Exhibit 10.1
FIRST AMENDED AND RESTATED FORBEARANCE AGREEMENT
This First Amended and Restated Forbearance Agreement (this "Forbearance
Agreement"), which, except as set forth below, amends, restates, and modifies
that certain Forbearance Agreement dated March 22, 2006 (the "Original
Forbearance") by and among the Lender and the Credit Parties referred to below,
is entered into as of June 1, 2006, by and among (i) PDS GAMING CORPORATION, a
Minnesota corporation, in its capacity as lender (together with its successors
and assigns, the "Lender"); (ii) Cruise Holdings I, LLC, a Nevada limited
liability company ("Cruise I"); (iii) Cruise Holdings II, LLC, a Nevada limited
liability company ("Cruise II"); (iv) Royal Star Entertainment, LLC, a Delaware
limited liability company ("RSE"); (v) Riviera Beach Entertainment, LLC, a
Delaware limited liability company ("RBE"); (vi) ITG Vegas, Inc., a Nevada
corporation ("ITGV"); and (vii) ITG Palm Beach, LLC, a Delaware limited
liability company ("ITGPB" and together with Cruise I, Cruise II, RSE, RBE and
ITGV, individually, and collectively referred to as the "Borrower"); (viii) Palm
Beach Maritime Corporation, a Delaware corporation ("PBM"); (ix) Palm Beach
Empress, Inc., a Delaware corporation ("PBE"); (x) International Thoroughbred
Gaming Development Corporation, a New Jersey corporation ("ITGD"); and (xi)
International Thoroughbred Breeders, Inc., a Delaware corporation ("ITB" and
together with PBM, PBE and ITGD, individually, and collectively referred to as
"Guarantor", Borrower and Guarantor are collectively known as the "Credit
Parties"). Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Loan Agreement (as defined
below).
PRELIMINARY STATEMENTS
A. The Credit Parties are parties to that certain Loan and Security
Agreement, dated as of June 30, 2005 (as amended, restated, supplemented or
otherwise modified from time to time, the "Loan Agreement"), pursuant to which,
among other things, the Lender has made a loan (the "Loan") to Borrower in the
aggregate principal amount of Twenty-Nine Million Three Hundred Thirteen
Thousand Eight Hundred Eighty-eight and 96/100 Dollars ($29,313,888.96). The
current principal amount of the Loan, adjusted to reflect interim payments and
the terms of the Original Forbearance, is Twenty-Eight Million Nine Hundred
Ninety-Nine Thousand Two Hundred Ten and 7/100 Dollars ($28,999,210.07).
B. Pursuant to the Loan Agreement and that certain Guaranty Agreement dated
as of June 30, 2005 by and among Lender and Guarantor, the Guarantors agreed to
be unconditionally liable for the payment of all of the Borrower's obligations
under the Loan Agreement and the other Loan Documents.
C. Lender and the Credit Parties entered into the Original Forbearance on
March 22, 2006 in order to provide the Credit Parties with an opportunity to
address and remedy the Current Events of Default described in the Original
Forbearance. The Credit Parties have failed to comply with their obligations
under the Original Forbearance and are in default thereunder because they:
(i) have failed to make the lease and interest payments required to be
made pursuant to Section 4 thereof, and
(ii) have made a prohibited Restricted Payment.
The Lender asserts (but the Credit Parties dispute) that they have failed
to use their best efforts to sell or finance the Big Easy Vessel and the
Turnberry Note as required by Section 8 thereof (the Original Forbearance
defaults are further described on Schedule I-A).
D. Events of Default have occurred and are continuing under the Loan
Agreement by reason of the acts or omissions of the Credit Parties, including:
(i) their failure to make any of the principal or interest payments
required to be made thereunder from and after January 10, 2006, and
(ii) the failure to comply with certain financial covenants thereunder
from and after October 30, 2005 (the Loan Agreement defaults are further
described on Schedule I-B attached hereto).
The defaults and events of default described in Paragraphs C and D are
referred to herein as the "Specific Loan and Forbearance Events of
Default."
E. The Specific Loan and Forbearance Events of Default exist and remain
uncured as of the date hereof.
F. In addition to the Specific Loan and Forbearance Events of Default, one
or more Defaults or Events of Default may occur as a result of the events and
circumstances described on Schedule II to this Forbearance Agreement (the
"Potential Loan Defaults").
G. By reason of the occurrence of those Specific Loan and Forbearance
Events of Default that have existed since October 31, 2005, the unpaid principal
and overdue interest owing to the Lender under the Loan Agreement have been
bearing interest at the default rate of interest as provided in Section 4(b) of
the Loan Agreement. The total amount of unpaid default interest due and owing to
the Lender under the Loan Agreement is Three Million Two Thousand Two Hundred
Seventy-Four and 35/100 Dollars ($3,002,274.35), as of June 1, 2006.
H. The Credit Parties agree and acknowledge that (i) as of June 1, 2006,
the outstanding principal amount of the Obligations owing under the Loan
Agreement is Thirty-One Million Eight Hundred Thirty-Five Thousand Six Hundred
Eighty-Eight and 32/100 Dollars ($31,835,688.32), including accrued default
interest, but excluding continuing accruing interest thereon until full payment
thereof, costs, fees and other expenses payable by the Credit Parties under the
Loan Agreement and the other Loan Documents (the "Loan Forbearance Balance"),
and (ii) the Obligations are not subject to offset, reduction or counterclaim by
any Credit Party or otherwise.
I. The Borrower and the Guarantors acknowledge and agree that as a result
of the Specific Loan and Forbearance Events of Default, the Lender has the right
to exercise all of its rights and remedies under the Loan Agreement, together
with any and all documents executed by the Credit Parties in any way related to
the Loan Agreement (collectively, the "Loan
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Documents") including, without limitation, the right to accelerate and
immediately demand payment in full of the Obligations and to foreclose on the
Collateral.
J. PDS, ITGV and ITGPB are parties to (i) that certain Master Lease
Agreement dated as of July 6, 2004 (the "PB Master Lease"), (ii) Lease Schedule
No. T3 dated as of July ▇, ▇▇▇▇ ("▇▇▇▇▇▇▇▇ ▇▇"), (▇▇▇) Lease Schedule No. T4
dated as of July 6, 2004 ("Schedule T4"), (iv) Lease Schedule No. T5 dated as of
July 6, 2004 ("Schedule T5," and collectively with the PB Master Lease, Schedule
T3 and Schedule T4, the "PB Lease"). PDS and RSE are parties to (i) that certain
Master Lease Agreement dated as of January 6, 2005 (the "RSE Master Lease") and
(ii) Lease Schedule No. 1 dated as of January 6, 2005 ("Schedule 1," and
together with the RSE Master Lease, the "RSE Lease"). The PB Lease and the RSE
Lease are together referred to as the "Leases".
K. Events of Default have occurred under the Leases by reason of the acts
or omissions of RSE, ITGV and ITGPB described on Schedule I-C attached hereto
(the "Specific Lease Events of Default").
L. The Specific Lease Events of Default exist and remain uncured as of this
date.
M. In addition to the Specific Lease Events of Default, one or more
Defaults or Events of Default may occur under the Leases as a result of the
events and circumstances described on Schedule III to this Forbearance
Agreement. The Specific Lease Events of Default and the Specific Loan and
Forbearance Events of Default are collectively referred to herein collectively
as the "Specific Events of Default."
N. The Credit Parties agree and acknowledge that by reason of the
occurrence of the Specific Lease Events of Default, pursuant to the terms of the
Leases, the Lender is entitled to terminate the Leases and to repossess all of
the equipment leased thereunder.
O. The Credit Parties agree and acknowledge that were the Lender to
terminate the Leases, the Lender would be entitled to the payment of termination
damages in the amount of Two Million Seven Hundred Seventy-Five Thousand Five
Hundred Seventy and 04/100 Dollars ($2,775,570.04), as of June 1, 2006,
exclusive of costs and other expenses payable by the applicable Credit Parties
under the Leases (the "Lease Forbearance Balance," and together with the Loan
Forbearance Balance, the "Forbearance Balance"). The Leases have not been
terminated as of the date hereof. The Credit Parties agree and acknowledge that
(i) as of June 1, 2006, the outstanding amount of the Forbearance Balance is
Thirty-Four Million Seven Hundred Seventy-Seven Thousand One Hundred Fourteen
and 46/100 Dollars ($34,777,114.46), exclusive of continuing accruing interest
and late fees thereon until full payment thereof, costs, fees and other expenses
payable by the Credit Parties under the Loan Agreement, and (ii) the Forbearance
Balance is not subject to offset, reduction or counterclaim by any Credit Party
or otherwise.
