Exhibit 10.23
Transaction No. 1203-P-01-01
LOAN AND SECURITY AGREEMENT
THIS LOAN AND
SECURITY AGREEMENT (as
amended, restated,
supplemented and
otherwise modified from time to time, this
"Agreement") made and entered into as
of June 30, 2005 by and between PDS Gaming
Corporation, a Minnesota corporation,
with an office and place of business at 6280 Annie Oakley Drive, Las Vegas,
Nevada 89120-3910 ("Lender"), Cruise
Holdings I, LLC, a Nevada limited liability
company ("Cruise I"), Cruise Holdings II, LLC, a Nevada limited liability
company ("Cruise II"), Royal Star Entertainment, LLC, a Delaware limited
liability company ("RSE"), Riviera Beach
Entertainment, LLC, a
Delaware limited
liability company ("RBE"), ITG Vegas, Inc., a Nevada
corporation
("ITGV") and
ITG Palm Beach, LLC, a Delaware limited liability company ("ITGPB"), each
jointly and severally, each with an office and place of
business at One
East
11th Street, Suite 500, Riviera Beach, Florida
33404 (Cruise I, Cruise II, RSE,
RBE, ITGV and ITGPB are hereinafter
individually and collectively referred to as
the "Borrower"), Palm Beach Maritime Corporation, a Delaware corporation
("PBM"), Palm Beach Empress, Inc., a
Delaware corporation ("PBE"), International
Thoroughbred Gaming Development
Corporation, a New
Jersey corporation ("ITGD"),
International Thoroughbred Breeders, Inc., a
Delaware corporation ("ITB"), with
an office and place of business at 1105 North Market Street, Wilmington,
Delaware 19899 (PBM, PBE, ITGD and ITB are hereinafter individually and
collectively referred to as
"Guarantor").
AGREEMENT
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND AGREEMENTS
CONTAINED HEREIN, AND SUBJECT TO THE TERMS OF THIS
AGREEMENT AND THE RELATED
LOAN DOCUMENTS, Lender and Borrower hereby
agree as follows:
1. Definitions. As used in this Agreement,
and not otherwise defined herein, the
following terms shall be defined as
follows:
a. "Affiliate" , with respect to any Loan Party,
(a) each Person
that,
directly or indirectly, owns or controls,
whether beneficially, or as a trustee,
guardian or other fiduciary, five percent (5%) or more of the
capital stock or
other equity ownership interests having
ordinary voting power in the election of
directors or managers (if a limited
liability company) of such Loan Party,(b)
each Person that controls, is controlled by
or is under common control with such
Loan Party, (c) each of such Loan Party's executive officers, directors,
managers (if a limited liability company),
joint venturers and
partners and (d)
the immediate family members, spouses and
lineal
<PAGE>
descendants of individuals who are
Affiliates of Loan Parties. For the purposes
of this definition, "control" of an entity means the
possession,
directly or
indirectly, of the power to direct or cause
the direction of its
management or
policies, whether through the ownership of voting
securities,
by contract or
otherwise; provided, however, that the term "Affiliate" as it relates to
any
Loan Party shall specifically exclude
Lender.
b. "Big Easy Marketing Expenses" means those non-recurring expenses
incurred by Borrower in connection with the promotion and marketing
of the Big
Easy Vessel subsequent to its initial voyage through and including the
grand
opening event, the aggregate amount of
which expenses shall not exceed $250,000.
c. "Big Easy
Mortgage" means that certain first-priority Preferred Mortgage
made by Cruise II, as owner of the Big Easy
Vessel, to and for the benefit of
Lender, securing the original principal amount of the Note in the amount
of
Twenty-Nine Million Three Hundred Thirteen
Thousand Eight Hundred
Eighty Eight
Dollars and Ninety Six Cents (US$29,313,888.96) plus interest,
duly recorded in
the records of the United States Coast
Guard, as assigned to PDS Funding 2004-A,
LLC as permitted under this Agreement.
d. "Big Easy
Vessel" means the
Casino Cruise Ship EMPRESS II, now known as
the Big Easy, United States Official Number
998517 ("Big Easy Vessel").
e. "Charges"
means all federal,
state, county,
city, municipal, local,
tribal, foreign or other taxes of a
governmental authority, levies, assessments,
charges, liens, claims or encumbrances
upon or relating to
(a) the Vessels or
the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross
receipts of any Loan Party, (d) any Loan Party's ownership or use of any
properties or other assets, or (e) any other aspect of any Loan Party's
business.
f. "Code"
means the Uniform
Commercial
Code of Florida
except where the
Uniform Commercial Code of another state governs the
perfection of a
security
interest in the Equipment, as defined in Section 5 herein, located in that
state.
g. "Collateral" means the assets of the Loan Parties from time to time
pledged pursuant to the Security Agreement,
the Pledge Agreement,
the Turnberry
Note Pledge or the OC Note Pledge. "Collateral" shall include, without
limitation, purchase price, rents, revenues, royalties, license fees, other
fees, issues, profits, principal and interest payments,
monies, properties,
accounts, payment intangibles, receipts and
other payments of every kind arising
from the Turnberry Note, the ownership, sale, financing or operation by Loan
Parties of the
2
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
Vessels, dividends and other distributions received from Special Purpose
Subsidiaries in connection with the
operation of Royal Star Vessel in Brazil (if
so operated) and any Gaming Investment.
h. "Contingent
Event" shall be deemed
to have occurred upon the occurrence
of (i) the combined annual PB Earnings, defined below, with respect to ITGV's
United States domestic operations, is greater than Seventeen
Million Dollars
($17,000,000.00) (hereinafter referred to as, an
"Earnings Event") and (ii) the
aggregate combined ITG Debt, as defined
below, of ITGV and ITGPB is less than
two and three tenths (2.3) times the
combined annual PB Earnings with respect to
ITGV's United States domestic operations. For purposes of calculating the
existence of a Contingent Event, the amount of debt associated with any PDS
Entity operating lease shall be determined by
reducing the original
equipment
cost or gross lease amount of such PDS Entity
operating lease by (i) 2.7% per
month for a thirty-six (36) month lease, (ii) 2.0% per month for a
forty-eight
(48) month lease and (iii) 1.6% per month for
a sixty (60) month
lease until
such time as such lease is paid in full;
at which time it shall be reduced to
zero.
i. "Control"
(including with
correlative meaning, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly,
of the power to direct
or cause
the direction of the management and
policies of that Person, whether through the
ownership of voting securities, by contract
or otherwise.
