SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

Exhibit 10.66

 

SECOND AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

Between

The CIT Group/Equipment Financing, Inc.

and

Resorts International Hotel, Inc.

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Dated as of September 29, 2006

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SECOND AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

This Second Amended and Restated Loan and Security Agreement made as of the 29th day of September, 2006 between The CIT Group/Equipment Financing, Inc. ( “Secured Party” ) and Resorts International Hotel, Inc. ( “Debtor” ) amends and restates in its entirety that certain Amended and Restated Loan and Security Agreement dated as of June 24, 2002 between Secured Party and Debtor, as amended prior to the execution hereof (the “ First Restatement ”), which First Restatement amended and restated in its entirety that certain Master Security Agreement dated August 17, 2001 between Secured Party and Debtor, as amended prior to June 24, 2002 (such amended Master Security Agreement, as further amended and restated by the First Restatement, being referred to herein as the “Original Agreement” ). All capitalized terms used in this Agreement and not defined in the body of this Agreement, are defined in Section 13.

This Agreement provides a set of terms and conditions that the parties hereto (the “Parties” and each a “ Party ”) intend to be applicable to various loan transactions secured by personal property. Each such loan shall from time to time at the option of the Secured Party be evidenced by a schedule of indebtedness and non-exclusive collateral in the form of Exhibit A hereto (or, with respect to Loans made under the Original Agreement, in the form of Exhibit A thereto) executed by Secured Party and Debtor (each a “Schedule” ). Whether or not stated, each Schedule shall be and is hereby deemed to incorporate the provisions of this Agreement and each Schedule may set forth more specified terms as to that particular loan. Where the provisions of a Schedule conflict with the terms hereof, the provisions of this Agreement shall prevail except to the extent set forth in Section 2.1.

One originally executed copy of a Schedule shall be denominated “Originally Executed Copy No.      of      originally executed copies” and such copy shall be retained by Secured Party. If more than one copy of a Schedule is executed by Secured Party and Debtor, all such other copies shall be numbered consecutively. Unless and only to the extent otherwise expressly provided in a Schedule, no Schedule shall replace any previous Schedule but shall be supplementary to all previous Schedules.

1. GRANT OF SECURITY INTEREST; DESCRIPTION OF COLLATERAL; OBLIGATIONS THE COLLATERAL SECURES .

1.1 Grant of Security Interest . Subject to Section 1.2, as security for the full and punctual payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all of the Obligations, Debtor hereby grants to Secured Party a security interest (and hereby confirms all security interests granted by Debtor to Secured Party pursuant to the Original Agreement, which shall remain in full force and effect) in and to each of the following assets (collectively, the “Collateral” ): (i) (A) all gaming equipment of every kind and nature whatsoever described in each Schedule ( “Gaming Equipment” ), (B) all furniture, machinery, and equipment of every kind and nature whatsoever described in each Schedule other than Gaming Equipment ( “Non-Gaming Equipment” ), and (C) all present and future attachments and accessions and other additions to any such items described in subclauses (A) and (B)

immediately preceding and all substitutions therefor, it being acknowledged that only certain substitutions are permitted hereunder as to the equipment (all the foregoing described in this clause (i) being referred to herein as “Equipment” ), (ii) all property and assets of every kind and nature whatsoever otherwise related to the Equipment, including related software and other intellectual property rights, (iii) all rights and remedies of Debtor in or relating to the Equipment Documents, (iv) all proceeds and products of any of the items described in clauses (i), (ii) and (iii) immediately preceding, including amounts payable under any insurance policy, and (v) any books and records relating thereto.

1.2 Cross-Collateralization . Each item of Collateral shall secure not only the specific amount which Debtor promises to pay in any Obligation (including, any Loan) corresponding to the Schedule listing such item of Collateral, but also all other Obligations, including all principal and interest of each other Loan (such security of such other Obligations being referred to herein a “ cross-collateralization ”); provided, that if and to the extent such cross-collateralization conflicts with or violates Section 4.09 of the First Mortgage Indenture by reason of an assignment, syndication or other similar transfer by Secured Party of a portion of the Obligations thereby resulting in more than a single lender having rights in respect of the same Collateral, then the cross-collateralization hereunder shall be correspondingly limited and/or released to the extent (and only to such extent) necessary such that the security interests granted pursuant to this Agreement constitute “Permitted Liens” under the First Mortgage Indenture (as the same exists on the date hereof and assuming for the purposes of this Section 1.2 no restatement, supplementation or other modification of any applicable provision to the same).