P. As a result of the occurrence and continuation of the Specific Lease
Events of Default, pursuant to the Leases, the Credit Parties owe late payment
fees of Eight
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Thousand Five Hundred Thirteen and 40/100 Dollars ($8,513.40) to the Lender, as
of June 1, 2006. Such late payment fees will continue to be applicable to missed
Lease payments after the date hereof (including during the Second Forbearance
Period) and shall be payable at a rate of One Thousand Seven Hundred Two and
68/100 Dollars ($1,702.68) per month.
Q. On March 22, 2006, following the request made by the Credit Parties to
the Lender to agree to an Initial Forbearance Period (as defined below), the
Credit Parties and the Lender entered into the Original Forbearance. Pursuant to
the terms and conditions of the Original Forbearance, the Lender and the Credit
Parties agreed that the Lender would forbear from exercising its rights and
remedies under the Loan Documents and the Leases, in consideration of, among
other things, the Credit Parties' agreement to take certain actions during the
period from the effective date of the Original Forbearance until the earlier of
May 31, 2006 or a Forbearance Default (as defined in the Original Forbearance)
(hereafter, the "Initial Forbearance Period").
R. Despite the agreement of the Credit Parties to take certain actions
during the Initial Forbearance Period, as more fully described in the Original
Forbearance, the Credit Parties, as applicable, failed to, or failed to use
their best efforts to, take the following actions, all of which were designed to
maximize the value of the Collateral:
(i) Sale (or financing pursuant to a Non-Recourse Financing) of the
Big Easy Vessel in exchange for cash proceeds of not less than $15,000,000,
as described in Section 8(h) of the Original Forbearance;
(ii) Sale (or financing pursuant to a Non-Recourse Financing) of the
Turnberry Note in exchange for cash proceeds of not less than $6,500,000,
as described in Section 8(h) of the Original Forbearance; and
(iii) Reduction of Restricted Payments to Affiliates to an amount not
to exceed $25,000 per week, as described in Section 8(g) of the Original
Forbearance.
S. The Initial Forbearance Period expired as of May 31, 2006, and the
Credit Parties acknowledge and agree that the Lender (inclusive of all of the
Lender Parties) performed all of its obligations under the Original Forbearance.
T. The Credit Parties have now requested that the Lender extend the
forbearance period and agree to forbear from exercising certain of its rights
and remedies against Borrower, the other Credit Parties (as applicable), and the
Collateral with respect to the Specific Events of Default, including, but not
limited to, the Lender's rights to (i) accelerate and immediately demand payment
in full of the Obligations under the Loan Agreement, (ii) foreclose on the
Collateral, and (iii) terminate the Leases and repossess the leased equipment
thereunder. The Lender has agreed to such forbearance, subject to the terms and
conditions of this Forbearance Agreement.
U. Borrower has requested that the Lender grant a deferment with respect to
payment of the Lease, principal and interest payments during the Deferment
Period and, subject
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to the terms and conditions of this Forbearance Agreement, the Lender has agreed
to grant such deferment.
NOW, THEREFORE, in consideration of the foregoing and of the agreements,
promises and covenants set forth below, the parties hereto agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings in this
Forbearance Agreement (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Agreement" means this Forbearance Agreement, as the same may be
amended, restated, supplemented or otherwise modified from time to time.
"Approved Budget" has the meaning set forth in Section 11(g).
"Borrower" has the meaning set forth in the introductory paragraph
hereto.
"Credit Party" has the meaning set forth in the introductory paragraph
hereto.
"Creditor Party" means any individual or entity that is, from time to
time, a creditor of a Credit Party.
"Crisis Manager" has the meaning set forth in Section 11(a) hereof.
"Deferment Period" has the meaning set forth in Section 4 hereof.
"Financier" means PDS Funding 2004-A, LLC.
"Forbearance Balance" has the meaning set forth in the Preliminary
Statements.
"Forbearance Default" has the meaning set forth in Section 13 hereof.
"Forbearance Effective Date" has the meaning set forth in Section 6
hereof.
"Forbearance Expiration Date" means August 29, 2006.
"Guarantor" has the meaning set forth in the introductory paragraph
hereto.
"Lease Forbearance Balance" has the meaning set forth in the Preliminary
Statements.
"Leases" has the meaning set forth in the Preliminary Statements.
"Lender" has the meanings set forth in the introductory paragraph
hereto.
"Lender Party" and "Lender Parties" have the meanings set forth in
Section 16(a) hereof.
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"Loan" has the meaning set forth in the Preliminary Statements.
"Loan Agreement" has the meaning set forth in the Preliminary
Statements.
"Loan Forbearance Balance" has the meaning set forth in the Preliminary
Statements.
"Releasor" and "Releasors" have the meanings set forth in Section 16(a)
hereof.
"Second Forbearance Period" means the period commencing on the
Forbearance Effective Date and continuing through the earliest to occur of (i)
the Forbearance Expiration Date; (ii) the date of the termination of the
Forbearance Period pursuant to Section 13 hereof; and (iii) the date on which
all of the Obligations have been indefeasibly paid in full to the Lender, the
applicable Credit Parties have satisfied all of their obligations under the
Leases to the Lender, and the obligations of the Lender under the Loan Agreement
and the Leases have been terminated.
"Specific Events of Default" has the meaning set forth in the
Preliminary Statements.
"Specific Lease Events of Default" has the meaning set forth in the
Preliminary Statements.
"Specific Forbearance and Loan Events of Default" has the meaning set
forth in the Preliminary Statements.
2. INCORPORATION OF PRELIMINARY STATEMENTS.
The preliminary statements set forth above are hereby incorporated into
this Agreement as accurate and complete statements of fact. Without limiting the
foregoing, each Borrower and Guarantor hereby acknowledges and agrees that (a)
the Specific Forbearance and Loan Events of Default have occurred and are
continuing under the terms of the Loan Agreement and the Original Forbearance;
(b) the Specific Lease Events of Default have occurred and are continuing under
the terms of the Leases; (c) each of the Borrower and the Guarantor does not
have any disputes, defenses or counterclaims of any kind with respect thereto;
(d) absent the effectiveness of this Forbearance Agreement, the Lender has the
right to immediately enforce payment of all Obligations and, in connection
therewith, to immediately enforce its security interests in, and liens on, the
Collateral, (e) the Forbearance Balance correctly sets forth the amount
(exclusive of expenses) owed to the Lender under the Loan Agreement and the
Leases as of June 1, 2006 (including rent not yet due and payable), and (f) the
Forbearance Balance and all other Obligations are payable pursuant to the Loan
Agreement and the Leases, without defense, dispute, offset, withholding,
recoupment, counterclaim or deduction of any kind.
3. FORBEARANCE.
(a) During the Second Forbearance Period, and provided that no Forbearance
Default occurs, the Lender shall not exercise those rights and remedies afforded
to it under the Loan
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Agreement and the other Loan Documents with respect to the Specific Events of
Default to (a) accelerate and/or immediately enforce payment in full of the
Obligations or enforce payment of any part of the Obligations in advance of the
date such Obligations shall be due and payable in accordance with the terms of
the Loan Agreement, (b) exercise its rights to terminate the Leases; or (c)
enforce its security interests in, and liens on, the Collateral, provided, that
(i) no Creditor Party has exercised or taken action to assert any adverse claims
(including any litigation) with respect to any part of the Collateral, any
Vessel or any equipment leased pursuant to the Leases; (ii) Credit Parties
comply with all of their covenants and agreements set forth in this Forbearance
Agreement; (iii) no other Event of Default occurs during the Second Forbearance
Period; and (iv) no Credit Party or Affiliate receives any Restricted Payment or
other proceeds or distribution from the Borrower's business prior to the full
and indefeasible payment of the Obligations to the Lender, except as expressly
permitted by this Forbearance Agreement.
(b) In consideration of the Lender's agreement to forbear on the terms and
conditions set forth herein, the Credit Parties hereby agree that the full
Forbearance Balance shall be deemed to be increased by the sum of One Hundred
Seventy-Three Thousand Six Hundred Eighty-Seven and 39/100 Dollars ($173,687.39)
as a forbearance fee, which shall be deemed fully earned by the Lender and shall
constitute a portion of the Obligations secured by the Collateral. The Credit
Parties hereby grant to Lender a security interest in and lien on the Collateral
securing the full payment of such forbearance fee.