j. "EBITDA" means, with respect to any Person and for any period of
determination, an amount equal to (i) net income (or
deficit) of such Person
determined in accordance with GAAP ("Net Income") for such period,
after the
exclusion of (A) all items which should be
classified
as extraordinary, all
determined in accordance with GAAP, (B) all
non-recurring "pre-opening" expenses
incurred in connection with any Vessel
prior to its initial voyage, (C) Big Easy
Marketing Expenses, (D) all insurance proceeds (other
than proceeds of business
interruption insurance) received by such
Person during such period to the extent
included in Net Income and (E) tax gains and
losses of such
Person upon the
disposition of capital assets plus (ii) all amounts
deducted in computing
Net
Income for such period in respect of (A) Interest Expense, (B) noncash
amortization expense, (C) depreciation,
(D) income taxes and
(E) the payment of
the ITGV Employee Bonuses.
k. "Eligible Bank" means a bank that (a) either
(i) has (A) a
short-term
unsecured debt obligations rating of at least "AA" by
Standard & Poor's and, if
rated by another rating agency, are rated in an equivalent category by such
other rating agency, or (B) a long-term
unsecured debt
obligations rating of at
least "AA-" by
3
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
Standard & Poor's and, if rated by another rating agency, are rated in an
equivalent category by such other rating agency, or (ii) is another bank
satisfactory to Lender, and (b) insures the deposits with
such bank through the
Federal Deposit Insurance Corporation.
l. "Excess Cash"
means, as determined for the Borrower for any period
of
determination, beginning July 4, 2005,
the cumulative
EBITDA through the
last
day of such period of determination less (without duplication and each as
expended during such period of determination): (i) Interest Expense; (ii)
payments in respect of taxes, including payments made pursuant to the
terms of
the Tax Sharing Agreement, (iii) permitted Capital
Expenditures
actually made
(as opposed to committed), (iv) Charter Payments, (v) ITB
Distributions,
(vii)
principal payments paid in respect of
Indebtedness,
including the Loan, (viii)
all non-recurring "pre-opening" expenses incurred in
connection with any Vessel
prior to its initial voyage and (ix) Big
Easy Marketing Expenses.
m. "Gaming
Investment" means a
portion of the original principal amount of
the Loan in an amount up to $1,999,696.84,
which may be used solely by a Special
Purpose Subsidiary in accordance with the
terms hereof to make an Investment in
a gaming business.
n. "Guaranty" means that certain guaranty of even date herewith made by
ITB, PBM, PBE and ITGD for the benefit of Lender and guaranteeing the
obligations of Borrower under this
Agreement, the Note,
the Security
Agreement
and other documents related thereto.
o. "Guaranteed Indebtedness" means, with respect to any Person, any
obligation guaranteeing, providing comfort or otherwise supporting any
Indebtedness, lease, dividend, or other
obligation ("primary obligation") of any
other Person (the "primary obligor") in any
manner, including any
obligation or
arrangement to (a) purchase or repurchase any such primary obligation, (b)
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital
of the primary
obligor or otherwise to maintain the net
worth or solvency or any balance sheet
condition of the primary obligor, (c)
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) protect the beneficiary of such arrangement from loss (other
than product warranties given in the ordinary course of business) or (e)
indemnify the owner of such primary
obligation against
loss in respect thereof.
The amount of any Guaranteed Indebtedness at any time shall be deemed to be
an
amount equal to the lesser at such time of
(x) the stated or determinable amount
of the primary obligation then outstanding then
outstanding in respect of which
such Guaranteed Indebtedness is
incurred
4
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
and (y) the maximum amount for which such Person may
be liable pursuant to
the
terms of the instrument embodying such
Guaranteed Indebtedness, or the terms of
the Indebtedness being guaranteed, as applicable, or if not stated or
determinable, the maximum reasonably anticipated liability (assuming full
performance) in respect thereof.
p.
"Indebtedness" means,
with respect to any Person, (i) all iindebtedness
for borrowed money, (ii) that portion of obligations with respect to capital
leases which is properly classified as a liability on a balance sheet in
conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not
representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the
deferred purchase
price of
assets, real or personal property or services which purchase price is (a)
due
more than six (6) months from the date of incurrence of the obligation in
respect thereof, or (b) evidenced by a note
or similar written
instrument, (v)
all indebtedness secured by any lien on any
property or asset owned or held by
such Person regardless of whether the
indebtedness
secured thereby shall
have
been assumed by such Person or is
nonrecourse to the credit of such Person, (vi)
all indebtedness created or arising under any
conditional sale or
other title
retention agreement with respect to property
acquired (even though
the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (vii) all
obligations under commodity purchase or option agreements or other commodity
price hedging arrangements, in each case, whether contingent
or matured, (viii)
all obligations under any foreign exchange
contract, currency swap agreement,
interest rate swap, cap or collar agreement or other similar agreement or
arrangement designed to alter the risks
arising from
fluctuations in
currency
values or interest rates, in each case
whether contingent or
matured, (ix) all
indebtedness referred to above secured by (or for which the holder of such
indebtedness has an existing right,
contingent or
otherwise, to be
secured by)
any lien, security interest or other encumbrance upon or in property or
other
assets (including accounts and contract
rights) of such Person, even though such
Person has not assumed or become
liable for the
payment of such
indebtedness,
and (x) the Obligations.
q. "Interest
Expense" means, with
respect to any measuring period, the sum
of all interest expense (cash and non-cash) paid or required to be paid by
Borrower during such period in respect of all Indebtedness of Borrower,
including the Loan. r. "Investments" means, with respect to any Person,
any
capital stock or other equity ownership interest, evidence of Indebtedness,
partnership or limited liability company interest or other securities of any
other entity, any loan, advance,
contribution of capital, extension of credit or
commitment therefor, including without
5
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
limitation the guaranty of Indebtedness of others or make whole
commitment or
similar obligation, and any purchase of or agreement to purchase (a) any
securities of another entity or (b) any business or
undertaking
of any other
Person or any commitment or option to make any
such purchase,
provided, that
Investments shall not include current trade and customer
accounts receivable
(excluding advances) for goods or services
provided or rendered in the ordinary
course of business and payable in
accordance with customary trading terms in the
ordinary course of business by such
Person.
s. "ITG Debt" means all Indebtedness of Borrower and any of their
respective Subsidiaries, whether secured or unsecured, including without
limitation (A) the Leases and any future
operating lease with any PDS Entity,
(B) any capital leases, (C) obligations of ITB that are
recourse to ITGV, (D)
any debt of ITGV Subsidiaries that own or
operate any collateral or security for
any PDS Entity operating or capital lease,
and (E) such debt created, related to
or arising from any Palm Beach Entity's
obligations pursuant
to this Agreement,
the Note, the Mortgages, any other Loan Documents, the Big Easy Vessel, the
Princess Vessel and the Royal Star
Vessel; but not including fees and other
charges paid or payable (but not in default) in respect thereof and not
including existing and future operating leases between ITGV or ITGPB and any
party other than a PDS Entity, its
Subsidiaries and Affiliates, approved by PDS
in writing prior to execution.