1.3 Cross Default . If any Event of Default shall occur, then, in addition to any other rights or remedies available to Secured Party hereunder of law or equity or otherwise, Secured Party shall have the right to accelerate the entire outstanding principal balance of all Loans and other Obligations and to terminate the New Gaming Equipment Loan Facility.

2. PROMISE TO PAY; TERMS AND PLACE OF PAYMENT; OTHER TERMS RELATING TO PAYMENTS; PAYMENT OF FEES AND EXPENSES .

2.1 Debtor’s Promise to Pay . Debtor promises to pay Secured Party the principal, interest and other amounts set forth on each Schedule at the rate and upon such terms as provided in this Agreement. The only times in which any terms, including the payment terms for principal and interest, specified in a Schedule shall supersede the provisions of this Agreement shall be where all of the following apply: (i) it is expressly stated in such Schedule that such specific terms specified in such Schedule is intended to and does supersede the corresponding terms provided for in this Agreement and (ii) the Secured Party expressly acknowledges and accepts such provision in such Schedule, and signs such Schedule and (iii) such Schedule relates to a New Gaming Equipment Loan.

2.2 Interest Rate . All loans made by Secured Party to Debtor pursuant to this Agreement (including all loans made under the Original Agreement and under this Second Restatement) (the “Loans” and each a “Loan” ) shall bear interest at a fluctuating interest rate from time to time per annum equal at all times to the Applicable Margin plus LIBOR in effect from time to time (the “Interest Rate” ), each change in such fluctuating rate to take effect simultaneously with the corresponding change in LIBOR and/or the Applicable Margin, as the case may be, without

 

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notice to Debtor; provided that, subject to Section 9.2(a), if the Secured Party declares one or more Events of Default, then the Loans shall bear interest at a fluctuating interest rate from time to time per annum equal to the sum of (a) two percent (2%) plus (b) the Applicable Margin in effect from time to time plus (c) LIBOR in effect from time to time (the “Default Rate” ) for the entire period during which any such Event of Default occurs and remains continuing. The Applicable Margin shall be reset on the forty-fifth (45 ^th ) day after the end of each fiscal quarter of Debtor, and shall be determined based on the ratio of Debtor’s Senior Debt to EBITDA (trailing twelve (12) months) that existed on the last day of Debtor’s then most recent fiscal quarter.

“ LIBOR ” means the London Interbank Offered Rate (in U.S. dollar deposits) for a term of three months, as determined by Secured Party by reference to Telerate page 3750 (or any successor page) or by any other means used by Secured Party in the ordinary course of its business. Interest on each Loan shall begin to accrue on the day each such Loan is made.

“Applicable Margin” means, on any date of determination with respect to the applicable Interest Rate, the Applicable Margin set forth in the table below that corresponds to the Senior Debt/EBITDA ratio set forth in the table below:

 

 

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2.3 Timing of Payment of Interest . Subject to the provisions of Section 9, the accrued interest with respect to each Loan shall be payable to Secured Party (i) in arrears on each Payment Date, commencing in the month following the making of such Loan, (ii) on any day in which any prepayment of principal is made with regard to such Loan, and (iii) on any day such Loan is paid or is payable in full.

2.4 Payment of Principal .

(a) Payment of Principal on Existing Debt . Subject to the provisions of Section 9, the aggregate principal balance of the Existing Debt shall be amortized in twelve (12) equal monthly installments of $455,898.56, which shall be due and payable on each consecutive Payment Date from and including the first Payment Date in October, 2006 through and including the first Payment Date in September, 2007; and the aggregate principal balance of the Existing Debt outstanding following the September, 2007 amortization payment shall be due and payable in accordance with the provisions of Section 2.4(c). Each Schedule corresponding to the Existing Loans is hereby amended to delete any amortization schedule (or similar provision) included therein or in any attachment thereto.

(b) Payment of Principal on New Gaming Equipment Loans . Subject to the provisions of Section 9, the aggregate principal balance of the New Gaming Equipment Loans shall be due and payable in accordance with the provisions of Section 2.4(c).

(c) Conversion of Loans . On the first Payment Date in October, 2007 (the “Conversion Date” ), all Loans will be combined into a fully amortizing loan at the Interest Rate, and subject to the provisions of Section 9, (i) the principal of each such Loan shall thereafter be fully amortized in seventeen (17) consecutive equal monthly installments, commencing on such Payment Date in October 2007 and (ii) shall be due and payable on each consecutive Payment Date from and including the first Payment Date in October, 2007.