4. DEFERMENT. As a result of the occurrence of the Specific Events of Default,
the Lender hereby defers the principal and interest payments payable with
respect to the Loan Agreement and the rental payments payable pursuant to the
Leases, in each case, from the Forbearance Effective Date through the
Forbearance Expiration Date (the "Deferment Period"); provided that (a) such
deferred Loan payments will continue to accrue with interest on such sums from
the scheduled due date for payment thereof at the Default Rate and deferred
rental payments under the Leases will continue to accrue with monthly late
charges at the rate set forth therefor in the applicable Lease; and (b) upon the
occurrence of a Forbearance Default, the foregoing deferment shall be deemed to
have no force or effect. The rate of interest payable on the Loan and all
overdue interest thereon shall continue at the applicable Default Rate of
interest pursuant to Section 4(b) of the Loan Agreement (and, for the avoidance
of doubt, upon the termination of the Deferment Period each Credit Party shall
be liable for, and shall pay in cash, any deficiency in any interest payment
made prior to the date of the Forbearance Default). Notwithstanding anything to
the contrary set forth in the Loan Agreement, during the Second Forbearance
Period, provided that no Forbearance Default shall have occurred prior thereto,
the Credit Parties shall be permitted to prepay the Loan (including the
additional Loan amount described in Section 3), in whole or in part, at 100% of
par (plus all fees (including the fees set forth in Section 8(j) of the Original
Forbearance, which shall be payable in connection with the sale of the Big Easy
Collateral or the Turnberry Note Collateral) and expenses (including the
expenses described in Sections 11(n) and 19 and accrued interest payable
pursuant hereto or pursuant to the Loan Agreement).
5. EFFECT ON ORIGINAL FORBEARANCE
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The Lender and Credit Parties hereby agree that the provisions of the
Original Forbearance described on Schedule IV hereto (and the related
definitions set forth in the Original Forbearance) shall survive the amendment
and restatement of the Original Forbearance pursuant to the terms hereof and
shall remain in full force and effect for all purposes from and after the date
hereof, including after the termination of this Agreement (it being acknowledged
by Lender that the amounts payable under Section 8(i) of the Original
Forbearance have been paid).
6. CONDITIONS TO EFFECTIVENESS. This Forbearance Agreement shall become
effective as of the date first written above (the "Forbearance Effective Date")
upon the satisfaction of each of the following conditions:
(a) The Lender shall have received this Forbearance Agreement (or
counterparts hereof) duly executed by each Credit Party and the Lender;
(b) The Lender shall have received a certificate signed by a duly
authorized officer of each Borrower and each of the Credit Parties certifying,
as of the Forbearance Effective Date, (i) that all conditions precedent to the
effectiveness of this Forbearance Agreement have been satisfied, (ii) that no
Events of Default other than the Specific Events of Default have occurred, (iii)
that since the date of the Loan Agreement, no amendments, modifications or other
changes have been made to each Borrower's or Credit Parties' articles of
incorporation, certificate of formation, bylaws, operating agreements or to any
other organizational or governing documents of such Borrower or Credit Parties
and (iv) the resolutions of each Borrower's and Credit Parties' board of
directors or managers authorizing the execution, delivery and performance of
this Forbearance Agreement and the transactions contemplated hereby;
(c) All of the representations and warranties of each Borrower and Credit
Parties contained in this Forbearance Agreement shall be true and correct on and
as of the Forbearance Effective Date;
(d) All corporate and other proceedings, and all documents, instruments and
other legal matters in connection with the transactions described in this
Forbearance Agreement shall be reasonably satisfactory in form and substance to
the Lender; and
(e) Borrower shall have paid, or the Credit Parties shall cause the
Borrower to pay, to the Lender, in immediately available funds, to the extent
provided in Section 11(n) hereof, all fees and expenses reimbursable by Borrower
and the Credit Parties as of the Forbearance Effective Date pursuant to Section
6(b) of the Loan Agreement and Section 18 hereof.
7. STATUS AND DISPOSITION OF "BIG EASY VESSEL".
(a) The Credit Parties acknowledge and agree that the Lender has a validly
perfected, first-priority lien on, and security interest in the Big Easy Vessel,
together with any and all collateral related thereto and more fully described in
that certain Preferred Mortgage dated as of June 30, 2005 by Cruise II in favor
of Lender (collectively, the "Big Easy Collateral").
(b) The Credit Parties acknowledge and agree that (i) it is in the best
interests of the Credit Parties to effect the sale of the Big Easy Collateral;
(ii) the monthly costs to maintain,
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protect, and insure the Big Easy Collateral is approximately $240,000, as more
fully described in Schedule V hereto; (iii) the Credit Parties have been unable
to generate any positive cash flow from the use of the Big Easy Collateral and
determined in January 2006 that it was advisable to store the Big Easy
Collateral (and otherwise take steps to "mothball" such collateral) until a
purchaser could be found; (iv) the Credit Parties have sought to market and sell
the Big Easy Collateral since January 2006, but have been unsuccessful in
effecting such sale to a third party under terms and conditions that are
acceptable to the Lender and would provide for the indefeasible payment in cash
to the Lender of the net sales proceeds therefrom; (v) the Credit Parties have
failed to pay certain accounts payable with respect to the Big Easy Vessel in an
amount that will be reported by the Credit Parties to Lender not later than July
15, 2006, which has caused maritime liens to attach to the Big Easy Vessel; and
(vi) the Credit Parties have failed to pay certain ad valorem taxes with respect
to the Big Easy Collateral, which have attached to the Big Easy Collateral, and
such tax liens remain unpaid as of this date and continue to accrue interest and
applicable penalties thereon. Nothing herein shall constitute an admission by
the Lender or the Credit Parties as to the validity, priority or effectiveness
of such maritime liens.
(c) The Credit Parties shall submit to the Lender a proposed cash budget
applicable to the Big Easy Collateral, assuming its continuing non-operational
status (the "Big Easy Budget"), in form, substance, and detail reasonably
satisfactory to the Lender, covering the three (3) month period from June 1,
2006 through August 29, 2006. The Big Easy Budget shall set forth, among other
things reasonable, projected disbursements in connection with the maintenance,
storage, insurance, and costs of disposition of the Big Easy Collateral,
including line items setting forth proposed professional fees, expenses and
similar items for the period indicated thereon, together with the statement of
all material assumptions used in the preparation of the Big Easy Budget.
(d) The Credit Parties shall engage the services of ▇▇. ▇▇▇ ▇▇▇▇▇ of
Coastal Passenger Vessels, Ltd., LLP ("▇▇▇▇▇") and Innovation Capital, LLC (or
another broker approved by Lender) ("ICLLC," ICLLC and ▇▇▇▇▇, as applicable, are
each referred to herein as a "BEC Broker") not later than July 15, 2006. The
terms and conditions of the engagement contract for each BEC Broker shall be
reasonably satisfactory to the Lender and the Credit Parties and shall provide
(i) for ▇▇▇▇▇ to attempt to sell the Big Easy Collateral for cash to two
prospective third party purchasers previously identified by ▇▇▇▇▇ to the Credit
Parties and (ii) for ICLLC to attempt to sell the Big Easy Collateral for cash
to other prospective third party purchasers. The Credit Parties shall
continuously engage the services of each BEC Broker for such purposes, and any
sale of the Big Easy Collateral shall only be made on terms and conditions
acceptable to the Lender and the Credit Parties.
(e) The Big Easy Collateral shall be sold for cash to a third party
purchaser, with a closing date targeted to occur no later than the Forbearance
Expiration Date, and the Credit Parties shall direct each BEC Broker to proceed
under such timeline. Any contract for the sale of the Big Easy Collateral shall
provide for a cash purchase price to be paid at closing, less approved broker's
fees, which shall be indefeasibly paid to the Lender in reduction of the
Obligations owing under the Loan Agreement.
(f) The Credit Parties and each BEC Broker agree to provide to the Lender
on Friday of each week, or as often as may be requested by the Lender or its
attorneys, all such information
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or communications pertaining to the sale of the Big Easy Collateral, including,
but not limited to, expressions of interest, purchase commitments, appraisals,
together with any and all correspondence and written summaries of verbal
discussions pertaining to the status of the sale of the Big Easy Collateral for
cash.
8. STATUS AND DISPOSITION OF "ROYAL STAR VESSEL".
(a) The Credit Parties acknowledge and agree that the Lender has a validly
perfected, first-priority lien on, and security interest in the "Royal Star
Vessel" together with any and all collateral related thereto and more fully
described in that certain Preferred Mortgage dated as of June 30, 2005 by RSE in
favor of Lender (collectively, the "Royal Star Collateral").