t. "ITGV
Employee Bonuses" means cash bonuses to be paid by ITGV to
certain
of its employees in an aggregate
amount not to exceed
$368,600 plus the
amount
of the payroll taxes owing in respect
thereof, which bonuses are to be paid
in
lieu of granting certain options to purchase shares of
ITB's common stock that
were authorized in 2003.
u. "ITGV
Parties" means ITGV, ITGPB, RBE and RSE.
v. "Leases"
means, both
individually and
collectively,
(i) that certain
Master Lease Agreement made and entered
into as of July 6, 2004 among PDS Gaming
Corporation, as lessor ("PDS"), ITGV and
ITGPB, together with the Lease Schedule
Nos. T3, T4 and T5 thereto, wherein PDS
leases certain gaming equipment ("Gaming
Equipment") identified therein to ITGV and
ITGPB for use on the Big Easy Vessel
and Princess Vessel and (ii) that certain Master Lease Agreement made and
entered into as of the date hereof between PDS and RSE, together with Lease
Schedule No. 1 thereto, wherein PDS leases certain Gaming
Equipment
identified
therein to RSE for use on the Royal Star
Vessel.
w. "Lender's
Account" means account
number 35013958
maintained at
Silver
State Bank.
6
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
x. "Loan
Documents"
means this
Agreement,
the Note, the
Mortgages, the
Security Agreement, the Controlled Account
Agreement(s), the
Pledge Agreement,
the Turnberry Note Pledge, the OC Note
Pledge, the Guaranty,
the Leases and any
other documents related thereto.
y. "Loan Party"
means Borrower and Guarantor.
z. "Management
Services Agreement" means a management
services agreement
between a Borrower or an Affiliate of
Borrower (e.g., ITB Investment, Inc.) and
a Special Purpose Subsidiary pursuant to
which the Borrower provides management,
accounting or other services to the Special
Purpose Subsidiary on an arms-length
basis and in exchange for reasonable and
commensurate compensation.
aa. "Mortgages" means, both individually and collectively,
the Big Easy
Mortgage, the Princess Mortgage and the
Royal Star Mortgage.
bb. "Net
Revenue" means, without duplication, (i) fare revenue plus casino
revenue plus on-board revenue less (ii) the total amount of complimentary
passenger fares plus other discounts.
cc. "Note" means
that certain promissory note of even date herewith made by
Borrower, jointly and severally, and
payable to Lender.
dd. "Obligations" means all present
and future liabilities and obligations
of Borrower to Lender hereunder
(including
without limitation the
Loan), under
the Note, under the other Loan Documents and all other liabilities and
obligations of Borrower to Lender of every kind,
now existing or hereafter
owing, matured or unmatured, direct or
indirect, absolute or
contingent, joint
or several, including any extensions and renewals thereof and substitutions
therefor.
ee. "OC Note"
means that certain
Promissory Note, dated
May 1, 2002, made
by OC Realty, LLC in favor of ITGV, in the
principal amount of $2,021,176.90.
ff. "OC Note
Pledge" means that certain Pledge Agreement of even date
herewith made by ITGV in respect of the OC
Note.
gg. "Palm Beach Port Lease"
means that certain
Maritime Office Complex
Lease & Operating Agreement,
dated on or about
April 26, 2002, between ITGV, as
lessee, and Port of Palm Beach District, as
lessor.
hh. "PB
Earnings" means (i) Borrower's EBITDA plus (ii) without
double
counting, rents, as specifically permitted
below, calculated on
the prior four
months' average PB Earnings annualized as set forth on the
attached Exhibit
C.
Further, Lender and the Borrower acknowledge and agree that for purposes of
calculating PB
7
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
Earnings, hereunder, "rents" shall (y) only include any
interest payments made
by Borrower to any PDS Entity under the Loan Documents and any rent payments
made by Borrower to Lender under either
Lease, and (z) specifically exclude any
other rent, lease, interest, principal or similar payments made
by any of the
Palm Beach Entities to any of the other Palm Beach Entities or any third
parties.
ii. "PDS
Entities" means PDS,
Lender, Cruise Holdings III, LLC, a
Nevada
limited liability company, Cruise Holdings IV, a Nevada limited liability
company, and any other Subsidiaries or
affiliates of PDS.
jj. "Permitted
Investments" means (i)
marketable direct obligations issued
or unconditionally guaranteed by the United States or any agency thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the
date of creation
thereof and currently having one of the two highest
ratings obtainable from
either Standard & Poor's or Moody's
Investors Service,
Inc., (iii) certificates
of deposit, maturing no more than one (1) year from the date of creation
thereof, issued by an Eligible Bank, (iv)
time deposits,
maturing no more than
thirty (30) days from the date of creation
thereof with an
Eligible Bank,
(v)
money market or mutual funds that invest solely in one or more of the
investments described in clauses (i) through
(iv) above,
and (vi) the
Gaming
Investment, provided that, with respect to
item (vi), such Gaming Investment (A)
is consummated through and held by a
Special Purpose
Subsidiary, (B) will
not,
in Lender's good faith determination,
made in its sole and
exclusive discretion
at the time of the investment, jeopardize Lender's (or Lender's parent
company's, Subsidiaries' or affiliates')
business or privileged licenses and (C)
cannot be made unless and until such time as (I) the
Loan Parties
have fully
complied with Section 14(qq) hereof and (II) the Big Easy Vessel (x) has
received all required governmental
approvals to permit it to conduct voyages for
paying customers and (y) has conducted its
first regularly
scheduled voyage for
paying customers.
kk. "Person"
means any individual or entity.
ll. "Pledge
Agreement"
means that certain
Pledge Agreement of even date
herewith made by Guarantor to and for the
benefit of Lender.
mm. "Princess Mortgage" means that certain first-priority Preferred
Mortgage made by Cruise I, as owner of the Princess Vessel, to and for the
benefit of Lender, securing the original principal amount of the Note in the
amount of Twenty-Nine Million Three Hundred Thirteen Thousand Eight Hundred
Eighty Eight Dollars and Ninety Six Cents
(US$29,313,888.96) plus interest, duly
recorded in the Panama Registry, as assigned to PDS Funding 2004-A, LLC as
permitted under this Agreement.
