injury to or death of any
person, or damage to or loss of property, occurring in the Premises or
connected with the use, condition or occupancy of any thereof unless caused by
the
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negligence or willful misconduct of Landlord or its servants or agents, (b)
violation of this Lease by Tenant or (c) any act, fault, omission, or other
misconduct of Tenant or its agents, contractors, licensees, sublessees or
invitees.
Section 8.6. Landlord's Right to Enter. Tenant shall permit Landlord
and its agents to enter into the Premises at reasonable times and upon
reasonable notice (except that in emergencies no notice shall be required) to
examine the Premises, make such repairs, replacements or construction as
Landlord may elect, without however any obligation to do so, or show the
Premises to prospective purchasers and lenders, and, during the last year of
the term, to show the Premises to prospective tenants and to keep affixed in
suitable places notices of availability of the Premises.
Section 8.8. Payment of Landlord's Cost of Enforcement. Tenant shall
pay, on demand, Landlord's expenses, including reasonable attorneys' fees,
incurred in the successful enforcement of any obligation of Tenant under this
Lease or in curing any material default by Tenant under this Lease as provided
in Section 10.4.
Section 8.9. Yield up. At the expiration of the term or earlier
termination of this Lease, Tenant shall surrender all keys to the Premises,
remove all of its trade fixtures and personal property in the Premises, remove
such installations and improvements made by Tenant as Landlord may request and
all Tenant's signs wherever located, repair all damage caused by such removal
and yield up the Premises (including all installations and improvements made by
Tenant which Landlord shall not request Tenant to remove) broom-clean and in
the same good order and repair in which Tenant is obliged to keep and maintain
the Premises under this Lease. Any property not so removed shall be deemed
abandoned and may be removed and disposed of by Landlord in such manner as
Landlord shall determine, and Tenant shall pay Landlord the entire cost and
expense incurred by it in effecting such removal and disposition and in making
any incidental repairs and replacements to the Premises and for use and
occupancy during the period after the expiration of the term and prior to
Tenant's performance of its obligations under this Section 8.9.
Section 8.10. Estoppel Certificate. Upon not less than fifteen (15)
business days prior notice by Landlord, Tenant shall execute, acknowledge and
deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect and that, except as stated therein,
Tenant has no knowledge of any defenses, offsets or counterclaims against its
obligations to pay the Annual Rent and Additional Rent and any other charges
and to perform its other covenants under this Lease (or, if there have been any
modifications that the same is in full force and effect as modified and stating
the modifications and, if there are any defenses, offsets or counterclaims,
setting them forth in reasonable detail), the dates to which the Annual Rent
and Additional Rent and other charges have been paid and a statement that
Landlord is not in default hereunder (or if in default, the nature of such
default, in reasonable detail). Any such statement delivered pursuant to this
Section 8.10 may be relied upon by any prospective purchaser or mortgagee of
the Facility.
Section 8.11. Landlord's Expenses Re Consents. Tenant shall reimburse
Landlord promptly on demand for all reasonable legal and other expenses
incurred by Landlord in connection with all requests by Tenant for consent or
approval hereunder.
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Section 8.12. Rules and Regulations. Tenant shall comply with such
reasonable Rules and Regulations as may be adopted from time to time by
Landlord.
Section 8.13. Holding over. Tenant shall vacate the Premises
immediately upon the expiration or sooner termination of this Lease. If Tenant
shall retain possession of the Premises or any part thereof after the
termination of the term without Landlord's express consent, Tenant shall pay
Landlord rent at triple the monthly rate specified in Section I for the time
Tenant so remains in possession and, in addition thereto, shall pay Landlord
for all damages, consequential as well as direct, sustained by reason of
Tenant's retention of possession. The provisions of this Section shall not
exclude Landlord's rights of reentry or any other right hereunder, including,
without limitation, the right to remove Tenant through summary proceedings for
holding over beyond the expiration of the term of this Lease.
Section 8.14. Assignment and Subletting. The Tenant shall not assign
or sublet the whole or any part of the Leased Premises without Landlord's prior
written consent, which consent shall not be unreasonably withheld.