(b) The Credit Parties acknowledge and agree that (i) it is in the best
interests of the Credit Parties to effect the sale of the Royal Star Collateral;
(ii) the monthly costs to maintain, protect, and insure the Royal Star
Collateral is approximately $35,000, as more fully described in Schedule V
hereto; (iii) the Credit Parties have been unable to generate any positive cash
flow from the use of the Royal Star Collateral; (iv) the Credit Parties have
sought to market and sell the Royal Star Collateral since January 2006, but have
been unsuccessful in effecting such sale to a third party under terms and
conditions that are acceptable to the Lender and would provide for the
indefeasible payment in cash to the Lender of the net sales proceeds therefrom;
(v) the Credit Parties have failed to pay certain accounts payable with respect
to the Royal Star Vessel, which has caused maritime liens to attach to the Royal
Star Vessel in an amount that will be reported by the Credit Parties to Lender
not later than July 15, 2006; and (vi) the Credit Parties have failed to pay
certain ad valorem taxes with respect to the Royal Star Collateral, which have
attached to the Royal Star Collateral, and such tax liens remain unpaid as of
this date and continue to accrue interest and applicable penalties thereon.
Nothing herein shall constitute an admission by the Lender or the Credit Parties
as to the validity, priority or effectiveness of such maritime liens.
(c) The Credit Parties shall submit to the Lender a proposed cash budget
applicable to the Royal Star Collateral, assuming its continuing non-operational
status (the "Royal Star Budget"), in form, substance, and detail reasonably
satisfactory to the Lender, covering the ninety (90) day period from June 1,
2006, through August 29, 2006. The Royal Star Budget shall set forth, among
other things, projected disbursements in connection with the maintenance,
storage, insurance, and costs of disposition of the Royal Star Collateral,
including line items setting forth proposed professional fees, expenses and
similar items for the period indicated thereon, together with the statement of
all material assumptions used in the preparation of the Royal Star Budget.
(d) The Credit Parties shall engage the services of ▇▇. ▇▇▇ ▇▇▇▇▇ of
Coastal Passenger Vessels, Ltd., LLP (the "RSC Broker") not later than July 15,
2006. The terms and conditions of the contract of engagement for the RSC Broker
shall be reasonably satisfactory to the Lender. The Credit Parties shall
continuously engage the services of the RSC Broker for the purposes of marketing
and selling the Royal Star Collateral to a third party purchaser for cash, upon
such terms and conditions acceptable to the Lender and the Credit Parties.
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(e) The Royal Star Collateral shall be sold for cash to a third party
purchaser, with a closing date targeted to occur no later than the Forbearance
Expiration Date, and the Credit Parties shall direct the RSC Broker to proceed
under such timeline. Any contract for the sale of the Royal Star Collateral
shall provide for a cash purchase price to be paid at closing, less approved
broker's fees, which shall be indefeasibly paid to the Lender in reduction of
the Obligations owing under the Loan Agreement.
(f) The Credit Parties and the RSC Broker agree to provide to the Lender on
Friday of each week, or as often as may be requested by the Lender or its
attorneys, all such information or communications pertaining to the sale of the
Royal Star Collateral, including, but not limited to, expressions of interest,
purchase commitments, appraisals, together with any and all correspondence, and
written summaries of verbal discussions, pertaining to the status of the sale of
the Royal Star Collateral for cash.
9. STATUS AND DISPOSITION OF "TURNBERRY NOTE".
(a) The Credit Parties acknowledge and agree that the Lender has a validly
perfected, first-priority lien on, and security interest in the Turnberry Note,
together with any and all collateral proceeds related thereto and more fully
described in that certain Pledge and Security Agreement dated as of June 30,
2005 by ITB in favor of Lender (collectively, the "Turnberry Note Collateral").
(b) The Credit Parties acknowledge and agree that (i) it is in the best
interests of the Credit Parties to effect the sale of the Turnberry Note
Collateral; (ii) the Credit Parties have sought to market and sell the Turnberry
Note Collateral since January 2006, but have been unsuccessful in effecting such
sale to a third party under such terms and conditions that are acceptable to the
Lender and provide for the indefeasible payment in cash to the Lender of the net
sales proceeds therefrom; and (iii) given that the Turnberry Note Collateral
does not constitute any core assets essential to the operations of the Credit
Parties, it is the Credit Parties' business judgment that the Turnberry Note
Collateral should be sold and the sales proceeds therefrom used to reduce the
Obligations owing under the Loan Agreement.
(c) The Credit Parties shall engage the services of Innovation Capital LLC
(the "Financial Advisor") not later than July 15, 2006. The terms and conditions
of the contract of engagement for the Financial Advisor shall be reasonably
satisfactory to the Lender and the Credit Parties. Subject to the Credit
Parties' existing contractual restrictions concerning the use of confidential
information concerning the Turnberry Note and the issuer thereof, the Credit
Parties shall continuously engage the services of the Financial Advisor for the
purposes of marketing and selling the Turnberry Note to a third party purchaser
for cash, upon terms and conditions acceptable to the Lender and the Credit
Parties, provided that the potential purchasers thereof shall agree to
reasonable confidentiality protection of any confidential information included
in the marketing and other materials relating to such sale.
(d) To the extent that they are able to obtain, and supply to the Financial
Advisor, reasonably sufficient information with respect thereto, the Credit
Parties agree to provide to the Lender, on or before July 29, 2006, a copy of
the Offering Memorandum or sales brochures,
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prepared by the Financial Advisor and designed to seek the sale of the Turnberry
Note to a third party purchaser for cash.
(e) To the extent that the Financial Advisor is able to obtain sufficient
information to reasonably market the Turnberry Note, the Turnberry Note shall be
sold for cash to a third party purchaser, with a closing date targeted to occur
no later than the Forbearance Expiration Date, and the Credit Parties shall
direct the Financial Advisor to proceed under such timeline. Any contract for
the sale of the Turnberry Note shall provide for a cash purchase price to be
paid at closing, less approved broker's fees, which shall be indefeasibly paid
to the Lender in reduction of the Obligations owing under the Loan Agreement.
(f) The Credit Parties and the Financial Advisor agree to provide to the
Lender on Friday of each week, or as often as may be requested by the Lender or
its attorneys, all such information or communications pertaining to the sale of
the Turnberry Note, including, but not limited to, expressions of interest,
purchase commitments, appraisals, together with any and all correspondence and
written summaries of verbal discussions pertaining to the status of the sale of
the Turnberry Note for cash.
10. ALTERNATIVE TRANSACTION.
(a) The Credit Parties have informed the Lender that they have received, or
are likely to receive in the coming weeks, one or more proposals from a third
party seeking to provide a financing/equity infusion (an "Alternative
Transaction") to the Credit Parties superior in value to the cash sale of the
Big Easy Collateral, the Royal Star Collateral, and the Turnberry Note. The
Credit Parties acknowledge and agree that, unless the Lender is being
indefeasibly paid in full upon the closing of the Alternative Transaction, (i)
the Alternative Transaction is subject to the written consent of the Lender,
which consent shall be granted or withheld at the sole discretion of the Lender,
and (ii) absent a specific written consent of the Lender after the date hereof,
the Lender has not agreed to permit the Credit Parties to enter into the
Alternative Transaction.
(b) Although the Credit Parties may continue to pursue the Alternative
Transaction, nothing herein shall relieve the Credit Parties from timely
performing all of their obligations under this Forbearance Agreement, including,
but not limited to, the marketing and sale of the Big Easy Collateral, the Royal
Star Collateral, and the Turnberry Note, and the Sale or Refinancing (as defined
below). The obligations of the Credit Parties to proceed with the marketing and
sale of the Big Easy Collateral, the Royal Star Collateral, and the Turnberry
Note, and the Sale or Refinancing, shall be strictly enforced and,
notwithstanding their pursuit of the Alternative Transaction, the Credit Parties
shall timely perform all of their obligations under this Forbearance Agreement.
(c) The Credit Parties agree to provide the Lender with copies of (or in
the case of verbal information, written summaries of) all information or
communications pertaining to any Alternative Transaction, including, but not
limited to, proposal letters, term sheets, commitment letters, refinancing
letters, and expressions of interest relating to any Alternative Transaction,
together with any and all correspondence pertaining to the status or updates of
the completion of documentation of any Alternative Transaction.