8
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
nn. "Princess Vessel" means the casino cruise ship Palm Beach
Princess
(Patente No. 12324-PEXT-7 and IMO No.
8402937).
oo. "RBE Dock
Lease" means that
certain Dockage
Space Agreement, dated
January 5, 2005, between RBE and the City
of Riviera Beach.
pp. "Recourse
Indebtedness" means,
without double
counting,
Indebtedness
and Guaranteed Indebtedness, the terms and conditions of which
Indebtedness or
Guaranteed Indebtedness, as the case may be, permit the lender of such
Indebtedness or Guaranteed Indebtedness, as the case may be, to seek
recourse
directly against any Loan Party (without limiting such recourse to certain
collateral or assets), as the case may be,
upon default by a Loan Party under or
with respect to such Indebtedness or
Guaranteed Indebtedness.
qq. "Restricted
Payments" means, with
respect to any Borrower, any of the
following: (a) the declaration or payment
of any dividend or distribution or the
incurrence of any liability to make any
other payment or distribution of cash or
other property or assets in respect of
capital stock or other equity ownership
interest (including, without limitation, a return of capital) other than
any
such declaration or payment or
distribution
made by PBM or PBE of
any Charter
Payment permitted to be paid hereunder; (b) any payment on account of the
purchase, redemption, defeasance, sinking fund or other retirement of such
Borrower's capital stock or other equity
ownership interest or any other payment
or distribution made in respect thereof, either directly or indirectly
other
than to or in respect of another Borrower; (c) any payment made to redeem,
purchase, repurchase or retire, or to obtain the surrender of, any
outstanding
warrants, options or other rights to acquire capital stock or other equity
ownership interest of such Borrower now or hereafter outstanding; (d) any
payment of a claim for the rescission of the purchase or sale of, or for
material damages arising from the purchase
or sale of, such Borrower's capital
stock or other equity ownership interest or of a claim for reimbursement,
indemnification or contribution
arising out of or
related to any such claim for
damages or rescission other than by another Borrower; (e) any payment, loan,
loan repayment, contribution, or other transfer of funds or
other property to
any direct or indirect holder of the capital stock or other equity ownership
interest of such Borrower other than to another Borrower or to the equity
holders of PBM or PBE of any Charter
Payment permitted to be paid hereunder; or
(f) any payment of management or consulting fees (or other fees of a
similar
nature) to any affiliate or to any holder of the
capital stock or other
equity
ownership interest of such Borrower or their Affiliates other than payments
expressly permitted by Section 14(w).
9
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
rr. "Royal Star Mortgage" means that certain first-priority Preferred
Mortgage made by RSE, as owner of the Royal
Star Vessel, to and
for the benefit
of Lender, securing the original principal amount of the Note in
the amount of
Twenty-Nine Million Three Hundred Thirteen
Thousand Eight Hundred
Eighty Eight
Dollars and Ninety Six Cents (US$29,313,888.96) plus interest,
duly recorded in
the SVG Registry, as assigned to PDS
Funding 2004-A, LLC as permitted under this
Agreement.
ss. "Royal Star Vessel" means the casino cruise ship Royal Star (St.
Vincent and the Grenadines Official Number
6695, IMO Number 8409056).
tt. "Secured Property" means the Vessels and
the Collateral (as each such
term may be further described from time to
time in the Mortgages or the Security
Agreement, as the case may be).
uu. "Security
Agreement" means that
certain Pledge and Security Agreement
of even date herewith made by Borrower to
and for the benefit of Lender.
vv. "Special
Purpose Subsidiary"
means an entity at least 50%-owned by any
Borrower, which Subsidiary is formed for the sole purpose of (i) owning and
operating the Royal Star Vessel in Brazil
or (ii) making a Permitted Investment
with the Gaming Investment.
ww. "Subsidiary" means any entity, the
majority of whose voting shares are
at any time owned, directly or indirectly, by (i) Borrower or (ii) any
entity
whose voting shares are at any time
owned, directly or indirectly owned by
Borrower.
xx. "SVG" means
St. Vincent and the Grenadines.
yy. "Tax Sharing
Agreement"
means that
certain Amended and Restated Tax
Sharing Agreement, dated as of July 1, 2004, by and between ITB and the
subsidiaries of ITB signatory thereto.
zz. "Term" means
a period of time
commencing on the date of this Agreement
and terminating upon the Termination
Date.
aaa.
"Termination
Date" means the date on which the Loan has been
indefeasibly repaid in full in cash and all
other Obligations hereunder and
under the other Loan Documents have been
completely discharged.
bbb.
"Turnberry
Note" means that
certain Promissory
Note, dated November
29, 2000, made by Realen-Turnberry/Cherry
Hill, LLC in favor of
GSRT, LLC, in
the principal amount of $10,000,000.
ccc.
"Turnberry
Note Pledge" means
that certain Pledge
Agreement of even
date herewith made by ITB in respect of the
Turnberry Note.
10
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
ddd.
"Useable Excess Cash"
means Excess Cash in excess of $3,000,000 as of
a date of determination.
eee. "Vessel" or
"Vessels" means, both
individually and collectively, the
Princess Vessel, the Big Easy Vessel and the Royal Star Vessel, including
without limitation such General Improvements located on any or each of the
Vessels. General Improvements shall mean all equipment and
FF&E as defined in
Section 1250 of the United States
Internal Revenue Service Publication 946,
where the equipment and FF&E is considered a structural
component or
critical
operating component of the Vessel.
2. Loan. Lender hereby agrees to lend to
Borrower, and Borrower hereby agrees to
borrow from Lender, a term loan in the
aggregate principal amount of Twenty-Nine
Million Three Hundred Thirteen Thousand Eight Hundred Eighty
Eight Dollars and
Ninety Six Cents (US$29,313,888.96) (the
"Loan") on the terms and conditions set
forth below. No amount of the Loan may be
reborrowed after repayment thereof.
3. Note and Mortgages. The Loan shall be evidenced by
Borrower's execution
and
delivery to Lender of the Note,
and the Note shall be
secured by the
Guaranty,
the Mortgages, the Security Agreement, the Pledge
Agreement, the Turnberry Note
Pledge, the OC Note Pledge Agreement and
the Controlled Account
Agreement(s).
The Note shall provide for Borrower's agreement to repay the Loan in full
(together with all accrued and unpaid
interest) in
accordance with the terms of
this Agreement on or before the earlier to occur of (i) July 1,
2009 and (ii)
the date on which the Lender has
accelerated the Loan
pursuant to Section 19 of
this Agreement (the "Maturity Date").