2.5 Prepayments . Each prepayment of any Loan shall be accompanied by payment in full of all accrued interest thereon to and including the date of such prepayment. Debtor may prepay the unamortized Loan balance in whole or in part without premium or penalty.

Notwithstanding the preceding provisions, all prepayments shall be in amounts of not less than $100,000 (and shall be in multiples thereof) except that after the first year of the making of a Loan, Debtor shall have the right to prepay the remaining balance in full on any Loan. Substitutions of Equipment will not be considered a prepayment event and will be permitted so long as, in Secured Party’s sole discretion (a) substitute Equipment in which Debtor grants Secured Party a first priority security interest is of equal or greater value and of a substantially similar nature and function than the Equipment disposed of and (b) all of the conditions precedent applicable to a Loan have been met as of the date of substitution.

2.6 Payment of Fees and Expenses . Debtor shall pay Secured Party the following non-refundable fees and expenses:

(a) Late Fees . Any payment not made when due shall (in addition to any interest otherwise accruing on such payment) bear late charges thereon, payable monthly on the Payment Date and calculated at the rate of one and one-half percent (1  ¹ / 2 %) per month on the amount of

 

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such payment from the date due until paid, but in no event shall any interest, late fees or other amounts individually (or in the aggregate to the extent such amounts are aggregated under applicable law) be greater than the highest rate permitted by relevant law. The payment of late fees shall not reduce or otherwise affect Secured Party’s right to accelerate the Obligations. Anything in this Agreement to the contrary notwithstanding, if Secured Party elects to make the monetary Obligations become immediately due and payable hereunder pursuant to Section 9.2, then the foregoing late charges shall not be applicable to any payments that become due exclusively on account of such election; it being agreed that any such late charges shall apply (and shall continue to apply) to any payments not made and due prior to such election.

(b) Returned Check Fee . Debtor shall be responsible for and pay to Secured Party a returned check fee, not to exceed the maximum permitted by law, which fee will be equal to the sum of (i) the actual bank charge incurred by Secured Party plus (ii) all other actual costs and expenses incurred by Secured Party. The returned check fee is payable upon demand as indebtedness secured by the Collateral under this Agreement.

(c) Reasonable Expenses . Debtor agrees to pay to Secured Party, within five days of request therefor, any and all reasonable legal and other fees and expenses incurred by or on behalf of Secured Party in connection with Secured Party’s investigation of Debtor, its assets and its business and preparation, negotiation and execution of this Agreement and the Relevant Documents, including field examination audits, filing fees and search fees provided that all such fees and expenses which have been incurred by Secured Party to date shall be paid on the date hereof (and any failure to so present same by Secured Party or to pay by Debtor shall not relieve Debtor of its obligations to pay and reimburse Secured Party therefor).

(d) Upfront Fee . On or before the execution of the Second Restatement, Debtor shall pay to Secured Party a commitment fee in the amount of $50,000.

2.7 No Setoff . All payments (including prepayments) to be made by Debtor hereunder on account of principal, interest, fees or otherwise shall be made to Secured Party without deduction, set-off or counterclaim of any kind or nature whatsoever for any reason whatsoever and shall be free and clear of, and without reduction for, any present or future income, stamp, documentary, excise or other taxes (which shall be paid by Debtor).

2.8 Other Matters Concerning Payments . Other matters concerning payments are as follows:

(a) Invoices . On or about the fifteenth day of each month so long as Loans are outstanding, Secured Party shall present a monthly invoice to Debtor reflecting the interest and principal due on the next Payment Date, but any failure or delay from time to time by Secured Party in submitting invoices for payments shall not discharge or relieve Debtor of the obligation to timely make such payments.

(b) Interest Calculation; Lawful Rate; Non-Banking Days . Interest on the Loans shall be calculated on a daily basis upon the unpaid principal balance, with each day representing 1/360th of a year. If the interest rate calculated in accordance with any provision of this Agreement for any Loan (including, to the extent relevant, any application of the late fee) would

 

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at any time exceed the maximum permitted by any applicable law then for such period as such rate would exceed the maximum permitted by such law (and no longer) the rate of interest payable on the applicable Loan shall be reduced to the maximum permitted by such law. If any payment pursuant to this Agreement or any of the Relevant Documents shall be stated to be due on a day other than a Banking Day, such payment may be made on the next succeeding Banking Day and in each such case such extension of time shall be included in computation of the interest due or other payment due.