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(d) The Lender may elect in its sole discretion to extend the deadlines
provided in this Forbearance Agreement for the sale of the Big Easy Collateral,
the Royal Star Collateral, and the Turnberry Note or otherwise modify the Credit
Parties' obligations with respect thereto, after its due consideration of, among
other things, (i) the purchase offers received from third parties with respect
to the sale of the Big Easy Collateral, the Royal Star Collateral, and/or the
Turnberry Note; (ii) the range of values proposed by each BEC Broker, RSC
Broker, and the Financial Advisor for such assets to be sold for cash, the
timing of any or all of the closings of such sales, and other matters relating
to the net cash proceeds realizable from such assets; and (iii) the net cash
proceeds realizable from an Alternative Transaction to be paid in reduction of
the Indebtedness owing to the Lender, and the structure, risks, conditions, and
timing of such closing, among other factors deemed relevant by the Lender.
(e) Nothing herein in this Section 10 shall modify the obligations of the
Credit Parties to perform timely all of their obligations with respect to the
Sale or Refinancing, as described below.
11. CONDITIONS SUBSEQUENT TO EFFECTIVENESS; ADDITIONAL COVENANTS AND OBLIGATIONS
OF THE CREDIT PARTIES. The continued effectiveness of this Forbearance Agreement
is subject to the satisfaction of the following condition subsequent, unless
specifically waived in writing by the Lender, and in addition, the Credit
Parties agree to do the following:
(a) The Credit Parties shall continuously engage the services of the crisis
management group, chosen by the Credit Parties, The Innovation Group (the
"Crisis Manager"), for the purposes of constructing and implementing for the
Credit Parties a business plan, with the Crisis Manager having the full
authority, power, and oversight with respect to cash management, and timely and
accurate financial and collateral reporting. The Crisis Manager's engagement
will provide for a Crisis Manager representative to be present at the Credit
Parties' offices as frequently as the Crisis Manager believes is necessary to
perform its duties. The Credit Parties will (i) cooperate fully with the Crisis
Manager and conduct their business in accordance with the recommendations and
advice of the Crisis Manager as set forth in the Crisis Manager's engagement
letter, (ii) provide the Crisis Manager with access to all of their (and to the
extent possible, their affiliates') books, records, accounts and other
information requested by the Crisis Manager, (iii) will instruct and permit the
Crisis Manager (A) to discuss any and all aspects of the Credit Parties'
business with the Lender and the Financier (with or without the participation of
the Credit Parties, as determined by the Lender or the Financier) and (B) to
provide any and all written reports regarding the Credit Parties' business to
the Lender and the Financier (with or without providing copies thereof to each
Credit Party, as determined by the Lender or Financier), (iv) will provide that
each withdrawal from a Credit Party's deposit account (other than accounts in
the names of PBE, PBM or ITB as of the date hereof) shall be approved by the
Crisis Manager, and (v) will compensate the Crisis Manager in the manner
provided by the Crisis Manager's engagement letter with the Borrower.
(b) Each Credit Party acknowledges and agrees that all disbursements from
the Controlled Accounts shall require the written approval (on an item-by-item
basis) of the Crisis Manager. Except for $700,000 of "cage cash" that will be
maintained by the Borrower (as such
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amount may be adjusted from time to time based on the prudent recommendation of
the Crisis Manager) on the Princess Vessel and $15,000 of additional ▇▇▇▇▇ cash,
all cash (including all cash receipts) by the Credit Parties (other than cash
received by PBE, ITB or PBM not in violation of this Forbearance Agreement or
any other Loan Document) shall be deposited into the Controlled Accounts. Each
Credit Party shall hold in trust all checks, cash and other items of payment
constituting Secured Property received by such Credit Party or any such Related
Person, and shall deposit such Secured Property into a Controlled Account within
one Business Day after receipt by such Credit Party (provided that cash receipts
from the operation of the Princess Vessel shall be deposited on a weekly basis
in accordance with past practice).
(c) The Credit Parties shall immediately operate its business in accordance
with the Approved Budget (as defined below).
(d) The Credit Parties shall have submitted, not later than July 14, 2006,
at 2:00 p.m. (EST), a written cash budget, on an entity by entity basis, and by
July 25, 2006, a written business plan, in each case, in form, substance and
detail, reasonably satisfactory to the Lender (together, the "Budget") covering
the period commencing June 1, 2006, and continuing through August 29, 2006 (the
"Budget Period"), which Budget shall set forth, among other items, reasonable
projected weekly cash receipts, disbursements, inventory purchases, wages and
professional fees (itemized by each class of professional (i.e., attorneys,
accountants, consultants, and any other professional retained by the Credit
Parties) and expressly including line items for payment of the Lender's and
Financier's attorneys' fees, professional fees, audit and appraisal costs,
expenses and similar items) for the respective period indicated thereon,
together with a statement of all material assumptions used in preparation of
such Budget.
(e) Consistent with the terms of the Loan Agreement and the other Loan
Documents, the Credit Parties shall continue to provide to the Lender, each of
the following: (a) collateral reporting; (b) cash flow and disbursements report;
and (c) such other reports as presently provided by the Credit Parties to the
Lender.
(f) The Credit Parties shall deliver to the Lender, not later than July 14,
2006, at 2:00 p.m. (EST), with an update to be delivered to the Lender every
fourteen (14) days thereafter, the following:
(i) a report of accrued but unpaid state and federal taxes owing or to
become owing by the Credit Parties, including without limitation, state
property taxes, ad valorem taxes, fuel taxes, trust fund taxes, and payroll
taxes;
(ii) a list of missed payments and other known defaults under
obligations of the Credit Parties to other creditors; and
(iii) a list of accrued but unpaid amounts due such parties who are
claiming mechanics or materialmen's liens or whose provision of goals or
services could give rise to a maritime lien on the Collateral of the Credit
Parties.
(g) Budgets.
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(i) From time to time, the Credit Parties shall submit to the Lender
proposed revisions and modification of the Budget, reflecting the Credit
Parties' revised cash forecast and operating budget for the balance of the
Budget Period, which proposed revisions shall set forth, among other items,
the Credit Parties' projected weekly cash receipts, disbursements,
(including any disbursement to Guarantor or other Affiliates for services
rendered to the extent permitted pursuant to the Loan Agreement, as
modified and amended by this Forbearance Agreement, inventory purchases,
wages and professional fees (itemized by each class of professional (i.e.
attorneys, accountants, consultants and any other professionals retained by
each of the Credit Parties) and expressly including line items for payment
of the Lender's and Financier's attorneys' fees, professional fees, audit
and appraisal costs, expenses and similar items) for the respective period
indicated thereon. Each proposed set of revisions shall be subject to the
written approval and acceptance of the Lender, and upon such written
approval and acceptance by the Lender the most recent set of revisions so
approved shall be referred to as the "Approved Budget" (until such time as
the Lender shall have approved and accepted in writing a revised set of
projections and revised Budget, the Budget delivered pursuant to Section
11(c) hereof shall constitute the Approved Budget for all purposes). The
Approved Budget shall describe proposed disbursements by category
(including, but not limited to, cash receipts, disbursements, inventory
purchases, wages and professional fees (itemized by each class of
professional (i.e. attorneys, accountants, consultants and any other
professionals retained by the Credit Parties)), and the Credit Parties
alone shall decide parties to receive such disbursements. Each proposed
revision to the Approved Budget shall included a summary statement of each
material assumption utilized in the preparation of such revisions to the
Approved Budget including a statement of any variations in assumptions from
prior projections, which assumptions shall be subject to the review,
acceptance and written approval by the Lender in the same manner as the
Approved Budget itself.
(ii) On Tuesday of each calendar week, by 2:00 p.m. EST, the Credit
Parties shall provide to the Lender a comparison of the previous week's (1)
actual cash expenditures, disbursements, and cash receipts with the
previous week's (2) projected cash expenditures, disbursements, and cash
receipts, as set forth in the Approved Budget. All reporting pursuant to
this subsection (ii) shall be for the fiscal week most recently ended and,
on an aggregate basis, the fiscal week then ended together with the
immediately preceding two fiscal weeks, in each case as designated on the
Approved Budget and in sufficient detail to confirm both the Credit
Parties' compliance with its covenants set forth at subsection (iii) below
and the Credit Parties' financial results for the fiscal week most recently
ended.
(iii) The Credit Parties shall provide to the Lender the following
reports to be provided not less than every two weeks by Friday at 2:00 p.m.
EST beginning on July 14, 2006: (1) the Credit Parties' actual weekly
performance and results of operations as compared to its Approved Budget
for the week; and (2) management's written explanation of the variance, if
any, between its actual weekly performance and its Approved Budget for the
week, certified as true, correct, and complete by an officer of the Credit
Parties or an affiliate of the Credit Parties acceptable to the Lender.