4. Payments. Principal and interest under the
Note shall be paid by Borrower to
Lender as follows:
a. Subject to
Section 4(i),
scheduled payments of principal and
interest
under the Note shall be paid by
Borrower to Lender in accordance with the PB
Vessel Payment Summary ("Payment Summary"), attached hereto as Exhibit A
and
incorporated herein by reference. Such scheduled payment of principal and
interest due under the Note, as set forth
in the Payment Summary, shall commence
on the first day of the month succeeding the Closing and be paid monthly
thereafter, on the first day of the month and
continuing through the
remainder
of the Term; provided that all then
outstanding principal and accrued but unpaid
interest shall be due and payable on the
Maturity Date (each a "Payment Date").
b. From and
after the date a Contingent Event has occurred, on each Payment
Date, subject to Section 4(i), Borrower shall make scheduled payments of
principal and interest in respect of the
Note as set forth in the column of the
Payment Summary marked "Total Contingent
Event Payment". Prior to the occurrence
of a Contingent Payment Date, on each Payment Date, Borrower shall make
scheduled payments of principal and
interest
11
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
in respect of the Note as set forth in the
column of the Payment
Summary marked
"Total Payment". Notwithstanding the foregoing,
during any time during which an
Event of Default has occurred and is
continuing hereunder,
Borrower shall pay
additional interest in respect of the then
outstanding principal
amount of the
Note (and all overdue interest thereon) at a per annum rate of
two and one-half
percent (2.5%) (the "Default Rate"). Interest at the Default Rate shall be
payable on demand and shall accrue from the initial date of such Event of
Default until such Event of Default is
cured or waived.
c. Principal and interest accrued hereunder and under the Note shall
be
payable in lawful money of the United
States of America to Lender (i) in respect
of scheduled payments of principal and interest by automated clearing house
transfer initiated by Lender to Lender's Account, or (ii) in the event not
initiated by Lender, and in respect of all other
amounts owed by wire
transfer
to the Lender Account, or to such other account as Lender may designate in
writing from time to time to Borrower.
d. Except as set
forth in Sections 4(e), 4(f), 4(g)(1), 4(g)(2), 4(h)(1),
4(i)(3), 4(j)(1), 4(j)(2), 4(k)(1), and
13(c)(2) of this Agreement, Borrower may
not prepay the Loan at any time prior to
January 1, 2006. Except as set forth in
Sections 4(e), 4(f), 4(g)(1), 4(g)(2), 4(h)(1), 4(i)(3), 4(j)(1), 4(j)(2),
4(k)(1), and 13(c)(2) of this Agreement, after January 1, 2006,
Borrower may
prepay all or any portion of the Loan,
whether voluntary or
upon the occurrence
of an Event of Default and the acceleration of the Obligations
under the Note,
by making a payment of such principal prepaid plus all accrued but unpaid
interest thereon plus a prepayment
premium calculated as follows: (i) seven
percent (7%) of the principal prepaid for
any prepayment between January 1, 2006
and December 31, 2006; (ii) five percent (5%) of the
principal prepaid for
any
prepayment between January 1, 2007 and December 31,
2007; (iii) three
percent
(3%) of the principal prepaid for any prepayment between January 1, 2008 and
December 31, 2008; and (iv) zero percent (0%) of the
principal prepaid for
any
prepayment after January 1, 2009. Borrower
shall submit, at Lender's option, the
full pre-payment amount to Lender on the
fifteenth (15th) day of the month;
provided, however, Borrower shall have previously made such month's total
payment under the Note.
e. At any time
during which any Charter Payment for the Big Easy Vessel
or
the Princess Vessel is not permitted
pursuant to paragraph 14(w) below, the then
remaining balance of principal and interest due with respect to the Gaming
Investment may be prepaid in full at the
option of Borrower at any time upon the
payment of such principal and interest
prepaid plus a prepayment premium of two
percent (2%) of the principal then outstanding with respect to the Gaming
Investment.
12
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
f. Borrower
shall prepay the
proportionate amount
of the then outstanding
balance of principal and accrued interest
due under the Note attributable to the
Royal Star Vessel (the "Proportionate Share"), as set forth on the Payment
Summary, (i) upon consummation of a sale of
the Royal Star Vessel that complies
with Section 14(z) or (ii) upon removal of
the Royal Star Vessel from the United
States; provided that in the event of any
such removal or in the event of a sale
after one year from the date of the
Closing, Borrower
additionally shall pay to
Lender a prepayment premium in an amount equal to five percent (5%) of the
Proportionate Share.
g. Upon the
receipt by Borrower of any proceeds from the sale, assignment,
transfer or other disposition of the
Turnberry Note ("Turnberry Sale Proceeds"),
if no Event of Default has occurred and is
continuing,
Borrower shall pay and
apply the Turnberry Sale Proceeds in the
amounts, and in the
order of priority,
set forth below:
(1) first,
to the Lender in an
amount equal to the
then outstanding
Deferred
Principal Amount (the "Deficiency Repayment"), whereby the amount
of the Maximum
Deferred Principal (as defined below) shall
be permanently
reduced by the
amount of such Deficiency Repayment; then
(2) second, to the Lender in an amount equal to the lesser of (y)
Five
Million Dollars
($5,000,000)
less the amount of the
Deficiency
Repayment
made
pursuant to clause (1) of this Section 4(g) and (z) the Turnberry
Sales Proceeds
less the amount of the Deficiency Repayment made pursuant to
clause (1) of
this Section 4(g) (the
"Turnberry Sale
Prepayment"),
which
Turnberry
Sale Prepayment shall be applied to first to any
accrued and
unpaid interest
on account of the outstanding principal amount of the Loan
until
such interest is paid in full and second to the then outstanding
principal amount
of the Loan; then
(3) third, any amount
of Turnberry
Sale Proceeds remaining after
payments have
been made pursuant to
Sections 4(g)(1) and
4(g)(2) shall be
paid to ITB, and
upon such payment to ITB, the Turnberry Note Pledge shall
terminate and
Lender shall return the originally executed Turnberry Note to
ITB.
h. Upon the
receipt by Borrower of any payment of principal or interest or
otherwise under the terms of the Turnberry
Note ("Turnberry Note
Payment"), if
no Event of Default has occurred and is
continuing, Borrower shall pay and apply
the Turnberry Note Payment in the amounts,
and in the order of
priority, set
forth below:
(1) first, to the
Lender in an amount
equal to the then
outstanding
Deferred
Principal Amount, whereby the amount of the Maximum Deferred
Principal
shall be permanently reduced by the amount of such
Deficiency
Repayment;
then
13
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
(2) second, any amount
of the Turnberry Note Payment remaining after
payment has been
made pursuant to Section 4(h)(i) shall be paid to ITB.
i. If, at such time as any
scheduled payment of principal and interest
is
due under Section 4(a) or 4(b) hereof, the amount of such scheduled payment
exceeds the amount of Borrower's
Excess Cash for the
calendar month
preceding
the date such payment is due (which amount of Excess Cash shall be
calculated
for purposes of this Section 4(i) without
deducting the Charter Payments paid in
such prior calendar month, if any), then, so long as no Event of
Default has
occurred and is continuing, Borrower may defer the
principal portion of such
scheduled payment (the "Principal Amount") in accordance with the terms and
conditions of this Section 4(i).