Notwithstanding such consent, Tenant shall remain liable for the payment of all
rent and for full performance of the covenants and conditions of this Lease.
Any attempted assignment, transfer, mortgage, pledge grant of security
interest, sublease or other encumbrance, except with the prior written consent
thereto by Landlord, shall be void. No assignment, transfer, mortgage, grant of
security interest, sublease or other encumbrance, whether or not consented to,
and no indulgence granted by Landlord to any assignee or sublessee, shall in
any way impair the continuing primary liability (which after an assignment
shall be joint and several with the assignee) of Tenant hereunder, and no
consent in a particular instance shall be deemed to be a waiver of the
obligation to obtain Landlord's consent in any other case.
Section 8.15. Overloading and Nuisance. Tenant shall not injure,
overload, deface or otherwise harm the Premises, commit any nuisance, permit
the emission of any objectionable noise, vibration or odor, not in the ordinary
course of business or ordinary cruise ship use, make, allow or suffer any waste
or make any use of the Premises which is improper, offensive or contrary to any
law or ordinance or which will invalidate any of Landlord's insurance.
Section 8.16. Indemnification, Environmental Liability Notwithstanding
the existence of any insurance provided for in this Agreement, and without
regard to the policy limits of any such insurance, Tenant will protect,
indemnify, save harmless and defend SP (with counsel acceptable to SP) from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses), to the extent permitted by law, imposed upon or
incurred by or asserted against SP by reason of (a) any accident, injury to or
death of persons or loss of or damage to property occurring on or about the
Premises for which Landlord is not at fault, (b) any use, misuse, nonuse,
condition, maintenance or repair by Tenant of the Premises and (c) any failure
on the part of Tenant to perform or comply with any of the terms of this
Agreement. Any amounts which become payable by Tenant under this Paragraph
shall be paid within thirty (30) days after liability therefor on the part of
SP is determined by litigation or otherwise. Tenant, at its expense, shall
contest, resist and defend
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any such claim, action or proceeding asserted or instituted against SP or may
compromise or otherwise dispose of the same as Tenant sees fit. Nothing herein
shall be construed as indemnifying SP against its own negligence or willful
misconduct.
Landlord represents and warrants to Tenant, to the best of his
knowledge as of the date hereof and throughout the Term of this Agreement, that
(a) no Hazardous Substances have been or are being generated, stored, utilized,
heated, released, transported, or otherwise managed or disposed of on, under or
from the Premises by Landlord (whether or not in reportable quantities), (b)
Landlord has not received any notice from the Massachusetts Department of
Environmental Protection, the United States Environmental Protection Agency or
any other federal, state or local governmental agency or authority claiming
that (i) the Premises or any use thereof violates or (ii) Landlord has violated
any environmental law, (c) Landlord has not incurred any liability to the
Commonwealth of Massachusetts, the United States of America or any other
federal, state and/or local governmental agency or authority under any
environmental law, and (d) no lien on the Premises has arisen under any
environmental law.
Tenant further covenants that Tenant (a) shall not release, or permit
any release or threat of release, of any Hazardous Substances Substances or
Petroleum Product on the Premises, (b) shall not generate or permit any
Hazardous Substances to be generated on the Premises, (c) shall not store or
utilize or permit any Hazardous Substances to be stored or utilized on the
Premises, (d) shall not dispose of or permit any Hazardous Substances
Substances or Petroleum Product to be disposed of on the Premises, (e) shall
not permit any lien under any environmental law to attach to the Premises and
(vi) shall use the Premises and/or shall cause the Premises to be used in
accordance with the environmental laws and all other legal requirements.