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(h) Sale or Refinancing.
(i) The Credit Parties agree to effect the refinancing of the
Obligations owing to the Lender or the sale of the Credit Parties' assets
or a restructuring of the Credit Parties' business, in each case providing
for the complete and indefeasible payment and satisfaction of the
Obligations owing to the Lender, including the full and complete
satisfaction of the Lease Forbearance Balance and all other amounts due and
owing to the Lender under the Leases, in cash (the "Sale or Refinancing"),
which shall be targeted for completion by the Forbearance Expiration Date
(the "Sale or Refinancing Date").
(ii) By no later than July 14, 2006, the Credit Parties shall engage
the services of a financial advisor acceptable to the Lender and the Credit
Parties (the "Palm Beach Financial Advisor") as their financial advisor
with respect to the Sale or Refinancing. The terms and conditions of the
contract of engagement for the Palm Beach Financial Advisor shall be
reasonably satisfactory to the Lender. The Credit Parties shall
continuously engage the services of the Palm Beach Financial Advisor for
the purposes of effecting the Sale or Refinancing to a third party
purchaser for cash, upon terms and conditions acceptable to the Lender,
with a contemplated closing date for the Sale or Refinancing by no later
than the Sale or Refinancing Date.
(iii) The Credit Parties agree to provide to the Lender on or before
July 28, 2006, a copy of the offering memorandum prepared by the Palm Beach
Financial Advisor and designed to seek the Sale or Refinancing from a
third-party lender or third-party purchaser. At the time of delivery of the
offering memorandum, the Credit Parties will deliver a list of not less
than fifteen (15) third-party lenders or third party purchasers identified
by the Credit Parties as reasonably likely potential lenders or purchasers
with respect to a Sale or Refinancing, together with contact information,
names, addresses and telephone numbers for each such lender or purchaser.
(iv) Not later than August 2, 2006, the Credit Parties shall deliver
the offering memorandum and all other relevant information to each of the
lenders or purchasers identified pursuant to clause (iii) above.
(v) The Credit Parties agree to provide to the Lender on or before
August 14, 2006, a written term sheet from a third-party lender or third
party purchaser for the Sale or Refinancing, with such term sheet (the
"Term Sheet") having been executed by such party offering to effect the
Sale or Refinancing, and subject only to due diligence and other conditions
precedent customary for other similar types of transactions.
(vi) The Credit Parties agree to provide to the Lender on or before
August 25, 2006, a certification from the Credit Parties stating that (1)
the terms and conditions of the Term Sheet have been materially satisfied
and fulfilled, or are sufficiently close to being materially satisfied and
fulfilled, and (2) the consummation of the Sale or Refinancing is
reasonably likely to occur on or prior to the Sale or Refinancing Date
based on the foregoing or any other facts set forth in such certification.
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(vii) The Credit Parties also agree to provide to the Lender on Friday
weekly, or as often as may be requested by the Lender or its attorneys, at
their option, all such information or communications pertaining to the Sale
or Refinancing, including, but not limited to, proposal letters, term
sheets, commitment letters, refinancing letters, purchase commitments,
expressions of interest relating to the Sale or Refinancing, approvals and
consents from the Companies' other financing parties to any of the
foregoing proposals, together with any and all correspondence pertaining to
the status or updates of the completion of documentation of the Sale or
Refinancing.
(viii) The terms of the Sale or Refinancing shall be subject to the
prior written consent of the Lender unless, upon the closing thereof, the
Lender is indefeasibly paid in full.
(ix) The deadlines set forth in Sections 11(h)(iii) through (iv) shall
be extended reasonably to the extent that the Palm Beach Financial Advisor
is unable to perform the required tasks by the deadlines set forth in such
sections.
(i) Audits and Field Exams. Until all of the Obligations owing to the
Lender have been indefeasibly paid in full, the Lender and Financier, and their
respective agents, appraisers, and advisors shall have the right of full access
to, and may visit, the Credit Parties' business, upon reasonable notice, to (1)
inspect the Collateral of the Lender; (2) visit and conduct field exams of the
Credit Parties' business, (3) take copies and extracts from the Credit Parties'
books and records and inspect the Credit Parties' facilities, (4) conduct
on-site monitoring thereof, and (5) obtain information requested by the Lender
or Financier as to such matters relating to the Credit Parties' business
operations. The Credit Parties' officers and employees shall fully cooperate
with such efforts by the Lender, and their respective agents and advisors.
(j) Each Credit Party shall make all payments of principal, interest, fees,
expenses and other Obligations on the dates and times, in the amounts, and at
the rates specified in the Loan Agreement, subject only to Section 4 hereof. In
addition, each Credit Party will continue to perform their non-payment
Obligations under the Loan Documents in the manner required thereby.
(k) Borrower shall maintain in full force and effect all insurance required
by Section 13 of the Loan Agreement.
(l) Borrower shall provide the Lender with any and all financial,
operational and other reports and updates (written and oral) as may be requested
by the Lender in its sole discretion.
(m) Except as otherwise approved by the Lender in writing, no Credit Party
shall make any Restricted Payments or other payments to any Affiliates,
(including without limitation those contemplated by Section 14(w) of the Loan
Agreement), during the Second Forbearance Period or thereafter, except as
specifically provided in the Approved Budget.
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(n) In connection with their continuing discussions with the Credit Parties
and their analysis of certain financial matters concerning the Credit Parties,
the Lender Parties have incurred significant costs and expenses, which amounts,
as of June 30, 2006, are detailed on Schedule VII attached hereto. The Credit
Parties agree that they are responsible for payment of the amounts listed in
Schedule VII and shall pay such amounts in accordance with the Approved Budget.
(o) In the event that any Credit Party enters into a lease or operating
agreement for a berth or other space at the Port of Palm Beach or another port,
the Credit Parties shall immediately collaterally assign the same to the Lender
and the Financier.
(p) Consent to Relief. In the event of any re-occurrence of a Specific
Event of Default, or the occurrence of any Forbearance Default, then, to the
extent that the Lender establishes before a court of appropriate jurisdiction
that any of the foregoing has occurred, the Lender reserves the right to seek
injunctive relief against the Credit Parties and the Collateral, including, but
not limited to, the appointment of a receiver for the benefit of the Lender, in
order to enforce the terms of this Forbearance Agreement, the Loan Agreement,
the other Loan Documents and the Leases and to effect the remedies sought herein
and under applicable law, and the Credit Parties reserve the right to object to
such injunctive relief, including the appointment of a receiver, under such
circumstances.
(q) Cooperation of Guarantor. To the extent that compliance with any of the
covenants or agreements of Borrower requires action or cooperation by the
Guarantor, the Guarantor agrees to provide such cooperation and take such
action.
12. REPRESENTATIONS AND WARRANTIES. Each of the Credit Parties hereby represents
and warrants to the Lender that, on and as of the Forbearance Effective Date:
(a) All of the representations and warranties of the Credit Parties
contained in this Forbearance Agreement, the Loan Agreement and the other Loan
Documents are true and correct as though made on and as of the Forbearance
Effective Date, unless and to the extent (i) such representations and warranties
relate solely to an earlier date, in which case such representations and
warranties shall be true and correct as of such earlier date, or (ii) set forth
in Schedule V;
(b) Exhibit A attached hereto includes current, detailed summaries of the
following financial information regarding the Credit Parties, which are true,
correct and complete as June 18, 2006:
(i) All Indebtedness of the Credit Parties and each lease to which any
Credit Party is a party including all accounts payable "payment plans";
(ii) The current accounts payable balances and aging of the Credit
Parties (substantially in the form of the ITGV, Inc. Accounts Payable Aging
report and ITG Palm Beach, LLC Accounts Payable Aging report previously
provided to the Lender); and
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(iii) A list of each bank or investment account of each Credit Party,
together with the current balances in each such account, as well as a
diagram describing the manner in which cash and other receipts are
collected and deposited, including the timing of such deposits and the
accounts into which such receipts are deposited (collectively, the "Active
Accounts"). The Credit Parties have entered into, or will promptly enter
into, a deposit account control agreement with respect to each Active
Account and will only deposit such receipts into Active Accounts.
(c) No Forbearance Default has occurred;
(d) Each Credit Party has the requisite limited liability company and
corporate power and authority to execute, deliver and perform this Forbearance
Agreement and to perform its Obligations under the Loan Documents. The execution
and delivery of this Forbearance Agreement by the Credit Parties, the
performance by Borrower of its Obligations hereunder, and the consummation of
the transactions contemplated hereby, have been duly approved by all necessary
limited liability company, member or board action. This Forbearance Agreement
has been duly executed and delivered by the Credit Parties. This Forbearance
Agreement constitutes the legal, valid and binding obligation of each Credit
Party, enforceable against Borrower in accordance with its terms.