3. LOANS .

3.1 Maximum Amount of Loans . Subject to the terms and conditions of this Agreement, during the New Gaming Equipment Loan Period, Secured Party will lend to Debtor from time to time a principal sum up to the New Gaming Equipment Availability Amount (the “ New Gaming Equipment Loan Facility ”) to be used by Debtor solely to acquire Gaming Equipment.

3.2 Amount of New Gaming Equipment Loans; Promissory Notes . Each New Gaming Equipment Loan shall be used to pay not more than one hundred percent (100%) of the actual purchase price for Gaming Equipment (after taking into account applicable discounts, allowances and rebates). Further, not more than fifteen percent (15%) of any New Gaming Equipment Loan shall be used to pay for freight, delivery, taxes, installation, set-up, other labor, other similar services and other similar costs. Each New Gaming Equipment Loan (and each other Loan) shall be, if Secured Party requires (but otherwise need not be), evidenced by Debtor’s promissory notes in the form of Exhibit B to this Agreement with appropriate insertions thereon made by Secured Party, payable to the order of Secured Party (as each such Note is amended, supplemented, restated or otherwise modified from time to time, the “Notes” ).

3.3 Minimum Borrowings . Any borrowings by Debtor hereunder shall be for not less than the lesser of (a) Four Hundred Thousand Dollars ($400,000) and (b) the New Gaming Equipment Availability Amount at one time.

3.4 No Obligation To Lend After New Gaming Equipment Loan Period . Notwithstanding anything to the contrary in this Agreement, Secured Party shall have no obligation to make any Loans after the earlier of (a) the end of the New Gaming Equipment Loan Period or (b) the date the New Gaming Equipment Loan Facility terminates.

3.5 Termination of the New Gaming Equipment Loan Facility . Notwithstanding any other provision of this Agreement, all of the Loans shall be immediately due and payable, with all accrued interest, and the New Gaming Equipment Loan Facility shall terminate, upon the occurrence of an Event of Default and acceleration of all of the Loans by Secured Party.

3.6 Certain Obligations of Debtor Regarding the Loans . Secured Party’s obligations to make the New Gaming Equipment Loans are subject to Debtor providing to Secured Party Documents which evidence, in form and substance reasonably satisfactory to Secured Party that:

(a) Debtor has acquired good and valid title to (and possession of) the Gaming Equipment from the manufacturer thereof or authorized dealer thereof, whichever is the seller (the “Equipment Manufacturer/Dealer” ) within that period of time necessary so that (i) the

 

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corresponding Loan shall constitute a Purchase Money Obligation (as defined in and for the purposes of the First Mortgage Indenture) and (ii) Secured Party will have a Purchase Money Security Interest (as defined in and for the purposes of the UCC) in such Equipment;

(b) the Equipment Manufacturer/Dealer is a seller in the ordinary course of its business, and the proceeds of the Loan will be used to pay the Equipment Manufacturer/Dealer or in the sole discretion of Secured Party, reimburse Debtor for its payment to the Equipment Manufacturer/Dealer and that Debtor has paid the Equipment Manufacturer/Dealer;

(c) such Equipment is free and clear of all Liens except Liens in favor of Secured Party and Permitted Liens, including that no Liens thereon have been filed of record by a creditor of the Equipment Manufacturer/Dealer or any other Person;

(d) such Equipment consists only of new Gaming Equipment;

(e) such Equipment has been (A) delivered to Debtor to the Debtor’s Atlantic City Property and (B) fully installed and is operational; and

(f) Debtor has obtained insurance of the types and in the amounts required hereunder relating to such Equipment and all such insurance otherwise complies with the provisions of Section 8;

(g) no such Equipment is, or could in any manner be or be reasonably asserted to be, a fixture under applicable state law; and

(h) Debtor has provided to Secured Party a financing statement (or at the sole discretion of Secured Party, an amendment to an existing financing statement), in form and substance reasonably satisfactory to Secured Party, covering the Equipment.