Without limiting any other indemnification agreement contained in this
Agreement or any other documents between the parties, Tenant shall and hereby
agrees to indemnity, exonerate, defend (with counsel acceptable to SP) and hold
SP harmless from and against any claim, liability, loss, cost, damage or
expense, including, without limitation, environmental consultants' fees and
expenses and attorneys' fees and expenses, arising out of any breach of any of
the representations, warranties, conditions and covenants of this paragraph
(whether before or after foreclosure proceedings are commenced or entry for the
purpose of foreclosure is made) and in connection with the enforcement of the
aforesaid indemnification agreement. Notwithstanding the foregoing, SP shall
have the option of conducting its defense with counsel of SP's choice. So long
as this Agreement shall remain in force and effect, SP shall have the right,
but not the obligation, to enter upon the Premises, to expend funds to perform
environmental testing and to cure any breach by Tenant of the representations,
warranties, conditions and covenants of this Paragraph, and any amounts paid or
advanced by SP and all costs and expenses incurred in connection therewith
(including, without limitation, environmental consultants' fees and expenses
and attorneys' fees and expenses), with interest thereon at the Wall Street
Journal Prime Rate, shall be a demand obligation of Tenant to SP, to the extent
permitted by law.
Tenant shall provide SP with prompt written notice (a) upon Tenant's
becoming aware of any release or threat of release of any Hazardous Substances
or Petroleum Product upon, under or from the Premises (whether or not caused by
Tenant), (b) upon Tenant's receipt of any notice,
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<PAGE> 14
including, without limitation, any notice of violation, from any federal,
state, municipal or other governmental agency or authority pursuant to the
provisions of any environmental law and (c) upon Tenant's obtaining knowledge
of any incurrence of any expense by any governmental authority in connection
with the assessment, containment or removal of any Hazardous Substances
Substances or Petroleum Product (i) located upon or under the Premises, (ii)
emanating from the Premises or (iii) improperly stored, transported, disposed
of or released by Tenant (whether or not on, from or about the Premises).
SP shall indemnify, save harmless and defend Tenant from and against
all liabilities, obligations, claims, damages, penalties, causes of action,
costs and expenses imposed upon or incurred by or asserted against Tenant as a
result of the negligence or willful misconduct of SP. Tenant's or SP's
liability under the provisions of this Paragraph arising during the Term hereof
shall survive any termination of this Agreement. Tenant shall have no
responsibility or liability for any conditions existing at the Facility at the
Term Commencement Date or which do not arise out of Tenant's conduct.
All dock slips leases at the Marina shall include a hazardous waste indemnity.
The dock slip lessees shall be responsible for any hazardous substance or
petroleum product releases caused by them, and that is not in association with
any negligent or willful acts of the Tenant.
Section 8.17. Signage. Tenant shall have the right subject to the
approval of the City of Barnstable and Landlord to construct at Tenant's cost
and expense mutually acceptable signage at the Facility.
SECTION 9
Casualty or Taking
Section 9.1. Termination. In the event that greater than twenty-five
percent (25%) of the Premises shall be taken by any public authority or for any
public use or destroyed by the action of any public authority (a "Taking") then
this Lease may be terminated by either Landlord or Tenant effective on the
effective date of the Taking In the event that the Premises shall be destroyed
or damaged by fire or casualty (a "Casualty") and if Landlord's architect,
engineer or contractor shall determine that it will require in excess of one
hundred eighty (180) days from the date of the Casualty to restore the
Premises, this Lease may be terminated by either Landlord or Tenant by notice
to the other within thirty (30) days after the casualty. In the case of a
Taking, such election, which may be made notwithstanding the fact that
Landlord's entire interest may have been divested, shall be made by the giving
of notice by Landlord or Tenant to the other within thirty (30) days after
Landlord or Tenant, as the case may be, shall receive notice of the Taking.
Section 9.2. Restoration. In the event of a Taking or a Casualty,
unless Landlord or Tenant shall exercise an election to terminate provided in
Section 9.1, this Lease shall continue in force and a just proportion of the
Annual Rent and other charges hereunder, according to the nature and extent of
the damages sustained by the Premises, shall be abated until the Premises, or
what may remain thereof shall be put by Landlord in proper condition for use
subject to zoning
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<PAGE> 15
and building laws or ordinances then in existence, which, unless Landlord or
Tenant has exercised its option to terminate pursuant to Section 9.1, Landlord
covenants to do with reasonable diligence at Landlord's expense. Landlord's
obligations with respect to restoration shall not require Landlord to expend
more than the net proceeds of insurance recovered or damages awarded for such
Casualty or Taking and made available for restoration by Landlord's mortgagees.