All of the Credit Parties' representations and warranties contained in this
Forbearance Agreement shall survive the execution, delivery and acceptance of
this Forbearance Agreement by the parties hereto.
13. FORBEARANCE DEFAULTS. Each of the following events shall constitute a
"Forbearance Default":
(a) Any Credit Party shall fail to observe or perform any term, covenant,
or agreement binding on it contained in this Forbearance Agreement or any other
agreement, instrument, or document executed in connection herewith, except as
specifically described in Schedule VI;
(b) any instrument, document, report, schedule, agreement, representation
or warranty, oral or written, made or delivered to the Lender by any Credit
Party shall be false or misleading when made, or deemed made, or delivered; or
(c) the occurrence of an Event of Default under the Leases, the Loan
Agreement or any of the other Loan Documents, other than (i) a Specific Event of
Default or (ii) an Event of Default under Section 14(nn) of the Loan Agreement
(Minimum EBITDA Covenant) for the 12 month period ending July 2, 2006, for the
12 month period ending July 30, 2006 or for the 12 month period ending August
27, 2006.
Upon the occurrence of any Forbearance Default, the Second Forbearance
Period shall, at the option of the Lender, terminate, and all Obligations and
all obligations under the Leases shall automatically become immediately due and
payable without notice or demand of any kind (provided that Lender may rescind
such acceleration in its sole discretion). Upon the termination
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or expiration of the Second Forbearance Period, if at such time the outstanding
amount of the Obligations are not paid in full, the Lender shall be entitled to
exercise all of its rights and remedies under the Leases, the Loan Agreement,
the other Loan Documents and applicable law, including, without limitation, the
right to declare all of the Obligations to be immediately due and payable and to
enforce its Liens on, and security interests in, the Collateral, and to
repossess the equipment leased under the Leases. The occurrence of any
Forbearance Default shall constitute an Event of Default under the Leases, the
Loan Agreement and each of the other Loan Documents.
14. STATUS OF LEASES, LOAN AGREEMENT AND OTHER LOAN DOCUMENTS; NO NOVATION;
RESERVATION OF RIGHTS AND REMEDIES.
(a) This Forbearance Agreement shall be limited solely to the matters
expressly set forth herein and shall not (i) constitute an amendment or waiver
of, or a forbearance with respect to, any term or condition of the Leases, Loan
Agreement or any other Loan Document, except as expressly provided herein, (ii)
except as expressly provided herein, prejudice, restrict or affect any right or
rights which the Lender or any Lender Parties may now have or may have in the
future under or in connection with the Leases, Loan Agreement or any other Loan
Document, or (iii) require the Lender to agree to a similar transaction or
forbearance on a future occasion.
(b) Except to the extent specifically provided herein, the respective
provisions of the Leases, Loan Agreement and the other Loan Documents shall not
be amended, modified, waived, impaired or otherwise affected hereby, and such
documents and the Obligations under each of them are hereby confirmed as being
in full force and effect.
(c) This Forbearance Agreement is not a novation nor is it to be construed
as a release, waiver or modification of any of the terms, conditions,
representations, warranties, covenants, rights or remedies set forth in the
Leases, Loan Agreement or any of the other Loan Documents, except as
specifically set forth herein.
(d) Except as expressly provided herein, the Lender reserves all rights,
claims and remedies that it has or may have against each of the Credit Parties.
15. ACKNOWLEDGMENT OF VALIDITY AND ENFORCEABILITY OF THE LEASES, LOAN AGREEMENT
AND OTHER LOAN DOCUMENTS. Each Credit Party expressly acknowledges and agrees
that the Leases, the Loan Agreement and the other Loan Documents to which it is
a party are valid and enforceable by the Lender against such Credit Party and,
except as expressly modified pursuant to this Forbearance Agreement, expressly
reaffirms each of its Obligations under each Lease and each Loan Document to
which it is a party. Each Credit Party further expressly acknowledges and agrees
that the Lender, has a valid, duly perfected, first priority and fully
enforceable security interest in and lien against each item of Collateral
(including the Second Cherry Hill Note). Each Credit Party agrees that it shall
not dispute the validity or enforceability of the Leases, the Loan Agreement or
any of the other Loan Documents or any of its Obligations thereunder, or the
validity, priority, enforceability or extent of the Lender's security interest
in or lien against any item of Collateral, either during or following the
expiration of the Second Forbearance Period.
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16. RELEASE.
(a) Each Credit Party acknowledges that the Lender would not enter into
this Forbearance Agreement without Borrower's assurance that it has no claim
against the Lender, its respective Subsidiaries, Affiliates, officers,
directors, shareholders, employees, attorneys, agents, professionals and
servants, or any of their respective predecessors, successors, heirs and assigns
(including the Financier each of its financing providers and loan participants,
and each of their respective Subsidiaries, Affiliates, officers, directors,
shareholders, employees, attorneys, agents, professionals and servants)
(collectively, the "Lender Parties" and each, a "Lender Party") arising out of
the Loan Documents or the transactions contemplated thereby. Each of Borrower,
for itself and on behalf of its officers and directors, and its respective
predecessors, successors and assigns (collectively, the "Releasors" and each, a
"Releasor") releases each Lender Party from any known or unknown claims which
any Releasor now has against any Lender Party of any nature, including any
claims that any Releasor, or any Releasor's successors, counsel and advisors may
in the future discover they would have had now if they had known facts not now
known to them, whether founded in contract, in tort or pursuant to any other
theory of liability, arising out of or related to the Loan Documents or the
transactions contemplated thereby.
(b) The provisions, waivers and releases set forth in this Section 16 are
binding upon each Releasor. The provisions, waivers and releases of this Section
16 shall inure to the benefit of each Lender Party.
(c) The provisions of this Section 16 shall survive payment in full of the
Obligations, full performance of all of the terms of this Forbearance Agreement,
the Loan Agreement and the other Loan Documents and/or any action by the Lender
to exercise any remedy available under the Loan Documents, applicable law or
otherwise.
(d) Each Credit Party represents and warrants that it is the sole and
lawful owner of all right, title and interest in and to all of the claims
released by it hereby and it has not heretofore voluntarily, by operation of law
or otherwise, assigned or transferred or purported to assign or transfer to any
person any such claim or any portion thereof. Each Credit Party shall jointly
and severally indemnify, defend, protect and hold harmless each Lender Party
from and against any claim, demand, damage, debt, liability (including payment
of reasonable attorneys' fees and costs actually incurred whether or not
litigation is commenced) based on or arising out of any such assignment or
transfer.
17. FURTHER ASSURANCES. In consideration for the execution of this Forbearance
Agreement by the Lender, each Credit Party agrees to fully and promptly
cooperate in all reasonable respects the Lender and its advisors and counsel
with respect to any matter with respect to which the Lender may reasonably
inquire. Each Credit Party agrees that it will promptly execute and deliver to
the Lender all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Lender may reasonably request,
in order to grant a security interest in, or perfect, protect and maintain the
priority of any pledge, assignment or security interest granted or purported to
be granted under any Loan Document in, any Collateral.
21
18. COSTS AND EXPENSES. All fees and out-of-pocket expenses, including but not
limited to travel expenses and attorneys' and paralegals' fees, incurred by the
Lender or Financier (or its investors or participants) in the negotiation,
preparation, administration (including pursuant to Section 11(i)),
implementation or enforcement of this Forbearance Agreement or the Loan
Documents or Leases or any restructuring of the Leases or the Loan Documents or
any related documents constitute costs and expenses in connection with the
enforcement or preservation of the rights of the Lender under the Loan Documents
and, as such, are payable by Borrower. Without limiting the generality of the
foregoing, Borrower further agrees that it will pay all out-of-pocket costs and
expenses of the Lender and the Financier, including without limitation the fees,
costs and expenses incurred by the Financier (or its investors or participants)
in connection with the negotiation, preparation and implementation of this
Forbearance Agreement or any restructuring of the Loan Documents or Leases or
any related documents. Additionally, the Credit Parties agree to reimburse the
Lender for all of its actual out-of-pocket expenses caused by or related to the
Specific Events of Default, including but not limited to its legal costs and any
default rate interest it has incurred or will incur. The immediately preceding
sentence shall apply solely with respect to indebtedness of the Lender
outstanding and in default on the date hereof. The Credit Parties agree and
acknowledge that such reimbursement amount includes default interest that Lender
is required to pay to Financier at a rate of an additional two and one-half
percent per annum on the total Loan Forbearance Balance as defined above, which
amount equaled $460,580.28 as of June 1, 2006 (the "Additional Interest
Amount"); such amounts shall continue to accrue until paid in full. The Credit
Parties agree and acknowledge that they owe to the Lender the full amount of the
Additional Interest Amount. The Additional Interest Amount is not subject to
offset, reduction or counterclaim by any Credit Party or otherwise. All fees,
costs and expenses referred to in this Section 18, whether incurred in
connection with the Leases, Loan Agreement, this Forbearance Agreement, or
otherwise shall be deemed additional Obligations secured by the Collateral and
shall be payable upon demand.