Each New Gaming Equipment Loan is subject to Secured Party’s receipt of a Note therefor, the Schedule therefor and other Documents reasonably satisfactory to Secured Party relating to the transactions contemplated by the purchase of the Gaming Equipment. If Secured Party elects to make any Loan hereunder, Secured Party shall have the right, as Secured Party may elect from time to time in its sole discretion, to make advances to Debtor, reimburse Debtor after it pays the Equipment Manufacturer/Dealer or make one or more such Loans by paying the purchase price of the Gaming Equipment directly to the Equipment Manufacturer/Dealer of the Equipment. Without limiting the generality of Section 4.3, each of the request for and the acceptance of any Loan (including any Loan paid directly to an Equipment Manufacturer/Dealer) constitutes Debtor’s representations and warranties that all of Debtor’s rights and remedies in and under the Equipment Documents may be assigned to Secured Party, and Debtor is not as of the date thereof and will not as of the date of the acquisition of the Equipment be precluded from obtaining a security interest in the Equipment free and clear of any Liens other than the Liens of Secured Party and Permitted Liens.

If requested by Secured Party, Debtor shall as a precondition to a Loan confirm the foregoing matters in this Section and any other matters reasonably requested by Secured Party by delivery of a certificate dated the day of the Loan, signed by a duly authorized officer of Debtor.

 

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Secured Party shall have no obligation to make any Loan during any period that there exists a material breach under or relating to this Agreement, any Relevant Document or any Senior Debt Document. Debtor shall remit to Secured Party the proceeds (after deducting selling expenses) of any disposition of Equipment, and Secured Party shall accept such proceeds as a prepayment of the Loan secured by such Equipment.

3.7 No Lending Against Fixtures . Debtor does not intend any Equipment to be a fixture to real estate under applicable law or an accession to other property. Debtor covenants that all Equipment shall at all times remain personal property and not fixtures. Further, Debtor and Secured Party agree that regardless of the manner of affixation, the Equipment shall remain personal property and not become part of the real estate. Without limiting the generality of the preceding sentence, Debtor acknowledges that Secured Party does not intend to lend with respect to any Equipment which will be or could reasonably be asserted to be a fixture and, accordingly and by way of example only, Secured Party does not intend to lend with respect to carpeting, air conditioning units, heating units or any other item which may be construed to be permanently installed.

3.8 Secured Party’s Right to Elect to Make a Loan . With respect to each item of Gaming Equipment, it shall be within the sole discretion of Secured Party whether Secured Party elects to make a Loan with respect to such equipment.

3.9 Provisions Relating to the Implementation of the Loans . Debtor shall request a Loan under the New Gaming Equipment Loan Facility during the New Gaming Equipment Loan Period on any Banking Day by giving Secured Party irrevocable written notice (including by facsimile) prior to 11:30 a.m. EST at least five (5) Banking Days prior to the proposed borrowing date, specifying the requested loan amount and borrowing date (which must be a Banking Day), together with the invoice for and other Documents related to the corresponding Equipment. Subject to the terms and conditions contained herein, including Sections 3.5, 3.7 and 3.8, Secured Party shall make such Loan to Debtor by transferring the amount of any Loan approved by Secured Party in immediately available funds to the account of Debtor not later than 5:00 p.m. EST on the requested borrowing date.

3.10 Certain Determinations to be Made by Secured Party . Secured Party is hereby authorized (but not obligated) to record the amount of each Loan made by Secured Party and the date and amount of each payment or prepayment of principal thereof on a schedule annexed to and constituting a part of the applicable Note; provided that failure by Secured Party to obtain any one or more Schedules or Notes or make any such recordation on any Notes obtained shall not in any manner impair or otherwise affect Debtor’s obligations to repay any such Loans and interest thereon on the terms and conditions contained in this Agreement or the other obligations of Debtor under this Agreement, such Schedules or Notes or any other Relevant Document. Each Note shall (i) be dated the date of execution and delivery thereof, and (ii) bear interest at the Interest Rate, payable as specified in Section 2 for the period from the date the Loan is made (including any Loans paid directly to an Equipment Manufacturer/Dealer) until paid in full, on the unpaid principal amount thereof from time to time outstanding.

3.11 Storage of Equipment . Secured Party agrees that Debtor may store Non-Gaming Equipment at the Debtor’s Warehouse, but not more than ninety (90) calendar days.

 

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3.12 Debtor to First Request Loans from Secured Party . Debtor agrees not to directly or indirectly in any manner borrow any funds from any Person in order to purchase any equipment (the purchase of which is financeable under the Loan and Security Agreement) during the New Gaming Equipment Loan Period without first entitling Secured Party to make the applicable Loan pursuant to this Agreement; provided, that, subject to the terms and conditions of the First Mortgage Indenture, Debtor may use the proceeds of the issuance by Guarantor of the First Mortgage Notes to purchase equipment without first entitling Secured Party to make a loan secured by such equipment pursuant to this Agreement. For all purposes of this Agreement, Loans paid directly to an Equipment Manufacturer/Dealer in respect of Equipment shall be deemed to be made to Debtor.