"Net proceeds of insurance recovered or damages awarded" refers to the gross
amount of such insurance or damages less the reasonable expenses of Landlord in
connection with the collection of the same, including, without limitation, fees
and expenses for legal and appraisal services.
Section 9.3. Award. Irrespective of the form in which recovery may be
had by law, all rights to damages or compensation shall belong to Landlord in
all cases. Tenant hereby grants to Landlord all of Tenant's rights to such
damages and compensation and covenants to deliver such further assignments
thereof as Landlord may from time to time request. Nothing contained herein
shall be construed to prevent Tenant from prosecuting a claim for the value of
any of Tenant's fixtures or personal property and for relocation expenses.
Tenant shall maintain the right to any damages related to its business
or operations that Landlord can not claim, and do not diminish any of the
Landlord's claims for damages.
SECTION 10
Default
Section 10.1. Events of Default.
If:
(a) Tenant shall default in the performance of any of its obligations to pay
the Annual Rent, Additional Rent or any other sum payable hereunder and if such
default shall continue for five (5) days after written notice from Landlord
designating such default;
(b) within fifteen (15) days after written notice from Landlord to Tenant
specifying any other default or defaults Tenant has not commenced diligently to
correct the default or defaults so specified or has not thereafter diligently
pursued such correction to completion;
(c) any assignment for the benefit of creditors shall be made by Tenant;
(d) Tenant's leasehold interest shall be taken on execution or other process of
law in any action against Tenant;
(e) a lien or other involuntary encumbrance is filed against Tenant's leasehold
interest and is not discharged or efforts undertaken and diligently pursued,
within ten (10) days thereafter;
(f) a petition is filed by Tenant for liquidation, or for reorganization or an
arrangement or any other relief under any provision of the Bankruptcy Code as
then in force and effect; or
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<PAGE> 16
(g) an involuntary petition under any of the provisions of said Bankruptcy Code
is filed against Tenant and such involuntary petition is not dismissed within
thirty (30) days thereafter; or
(h) Tenant shall abandon the berth or vacate the berth for more than twenty
(20) days without prior written notice to Landlord other than for winter lay-up
or winter use elsewhere; then, and in any of such cases, Landlord and the
agents and servants of Landlord lawfully may, in addition to and not in
derogation of any remedies for any preceding breach of covenant, immediately or
at any time thereafter and without demand or notice and with or without process
of law (forcibly, if necessary) enter into and upon the Premises or any part
thereof in the name of the whole, or mail a notice of termination addressed to
Tenant, and repossess the same as of Landlord's former estate and expel Tenant
and those claiming through or under Tenant and remove its and their effects
without being deemed guilty of any manner of trespass and without prejudice to
any remedies which might otherwise be used for arrears of rent or prior breach
of covenant, and upon such entry or mailing as aforesaid this Lease shall
terminate, Tenant hereby waiving all statutory rights (including, without
limitation, rights of redemption, if any) to the extent such rights may be
lawfully waived. Landlord, without notice to Tenant, may store Tenant's
effects, and those of any person claiming through or under Tenant at the
expense and risk of Tenant, and, if Landlord so elects, may sell such effects
at public auction or private sale and apply the net proceeds to the payment of
all sums due to Landlord from Tenant, if any, and pay over the balance, if any,
to Tenant.