(1) The amount of the principal that may be deferred hereunder with
respect to any
one scheduled payment shall be equal to the Principal Amount
for such
scheduled payment less the amount of
Borrower's Excess Cash
for
the month
preceding the date
such scheduled payment
is due (the "Deferred
Principal
Amount"). Any Principal Amount that is not deferred under
this
Section 4(i)
shall be paid in accordance with the terms of Section 4(a)
or
4(b), as
applicable.
(2) The total Deferred Principal Amount that may be deferred
hereunder
shall at no time
exceed $3,000,000 (the "Maximum Deferred Principal"), as
such Maximum
Deferred Principal may be permanently reduced from time to
time by payments
made by Borrower in accordance with Section 4(g)(1),
4(h)(1), 4(j)(1)
or 4(k)(1).
(3) All or any portion of the Deferred Principal Amount may be repaid
by Borrower on
any subsequent Payment
Date without penalty;
provided that
all Deferred Principal Amount not repaid by the
Maturity Date shall be
payable in full
on the Maturity Date;
provided further that
any repayment
of Deferred
Principal Amount shall not increase the Maximum Deferred
Principal in
effect at the time of such repayment.
Nothing in this
Section 4(i) shall be deemed to permit
any deferral or
postponement of the payment of any interest due in respect of any scheduled
payment.
j. Upon the
receipt by Borrower of any proceeds from the sale, assignment,
transfer or other disposition of the OC Note ("OC
Sale Proceeds"), if no
Event
of Default has occurred and is continuing, Borrower shall pay and apply the
OC
Sale Proceeds in the amounts, and in the
order of priority, set forth below:
14
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
(1) first, to the
Lender in an amount
equal to the then
outstanding
Deferred
Principal Amount, whereby the amount of the Maximum Deferred
Principal
shall be permanently reduced by the amount of such
Deficiency
Repayment;
then
(2) second, to the
Lender in an amount equal to the lesser of (y) One
Million Dollars
($1,000,000)
less the amount of the
Deficiency
Repayment
made
pursuant to clause (1) of this Section 4(j) and (z) the OC Sales
Proceeds
less the amount of the
Deficiency
Repayment made pursuant to
clause (1) of
this Section 4(j) (the "OC Sale Prepayment"), which OC Sale
Prepayment
shall be applied to
first to any accrued and unpaid interest on
account of the
outstanding principal amount of the Loan until such interest
is paid in full
and second to the then outstanding principal amount of the
Loan; then
(3) third, any amount
of OC Sale Proceeds
remaining after
payments
have been made
pursuant to Sections
4(j)(1) and 4(j)(2)
shall be paid to
ITGV, and upon
such payment to ITGV, the OC Note Pledge shall terminate and
Lender shall
return the originally executed OC Note to ITGV.
k. Upon the
receipt by Borrower of any payment of principal or interest or
otherwise under the terms of the OC Note
("OC Note Payment"), if no Event of
Default has occurred and is continuing,
Borrower shall pay and apply the OC Note
Payment in the amounts, and in the order of
priority, set forth below:
(1) first, to the
Lender in an amount
equal to the then
outstanding
Deferred
Principal Amount, whereby the amount of the Maximum Deferred
Principal
shall be permanently reduced by the amount of such
Deficiency
Repayment;
then
(2) second, any amount
of the OC Note Payment remaining after payment
has been made
pursuant to Section 4(k)(i) shall be paid to ITGV.
5. Coordination of Prepayments. In
connection with (and prior to) any prepayment
of any portion of the Obligations pursuant to Section 4 above,
Lender and the
Borrower will contact and coordinate
with PDS' financier, PDS Funding 2004-A,
LLC (11766 Wilshire Boulevard, Suite 870, Los Angeles,
California 90025;
Tel.:
(310) 312- 5600; Fax: (310) 312-5658; Attn: Jess M. Ravich) in order to
(a)
confirm the date and amount of the prepayment and (b) confirm PDS Funding
2004-A, LLC's wire transfer instructions for such prepayment (together, the
"Prepayment Details"). Borrower shall only make
prepayments of the Obligations
in accordance with the Prepayment Details and no such prepayment will be
effective or credited against the Obligations unless paid in such manner
(provided that if a prepayment is made in a manner other than as
set forth in
the Prepayment Details, Lender and Borrower
shall
15
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
cooperate to ensure that such prepayment is
redirected and applied in accordance
with the Prepayment Details). In the event that the Borrower determines to
prepay the Obligations in full,
Lender will coordinate
with PDS Funding 2004-A,
LLC to provide (x) for any original collateral for the Obligations or
instruments evidencing the Obligations that are held by Lender or PDS
Funding
2004-A, LLC to be returned to Borrower and
(y) for the prompt termination of any
mortgage or security documents securing the Obligations, in each case, at
Borrower's cost and only upon complete
satisfaction of the Obligations.
6. Fees and Expenses. On the date of the Funding Borrower shall (a) pay a
closing fee equal to One Hundred Sixty-Five Thousand and No/100ths Dollars
(US$165,000.00) to Lender and (b) reimburse Lender for all of Lender's
out-of-pocket expenses, charges, costs and fees, including
Lender's reasonable
attorney's fees, incurred in connection
with the Loan; provided, however, such
fees and expenses to be paid under this
Section 6(b) shall in no event exceed
Ninety Thousand and No/100ths Dollars
(US$90,000.00).
7. ACH Authorization. Borrower shall complete, execute
and deliver to Lender an
Authorization for Automatic Payment form, which authorizes Lender to deduct
payments of Borrower's monetary Obligations under this Agreement and the
Note
directly from Borrower's checking or savings account at a specified
financial
institution in accordance with this
Agreement or the Note.