19. NO WAIVER. The Lender's failure, at any time or times hereafter, to require
strict performance by Borrower of any provision or term of this Forbearance
Agreement, the Leases, the Loan Agreement or any other Loan Document shall not
waive, affect or diminish any right of the Lender thereafter to demand strict
compliance and performance therewith. Any suspension or waiver by the Lender of
a Forbearance Default or of an Event of Default shall not, except as may be
expressly set forth herein, suspend, waive or affect any other Forbearance
Default or any other Event of Default, whether the same is prior or subsequent
thereto and whether of the same or of a different kind or character.
20. SOLE BENEFIT OF PARTIES. This Forbearance Agreement is solely for the
benefit of the parties hereto and their respective successors and assigns
(including the Financier and the other Lender Parties), and no other Person
shall have any right, benefit or interest under or because of the existence of
this Forbearance Agreement.
21. LIMITATION ON RELATIONSHIP BETWEEN PARTIES. The relationship of the Lender,
on the one hand, and each Credit Party on the other hand, has been and shall
continue to be, at all times, that of creditor and debtor. Nothing contained in
this Forbearance Agreement, any instrument, document or agreement delivered in
connection herewith or in the Loan
22
Agreement or any of the other Loan Documents shall be deemed or construed to
create a fiduciary relationship between the parties.
22. NO ASSIGNMENT. This Forbearance Agreement shall not be assignable by any
Credit Party without the written consent of the Lender. The Lender may assign to
one or more Persons (including the Financier) all or any part of, or any
participation interest in, such Lender's rights and benefits hereunder.
23. MISCELLANEOUS. This Forbearance Agreement is a Loan Document. The section
and subsection titles contained in this Forbearance Agreement are included for
the sake of convenience only, and shall not affect the meaning or interpretation
of this Forbearance Agreement, the Leases, the Loan Agreement or any other Loan
Documents or any provisions hereof or thereof. The Schedules to this Forbearance
Agreement are incorporated in, and shall be deemed a part of, this Forbearance
Agreement.
24. GOVERNING LAW; ENTIRE AGREEMENT. THIS FORBEARANCE AGREEMENT SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEVADA. This Forbearance Agreement, the Leases, the Loan Agreement and other
Loan Documents constitute the entire understanding among the parties hereto with
respect to the subject matter hereof and supersede any prior agreements, written
or oral, with respect thereto.
25. CONSULTATION WITH COUNSEL. Each Credit Party represents to the Lender that
it has discussed this Forbearance Agreement, including the provisions of
Sections 14 through 16 hereof, with its attorneys.
26. COUNTERPARTS. This Forbearance Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, and may
be executed either originally or by facsimile (in which case such facsimile
signatures shall for all purposes be treated and considered as original
signatures hereto, which shall fully bind the signatories hereto), each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
* * *
23
IN WITNESS WHEREOF, the parties hereto have executed this Forbearance
Agreement as of the date first written above.
BORROWERS:
CRUISE HOLDINGS I, LLC
By:/S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:President, Managing Member
CRUISE HOLDINGS II, LLC
By:/S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:President, Managing MemberBy:
ROYAL STAR ENTERTAINMENT, LLC
By:/S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:President
RIVIERA BEACH ENTERTAINMENT, LLC
By:/S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:President
Signature Page to PDS / Palm Beach Amended and
Restated Forbearance Agreement
1 of 4
ITG VEGAS, INC.
By:/S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:President
ITG PALM BEACH, LLC
By:/S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:President, Managing Member
Signature Page to PDS / Palm Beach Amended and
Restated Forbearance Agreement
2 of 4
GUARANTORS:
PALM BEACH MARITIME CORPORATION
By:/S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:President, Managing Member
PALM BEACH EMPRESS, INC.
By:/S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:President
INTERNATIONAL THOROUGHBRED GAMING DEVELOPMENT
By:/S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:President
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
By:/S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:President
Signature Page to PDS / Palm Beach Amended and
Restated Forbearance Agreement
3 of 4
LENDER:
PDS GAMING CORPORATION
By:/S/▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO
Signature Page to PDS / Palm Beach Amended and
Restated Forbearance Agreement
4 of 4
Exhibit A
Current Financial Statements
(attached hereto)
Schedule I-A
Original Forbearance Agreement Events of Default
(a) Failure of the Credit Parties to make the payments required by Section
4 of the Original Forbearance.
(b) $50,000 Restricted Payment made by ITGV to ITB on or around April 21,
2006 in violation of Section 8(g) of the Original Forbearance.
Schedule I-B
Specific Loan Events of Default
(a) Event of Default under Section 18(a) of the Loan Agreement resulting
from the failure to make any payment of principal and interest within 10 days of
when due under the Note on the following dates and following amounts: January 1,
2006 (missed payment of $857,296.56), February 1, 2006 (missed payment of
$856,665.93), March 1, 2006 (missed payment of $856,027.41), April 1, 2006
(missed payment of $855,380.91), May 1, 2006 (missed payment of $854,726.33)
June 1, 2006 (missed payment of $854,063.57), and July 1, 2006 (missed payment
of $853,392.52); and
(b) Breach by Borrower of Section 14(nn) of the Loan Agreement (Minimum
EBITDA Covenant) for the 12 month period ended October 30, 2005, for the 12
month period ended November 27, 2005, the 12 month period ended January 1, 2006,
the 12 month period ended January 29, 2006, the 12 month period ended February
26, 2006, the 12 month period ended April 2, 2006, the 12 month period ended
April 30, 2006, the 12 month period ended May 28, 2006, and the 12-month period
ended July 2, 2006.
Schedule I-C
Specific Lease Events of Default
Event of Default under each of the Leases resulting from the cross-default
to the Loan Agreement from and after October 30, 2005 and from the failure to
make scheduled monthly lease payments of $113,512.24 on January 1, 2006,
February 1, 2006, March 1, 2006, April 1, 2006, May 1, 2006, June 1, 2006 and
July 1, 2006.
Schedule II
Potential Loan Agreement Default Triggers
None.
Schedule III
Potential Lease Default Triggers
None.
Schedule IV
Surviving Provisions of the Original Forbearance (with reference to the sections
thereof)
(a) Section 2.
(b) Final Sentence of Section 3.
(c) Section 6(e).
(d) Section 7.
(e) Section 8(i).
(f) Section 8(j).
(g) Section 11.
(h) Section 12.
(i) Sections 14 through 22.
Schedule V
Representations and Warranties as of the Forbearance Effective Date
None.
Schedule VI
Specific Covenant Waivers During Second Forbearance Period
None.
Schedule VII
Costs and Expenses and Wire Transfer Instructions
Total Costs and Expenses:
▇▇▇▇▇▇ ▇▇▇▇ $35,940.20
Sidley Austin $54,152.52
PDS Lenders $ 1,000.00
PDS $15,878.00
Costs & expenses, total $106,970.72
===========
Wire Transfer Instructions for Expense Payments:
Sidley Austin PDS
------------- ---
Bank One, NA Silver State Bank
Routing/ABA: ▇▇▇▇▇▇▇▇▇ Routing/ABA: ▇▇▇▇▇▇▇▇▇
Account: ▇▇▇▇▇▇▇ Account: ▇▇▇▇▇▇▇▇
Ref: 2255-11020
▇▇▇▇▇▇ and ▇▇▇▇
---------------
JPMorgan Private Bank
Routing/ABA: 021 000 021
Credit Account Number: ▇▇▇▇▇-▇▇-▇▇▇
Credit Account Name: T and I Journal
For Further Credit: (FFC) Act. No Q33776 of ▇▇▇▇▇▇ and ▇▇▇▇, LLP
Ref:
Libra (for PDS
--------------
Lender Expenses)
----------------
Comerica Bank
Routing/ABA: ▇▇▇▇▇▇▇▇▇
Account: 1891948166