Section 10.2. Remedies. In the event that this Lease is terminated
under any of the provisions contained in Section 10.1, Tenant shall pay
forthwith to Landlord, as compensation, the excess of the total rent reserved
for the residue of the Term over the fair market rental value of the Premises
for the residue of the term. In calculating the rent reserved there shall be
included, in addition to the Annual Rent and Additional Rent, the value of all
other considerations agreed to be paid or performed by Tenant during the
residue. As additional and cumulative obligations after any such termination,
Tenant shall also pay punctually to Landlord all the sums and shall perform all
the obligations which Tenant covenants in this Lease to pay and to perform in
the same manner and to the same extent and at the same time as if this Lease
had not been terminated. In calculating the amounts to be paid by Tenant
pursuant to the preceding sentence, Tenant shall be credited with any amount
paid to Landlord pursuant to the first sentence of this Section 10.2 and also
with the net proceeds of any rent obtained by Landlord by reletting the
Premises, after deducting all Landlord's reasonable expenses in connection with
such reletting, including, without limitation, all repossession costs,
brokerage commissions, fees for legal services and expenses of preparing the
Premises for such reletting, it being agreed by Tenant that Landlord may (i)
relet the Premises or any part or parts thereof for a term or terms which may
at Landlord's option be equal to or less than or exceed the period which would
otherwise have constituted the balance of the term hereof and may grant such
concessions as Landlord in its reasonable judgment considers advisable or
necessary to relet the same and (ii) make such alterations and repairs as
Landlord in its reasonable judgment considers advisable or necessary to relet
the same, and no action of Landlord in accordance with the foregoing or failure
to relet or to collect rent under reletting shall operate or be construed to
release or reduce Tenant's liability as aforesaid.
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Section 10.3. Remedies Cumulative. Except as otherwise expressly
provided herein, any and all rights and remedies which Landlord may have under
this Lease and at law and equity shall be cumulative and shall not be deemed
inconsistent with each other, and any two or more of all such rights and
remedies may be exercised at the same time to the greatest extent permitted by
law.
Section 10.4. Landlord's Right to Cure Defaults. At any time following
ten (10) days' prior written notice to Tenant (except in cases of emergency
when no notice shall be required), Landlord may (but shall not be obligated to)
cure any default by Tenant under this Lease, and whenever Landlord so elects,
all costs and expenses incurred by Landlord, including reasonable attorneys'
fees, in curing a default shall be paid by Tenant to Landlord as Additional
Rent on demand, together with interest thereon at the rate provided in Section
10.7 from the date incurred by Landlord to the date of payment by Tenant.
Section 10.5. Effect of Waivers of Default. Any consent or permission
by Landlord to any act or omission which otherwise would be a breach of any
covenant or condition herein, or any waiver by Landlord of the breach of any
covenant or condition herein, shall not in any way be held or construed (unless
expressly so declared) to operate so as to impair the continuing obligation of
any covenant or condition herein, or otherwise operate to permit the same or
similar acts or omissions except as to the specific instance. The failure of
Landlord to seek redress for violation of or to insist upon the strict
performance of any covenant or condition of this Lease shall not be deemed a
waiver of such violation nor prevent a subsequent act, which would have
originally constituted a violation, from having all the force and effect of an
original violation. The receipt by Landlord of rent with knowledge of the
breach of any covenant of this Lease shall not be deemed to have been a waiver
of such breach by Landlord or of any of Landlord's remedies on account thereof,
including its right of termination for such default.
Section 10.6. No Accord and Satisfaction. No acceptance by Landlord of
a lesser sum than the Annual Rent, Additional Rent or any other sum then due
shall be deemed to be other than on account of the earliest installment of such
rent or charge due, unless Landlord elects by notice to Tenant to credit such
sum against the most recent installment due. Any endorsement or statement on
any check or any letter accompanying any check or payment as rent or other
charge shall not be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such installment or pursue any other remedy under this Lease or
otherwise.
Section 10.7. Interest on Overdue Sums. If Tenant shall fail to pay
Annual Rent, Additional Rent or other sums payable by Tenant to Landlord by the
due date thereof (i.e., the due date disregarding any requirement of notice
from Landlord or any period of grace allowed to Tenant), the amount so unpaid
shall bear interest at a rate (the "Delinquency Rage") of 1-1/2% charge per
month on overdue accounts of thirty (30) days which is an annual rate of
eighteen (18%) percent from time to time in effect commencing with the due date
and continuing through the day on which payment of such delinquent payment with
interest thereon is paid. If such rate is in excess of any maximum interest
rate permissible under applicable law, the Delinquency Rate shall be the
maximum interest rate permissible under applicable law.