8. Closing Documents. The closing of this Loan Agreement
(the "Closing") shall
occur on the date on which Lender shall
have received this
Agreement,
together
with the schedules and exhibits hereto,
duly executed by an
authorized officer
of each Loan Party. The parties anticipate that the Closing will occur on or
before June 30, 2005 and that the funding
of the Loan (the "Funding") will occur
on or before July 8, 2005, each at such
time and place or in such a manner as is
mutually agreeable to Borrower and
Lender.
a. Conditions to
Funding - Lender. The Funding shall occur only if and when
all of the conditions precedent set forth in this Section 8(a) have been
satisfied or waived, as determined in Lender's sole
discretion. As a
condition
to the making of the Loan hereunder, on or prior to the date of the
Funding,
Lender shall receive all of the following
in form and substance
satisfactory to
Lender:
(1) The Note, duly executed by an authorized officer of
Borrower;
(2) The Big
Easy Mortgage executed by an authorized officer of
Borrower and
properly recorded with
the United States Coast Guard granting
a preferred
maritime lien upon the Big Easy Vessel;
16
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
(3) The Princess
Mortgage and any other documents required by the
Registry
of the Republic of Panama ("Panama Registry") executed by an
authorized
officer of Borrower and properly recorded with the Panama
Registry
granting a preferred maritime lien upon the Princess Vessel;
(4) The Royal Star
Mortgage, Affidavit of Good Faith and any other
documents
required by the Register of Ships of St. Vincent and the
Grenadines ("SVG
Registry"), executed
by an authorized officer of Borrower
and properly
recorded with the SVG Registry granting a preferred maritime
lien upon the
Royal Star Vessel;
(5) Security Agreement
duly executed by an authorized officer of each
Borrower;
(6) Pledge Agreement duly executed by authorized officers of ITB,
PBM,
PBE and
ITGD;
(7) Turnberry Note Pledge duly executed by ITB;
(8) OC Note Pledge duly executed by ITGV;
(9) Controlled Account Agreement(s) executed by an authorized
officer
of each Borrower
and by an authorized
officer of the
Controlled
Account
Bank;
(10) Collateral
Assignment
of Maritime Office Complex Lease and
Operating
Agreement and Other Leases ("Collateral Assignment") executed by
an authorized
officer of ITGV;
(11) Leasehold
Mortgage
and Security Agreement executed by an
authorized
officer of ITGV;
(12) Financing
statements (Form UCC-1) completed and ready for filing
under
the Code in all such jurisdictions as may be necessary or, in
Lender's
opinion, desirable to
perfect Lender's security interests created
under this
Agreement;
(13) Insurance
Certificate(s) duly
executed by an authorized officer
of Borrower
confirming that the insurance required herein has been obtained
by Borrower with
respect to the Vessels;
(14) Authorization
for Automatic Payment form duly executed by an
authorized
officer of Borrower;
(15) The Guaranty duly
executed by authorized
officers of ITB,
PBE,
PBM and
ITGD;
(16) Notice, Consent
and Acknowledgment
of Assignment or Sale duly
executed by an
authorized officer of each Loan Party;
(17) Opinion of Borrower's counsel in form acceptable to Lender with
respect
to the authority of Borrower and enforceability of the Loan
Documents other
than the Mortgages, with such opinion
17
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
assuming,
among other things that the law purportedly governing the
documents
is the same as Pennsylvania law and excepting, among other
things, any
opinion regarding usury;
(18) Opinions of Borrower's USCG, Panamanian and SVG maritime
counsel
in form acceptable to Lender with respect to enforceability of the
Mortgages.
(19) Such corporate
resolutions
and certificates of Borrower and
Guarantor as may
be reasonably required by Lender;
(20) Acknowledgements
and consents executed by each issuer of capital
stock or other
equity interests pledged pursuant to the Security Agreement
or Pledge
Agreement;
(21) All original
certificates
evidencing the capital stock or other
equity
interests pledged pursuant to the Security Agreement or Pledge
Agreement,
together with powers executed in blank in respect of such
certificates;
(22) The originally executed Turnberry Note, together with the
originally
executed allonge and a note power executed
in blank in respect
thereof;
(23) The originally
executed OC Note, together with a note power
executed in
blank in respect thereof;
(24) Evidence that all of the representations and warranties of each
Loan Party set
forth herein and in
the other Loan
Documents are true
and
correct as of
the date of the Funding with the same force and effect as
if
made on and as
of the date of the Funding.
(25) Good standing certificates or their equivalent (including
verification
of tax status) of each Loan Party in such Loan Party's
jurisdiction of
formation and (if different) the state of Florida;
(26) Documents
conveying all of the
membership interests
of each of
Cruise I and
Cruise II to the
applicable Loan
Parties duly executed by an
authorized
officer of the applicable Loan Parties;
(27) Projections for the calendar year ending December 31, 2006;
and
(28) Such other documents, instruments and items as Lender may
reasonably require to
evidence and protect the Loan.
b. Conditions to Funding - Borrower. The obligation of Borrower to
consummate the Funding shall is subject to the satisfaction or waiver, as
determined in Borrower's sole discretion,
of the conditions precedent listed
18
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
in this Section 8(b). As a condition to the
consummation of the
Funding, on or
prior to the date of the Funding, Borrower
shall receive all of the following in
form and substance satisfactory to
Borrower:
(1) Documents
conveying all of the
membership
interests of each
of
Cruise I and
Cruise II to the
applicable Loan
Parties duly executed by an
authorized
officer of the Lender; and
(2) A certificate duly executed by an authorized officer of the
Lender
to the effect
that, assuming that
the representations
and warranties made
by the Loan
Parties hereunder are true, correct and complete as of the date
of Funding and
Lender has no actual
knowledge to the contrary, Lender has
no actual
knowledge of any Event of Default hereunder.
9. Condition of Vessel.
a. Any
damage or deficiencies in either the hull, equipment and/or
machinery affecting either the seaworthiness
of the Vessel or its capability to
operate in its intended service or the maintenance of the Vessel's
classification society certificates, U. S. Coast Guard, Panama or SVG
required
documents, certificates, or certifications required to
operate in U.S. waters,
if any, discovered at any time prior to
the Termination Date
shall be the sole
responsibility of Borrower and any such damage or
deficiency
shall not in any
way alter, amend or excuse Borrower's
obligations under this Agreement.
b. Borrower will
obtain, independent
from Lender, all
classification and
SVG, Panama or Coast Guard certificates for the Vessel and if any of the
Vessel's classification, SVG, Panama or Coast Guard certificates require
renewal, such renewals shall be paid for by
Borrower and Borrower
accepts full
responsibility for obtaining any
classification or certificates required for the
Vessel. The Borrower shall keep the
Vessel's documentation
and classification
certificates in full force and effect during
the Term of this
Agreement or any
extensions thereof, providing copies of
such certificates to Lender when issued,
and shall renew all such certificates at
the time of any foreclosure pursuant to
the Mortgage whether or not due for renewal,
unless otherwise
agreed to by the
parties.