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SECTION 11
Mortgages
Section 11.1. Subordination. Unless the holder of any such mortgage
otherwise elects at any time, this Lease is subject and subordinate to any
mortgages and to all renewals, modifications, consolidations, replacements and
extensions of any of the foregoing or of substitutions therefor or any other
forms or methods of financing or refinancing which may now or hereafter affect
the Facility whether now in use or not and any instruments executed for such
purposes or hereafter executed by the owners of the Facility. Tenant agrees
upon demand to execute, acknowledge and deliver to the owners of the Facility,
without expense to them, any instruments that may be necessary or proper to
confirm this subordination of this Lease and of all of the rights herein
contained to the lien or liens created by any such instruments. If Tenant shall
fail at any time to execute and deliver any such subordination instruments upon
request, the mortgagors in any such new mortgage or mortgages or the obligors
in any form of refinancing as provided above, in addition to any other remedies
available to them in consequence of such default, may execute, acknowledge, and
deliver such subordination instruments as the attorney-in fact of Tenant and in
Tenant's name, place and stead, and Tenant hereby makes, constitutes and
irrevocably appoints such mortgagors or obligors as its attorney-in-fact for
that purpose. Any secured lender as aforesaid may, at its option, elect to make
this Lease superior to its mortgage or other instrument referred to herein by
written notice thereof to Tenant. No such subordination provided for herein
shall be valid without the consent of all prior lien owners, if there be any.
Upon request of Tenant, Landlord agrees to request of any mortgagee that it
enter into a Subordination, Nondisturbance and Attornment Agreement with
Tenant. Tenant agrees to execute such agreement in the customary form required
by such mortgagee.
Section 11.2. Nondisturbance and Attornment Agreement with Tenant.
Tenant agrees to execute such agreement in the customary form required by such
mortgagee.
SECTION 12
Miscellaneous Provisions
Section 12.1. Notices from One Party to the Other. All notices
required or permitted hereunder shall be in writing and addressed, if to
Tenant, at the Address of Tenant or such other address as Tenant shall have
last designated by notice in writing to Landlord and, if to Landlord, at the
Address of Landlord or such other address as Landlord shall have last
designated by notice in writing to Tenant. Any notice shall be deemed duly
given when mailed, by registered or certified mail, postage and registration or
certification charges prepaid, addressed as above.
Section 12.2. Quiet Enjoyment. Landlord agrees that upon Tenant's
paying the rent and performing and observing the terms, covenants, conditions
and provisions on its part to be performed and observed, Tenant shall and may
peaceably and quietly have, hold and enjoy the Premises during the term without
any manner of hindrance or molestation from Landlord or anyone claiming under
Landlord, subject, however, to the terms of this Lease.
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<PAGE> 19
Section 12.3. Lease Not to Be Recorded; Notice of Lease. Tenant agrees
that it will not record this Lease. If the Term of this Lease, including
options, exceeds seven (7) years, Landlord and Tenant agree that, on the
request of either, they will execute and record a notice of lease in form
reasonably acceptable to Landlord.
Section 12.4. Bind and Inure; Limitation of Landlord's Liability. The
obligations of this Lease shall run with the land, and this Lease shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. No owner of the Premises shall be liable
under this Lease except for breaches of Landlord's obligations occurring while
owner of the Premises. The obligations of Landlord shall be binding upon the
assets of Landlord which comprise the Premises but not upon other assets of
Landlord. No individual partner, trustee, stockholder, officer, director,
employee or beneficiary of Landlord shall be personally liable under this Lease
and Tenant shall look solely to Landlord's interest in the Premises in pursuit
of its remedies upon an event of default hereunder, and the general assets of
Landlord and its partners, trustees, stockholders, officers, employees or
beneficiaries of Landlord shall not be subject to levy, execution or other
enforcement procedure for the satisfaction of the remedies of Tenant.
Section 12.5. Acts of God. In any case where either party hereto is
required to do any act, delays caused by or resulting from acts of God, war,
civil commotion, fire, flood or other casualty. labor difficulties, shortages
of labor, materials or equipment, government regulations, unusually severe
weather, or other causes beyond such party's reasonable control shall not be
counted in determining the time during which work shall be completed, whether
such time be designated by a fixed date, a fixed time or a "reasonable time,
"and such time shall be deemed to be extended by the period of such delay.
Section 12.6. Landlord's Default. Landlord shall not be deemed to be
in default in the performance of any of its obligations hereunder unless it
shall fail to perform such obligations and unless within thirty (30) days after
notice from Tenant to Landlord specifying such default Landlord has not
commenced diligently to correct the default so specified, refused to perform,
or has not thereafter diligently pursued such correction to completion. Tenant
shall have no right, for any default by Landlord, to offset or counterclaim
against any rent due hereunder.
Section 12.7. Indemnification by Landlord. Landlord agrees to
indemnify and hold Tenant harmless from and against, and to reimburse Tenant
with respect to, any and all claims, demands, causes of action, losses,
damages, liabilities, costs, and expenses (including reasonable attorneys' fees
and court costs) asserted against or incurred by Tenant by reason of or arising
out of (a) the failure of Landlord to perform any material obligation required
by this Lease to be performed by Landlord or (b) any liability to any third
party arising from the act or neglect of Landlord.
Section 12.8. Brokerage. Tenant warrants and represents to Landlord
that it has had no dealings with any broker or agent in connection with this
Lease other than the Broker(s) set forth in Section I and covenants to defend
with counsel approved by Landlord, hold harmless and indemnity Landlord from
and against any and all costs, expenses (including attorneys' fees) or
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<PAGE> 20
liability arising from any compensation, commissions and charges claimed by any
broker or agent other than the Broker(s) set forth in Section 1. Tenant shall
not be obligated to pay any fees to Mark Doran. Tenant shall be obligated to
pay certain fees to Edward O'Sullivan.
Section 12.9. Miscellaneous. This Lease shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts.
There are no prior oral or written agreements between Landlord and Tenant
affecting this Lease.
WITNESS the execution hereof under seal as of the day and year first
above written.
LANDLORD.
Shoestring Properties Limited Partnership
BY: /s/
-----------------------------
TENANT
Leisure Express Cruise, LLC.
BY: /s/
-----------------------------
20
<PAGE> 21
Exhibit A
Facility Description
The land with the buildings and improvements thereon, situated in
Barnstable (Hyannis), Barnstable County, Massachusetts as follows:
SOUTHERLY by Lewis Bay
WESTERLY by School Street
NORTHERLY by South Street; and
EASTERLY by land now or late of Isabel Crowell, widow of Alphonso Crowell.
Parcel 1 being the same premises shown on a plan of land entitled "Plan of Land
in Hyannis-Barnstable, Mass. Belonging to Lewis Bay Lodge, Inc., Scale 1 in. =
50 ft. Dec 20, 1961, John C. O'Toole, Surveyor" and recorded with said Deeds in
Plan Book 167 Page 41, to which plan reference is made for a more particular
description of the said parcel.
Together with all littoral rights appurtenant thereto.
Together with all rights over the streets and ways as shown on said plan in
common with all others lawfully entitle to use the same, for all purposes for
which streets or ways are commonly used in the Town of Barnstable,
Massachusetts.
21
<PAGE> 22
Exhibit B
Premises Description
The premises include the Restaurant and parking area located at 53 South
Street, Hyannis, Massachusetts. The premises include apartments above the
restaurant. Tenants have complete control of these apartments. Tenants are
responsible to keep the coastal bank clear.
22
<PAGE> 1
EXHIBIT 23.0
INDEPENDENT AUDITORS' REPORT
We consent to the use in the Registration Statement of Leisure Time Casinos &
Resorts, Inc. on Form S-1 of our report dated August 19, 1998 on the financial
statements of Leisure Time Casinos & Resorts, Inc. appearing in the Prospectus,
which is part of the Registration Statement.