10. Use and Operation of the Vessel.
a. The Borrower
shall have the full
use of the Vessel during the Term and,
subject to the trading limits of Section 26
hereof, may employ the Vessel in any
lawful trade or trades in accordance with the laws and regulations of the
Vessel's flag state and any country
where the Vessel may
be operated,
as the
Borrower may from time to time elect, and it agrees to comply with all
local,
state, and federal regulations pertaining to the operation of the
Vessel in the
United States.
19
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
b. During the
Term the Vessel shall
be under the complete
control of the
Borrower, who shall have exclusive possession, control, and command of the
Vessel, subject to the terms hereof, and
assumes full responsibility therefor,
including port charges, agencies, fines, assessments and
penalties incurred due
to Borrower's use and operation of the
Vessel. Nothing herein contained shall be
construed as constituting any implied
restriction on
Borrower's right,
during
the Term, consistent with this Agreement, to employ the Vessel for its own
account or for the account of others,
either on a voyage or
time charter basis
(within the United States), as the Borrower may from time to time determine,
provided however, Borrower must first obtain written
consent of Lender,
which
shall not be unreasonably withheld,
before entering into
any charter other than
charters with any other Borrower.
c. During the
Term, at its own expense, the Borrower shall either itself or
through a maritime management or agency contract, man, victual, navigate,
including engaging other vessels and
pilots, operate,
maintain in a good
state
of repair and in efficient operating condition, insure and supply the Vessel.
The Borrower shall be responsible for all
charges and expenses of every kind and
nature whatsoever incidental to Borrower's
use and operation of the Vessel under
the Agreement including without limitation
fuel, lubricating oil, and water.
d. (1)
Except for a lien for
wages of a stevedore,
wages for the crew
of
the Vessel, general average or salvage
including contract
salvage, and
except
for maritime tort liens covered (subject to a reasonable deductible) by
insurance or protection and indemnity entry and other maritime liens securing
payments not yet due or payable (collectively, "Permitted Encumbrances"),
Borrower will not create or suffer to be
continued any security interest, lien,
encumbrance or charge on the Vessels or any
income therefrom. In due course, and
in any event within thirty (30) days after
the same becomes due and payable, the
Borrower will pay or cause to be
discharged or make
adequate provision for
the
payment or discharge of all claims or
demands which, if not
paid or discharged,
might result in the creation of a security
interest, lien, encumbrance or charge
against any of the Secured Property or any
income therefrom, and
will cause any
of the Secured Property to be released or
discharged
from each such
security
interest, lien, encumbrance or charge
therefor.
(2) If a complaint
shall be filed against
the Vessel or if the Vessel
shall be seized, arrested and/or taken into custody
or sequestered by virtue of
any legal proceedings in any court, the Borrower shall within ten (10) days
thereafter cause the Vessel to be released
and discharged. Borrower shall remain
liable for the payment of any payments
required hereunder
throughout any of the
foregoing events.
20
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
e. Borrower
agrees, at its
expense, to drydock
the Vessel for the purpose
of cleaning and painting the Vessel's bottom when necessary and making any
required repairs, inspections or surveys,
but not less than twice in every sixty
months unless Lender otherwise agrees or as required by applicable
classification society rules, and when drydocking is due, Borrower agrees to
send the Vessel to a port where the Vessel
can so drydock, clean
and paint. All
expenses incidental to such drydocking and all charges
incurred in
connection
therewith shall be for the Borrower's
account, regardless of whether Lender's
repairs, if any, are concurrently
made, provided that the Lender's repairs
do
not delay the operation of the Vessel or
increase the cost to Borrower.
f. Borrower will
pay and discharge when and as due and payable, all taxes,
assessments, excises, levies, documentation
and registration fees, duties, fines
and penalties and other governmental charges including without limitation,
sales, use, franchise, property, gross receipts and occupation
taxes lawfully
imposed upon the Secured Property or the ownership, use, operation,
registration, documentation or maintenance thereof during the Term of the
Agreement or on any amounts payable hereunder, other than taxes and other
charges imposed on or measured by the net
income or capital of the Lender.
11. Continued Registration of Vessels. The Empress Vessel shall be kept
documented under the laws and flag of the
United States
during the Term.
The
Princess Vessel shall be kept documented under the laws and flag of Panama
or
the United States during the Term. The Royal Star Vessel shall be kept
documented under the laws and flag of SVG or
the United States during the Term.
Borrower warrants it is a citizen of the
United States and
entitled to own and
operate vessels documented under the laws of the United States with the
privilege of engaging in the Coastwise
trade.
12. Alterations.
a. Borrower has
proposed certain alterations to the Big Easy Vessel and the
Royal Star Vessel as detailed in Exhibit D.
Lender hereby
provides its
consent
to such alterations. Borrower's failure to complete the
alterations
for any
reason, including impossibility of
performance, the
failure of the shipyard to
complete the work, costs overruns,
or the failure to
obtain certification
for
the altered Vessel, will not excuse Borrower from its obligation hereunder
including its obligation to pay monthly
principal and interest
as set forth in
the Note, or default hereunder, and this Agreement will continue
in full force
and effect regardless of any such failure
hereunder.
b. From time to
time during the Term, the Borrower may make structural and
other alterations to the Vessel, its
machinery, or
electrical equipment,
only
with Lender's prior written approval, which
shall not be
21
PDS/PALM BEACH
LOAN & SECURITY AGREEMENT
<PAGE>
unreasonably withheld, provided the alterations to the
Vessel and its equipment
are returned to their original state at or prior to the
Termination
Date. Any
additions or alterations permitted by this Section are
subject to approval by
the Vessel's classification society, and,
if required, the U. S. Coast Guard.
c. The Vessel
shall be kept
painted and metal
surfaces preserved at all
times, and the Borrower shall maintain the
Vessel in as good a condition as when
delivered to Borrower from the shipyard
upon completion of the
alterations set
forth in Exhibit D hereto, normal wear and
tear excepted.
13. Insurance.
a. (1) Borrower
shall, at all times during the Term,
at its own cost
and
expense, carry and maintain on the Secured
Property insurance coverage covering
all general liability, casualty, marine and hull risks, including towers
liability, war risk insurance, protection
and indemnity insurance, together with
coverage for pollution clean up costs and
expenses including
natural resource
damage, third party claims as well as any fines or civil penalties now or
hereafter imposed under all applicable Federal, State and Local laws, or the
laws of any foreign country or political
subdivision thereof having jurisdiction
over any of the Vessels, and such crew insurance as is