We consent to the use in the Registration Statement of Leisure Time Casinos &
Resorts, Inc. on Form S-1 of our report dated August 15, 1997 on the financial
statements of Leisure Time Technology appearing in the Prospectus, which is part
of the Registration Statement.
We consent to the use in the Registration Statement of Leisure Time Casino's &
Resorts, Inc. on Form S-1, of our report dated April 8, 1999 on the financial
statements of Florida Casino Cruises, Inc. appearing in the Prospectus which is
part of the Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
Ehrhardt Keefe Steiner & Hottman PC
April 30, 1999
Denver, Colorado
<PAGE> 1
EXHIBIT 23.2
[BEAR STEARNS LETTERHEAD]
April 29, 1999
Mr. Robert W. Walter, ESQ
Berliner Zisser Walter & Gallegos
One Norwest Center
Suite 4700
1700 Lincoln Street
Denver, Colorado 80203-4547
Mr. Walter
In response to your request to make limited references to Bear Stearns' Global
Gaming Almanac, Bear Stearns consents to the use of its estimates and statistics
from the Global Gaming Almanac that will be included in the Registration
Statement on Form S-1, filed by Leisure Time Casinos & Resorts.
If you have any further questions, please do not hesitate to call us at
212-272-4320.
Sincerely
Jason N. Ader
Senior Managing Director
Gaming, Lodging & Leisure Equity Research
Bear Stearns, & Co. Inc.
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below constitutes and appoints Alan
N. Johnson and Elden W. Rance, or either of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him in his name, place and stead, in his capacity as an
officer, director, or both of Leisure Time Casinos & Resorts, Inc., a Colorado
corporation ("Company"), to sign the Company's Registration Statement on Form
S-1 and any and all amendments thereto (including post-effective amendments),
and to file the same with the United States Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact or agents or their substitute or substitutes, may do or cause
to be done by virtue hereof.
Date: April 16, 1999
/s/ Gerald J. Boyle
------------------------------------
Gerald J. Boyle
<PAGE> 2
POWER OF ATTORNEY
The person whose signature appears below constitutes and appoints Alan
N. Johnson and Elden W. Rance, or either of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him in his name, place and stead, in his capacity as an
officer, director, or both of Leisure Time Casinos & Resorts, Inc., a Colorado
corporation ("Company"), to sign the Company's Registration Statement on Form
S-1 and any and all amendments thereto (including post-effective amendments),
and to file the same with the United States Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact or agents or their substitute or substitutes, may do or cause
to be done by virtue hereof.
Date: April 16, 1999
/s/ R. Thomas Klingel
------------------------------------
R. Thomas Klingel
<PAGE> 3
POWER OF ATTORNEY
The person whose signature appears below constitutes and appoints Alan
N. Johnson and Elden W. Rance, or either of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him in his name, place and stead, in his capacity as an
officer, director, or both of Leisure Time Casinos & Resorts, Inc., a Colorado
corporation ("Company"), to sign the Company's Registration Statement on Form
S-1 and any and all amendments thereto (including post-effective amendments),
and to file the same with the United States Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact or agents or their substitute or substitutes, may do or cause
to be done by virtue hereof.
Date: April 16, 1999
/s/ Richard D. Sly
------------------------------------
Richard D. Sly
<PAGE> 4
POWER OF ATTORNEY
The person whose signature appears below constitutes and appoints Alan
N. Johnson and Elden W. Rance, or either of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him in his name, place and stead, in his capacity as an
officer, director, or both of Leisure Time Casinos & Resorts, Inc., a Colorado
corporation ("Company"), to sign the Company's Registration Statement on Form
S-1 and any and all amendments thereto (including post-effective amendments),
and to file the same with the United States Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact or agents or their substitute or substitutes, may do or cause
to be done by virtue hereof.
Date: April 16, 1999
/s/ Lester E. Bullock
------------------------------------
Lester E. Bullock
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