4. CONDITIONS PRECEDENT TO LOANS.

4.1 Conditions to Initial New Gaming Equipment Loan . The obligation of Secured Party to make the initial New Gaming Equipment Loan hereunder is subject to its obtaining the documents, in form and substance reasonably satisfactory to it, listed on Exhibit C hereto and Secured Party having obtained any Licenses of or from any Governmental Authority regulating gaming in the State of New Jersey that Secured Party, in its sole discretion determines is necessary or advisable, it being understood and agreed that Secured Party shall have no obligation of any kind or nature whatsoever to apply for or otherwise seek any such Licenses.

In addition, simultaneously with the execution and delivery of this Agreement, Secured Party shall have (a) obtained an executed and fully enforceable guaranty issued by Guarantor for the benefit of Secured Party in the form of Exhibit D and (b) caused the delivery to the Secured Party legal opinions in substantially the form of Exhibit E from counsel to the Debtor.

4.2 Conditions to All Loans . The following conditions are conditions precedent to (i) Debtor’s requesting approval of each New Gaming Equipment Loan and (ii) the obligation of Secured Party to make each Loan (including the initial Loan), with all such conditions being applied on each such date.

(a) Material Accuracy of Representations and Warranties . The representations and warranties made by Debtor in or pursuant to this Agreement and any Relevant Document shall be true and correct in all material respects on and as of the dates the Loan is requested to be made and is to be made (or if expressly applicable only to an earlier date, such as financial statements, as of such date).

(b) No Material Defaults . No member of the Debtor Group shall have committed a material breach of or other material default under (including any material non-compliance with) any provisions contained in this Agreement and in each Relevant Document to which it is a party, whether or not notice has been given to any member of the Debtor Group provided further that as of the end of each preceding fiscal quarter, Debtor must be in compliance with the Financial Covenants. As to the Financial Covenants, at each of the times a Loan (i) is requested to be made and (ii) is to be funded, the period for measuring compliance with the Financial Covenants shall be the end of the then most recent preceding fiscal quarter.

 

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(c) No Material Breach of Any Senior Debt or Any Revolving Debt . No member of the Debtor Group shall have committed any material breach of or other material default under (including any material non-compliance with) any provisions contained in any Senior Debt Documents or any Revolving Debt Documents whether or not notice has been given to any member of the Debtor Group, and no portion of any principal constituting Senior Debt or any Revolving Debt shall have been accelerated and/or the holders having the right to make a determination as to acceleration shall not have given notice that they will accelerate.

(d) No Material Adverse Change . There shall not have occurred, with respect to any member of the Debtor Group, any material adverse change from and after June 30, 2006 with respect to its business, operations, properties or other assets, results of operations or condition (financial or otherwise) (a “Material Adverse Change” ).

(e) First Priority Lien . The liens of Secured Party in the Equipment shall at all times be a first priority lien and neither Debtor nor any of its representatives shall have taken any position in writing or before any court or other governmental authority that is inconsistent with Secured Party having a first priority lien in all Equipment.

(f) No Event of Default or Material Default . No (i) Event of Default or (ii) material default which, with the giving of notice, the lapse of time or both, would constitute an Event of Default and/or no other condition which would constitute an Event of Default shall have occurred and be continuing on either the date the Loan is requested to be made or (after giving effect to the Loan) the date the Loan is to be made.

(g) No Change of Control; Change of State of Incorporation . No Change of Control shall have occurred with respect to any member of the Debtor Group; and Debtor shall not have changed the jurisdiction (i.e., the State of New Jersey) in which it is incorporated.

(h) Schedule; Compliance Certificates . (i) the Schedule corresponding to such Loan shall have been fully completed (to the reasonable satisfaction of Secured Party), executed and delivered to Secured Party; and (ii) Debtor shall have given to Secured Party a certificate from its chief financial officer or chief executive officer, in form and substance reasonably satisfactory to Secured Party, confirming that at the time of the request for approval of each Loan and the making of each Loan, each of the conditions set forth above are satisfied.

4.3 Continuing Representation and Warranty By Debtor . Debtor agrees that each borrowing by Debtor hereunder shall without any further action on Debtor’s part conclusively constitute a representation and warranty by Debtor as of the date of such request for borrowing and the date of the actual borrowing that the conditions in Section 4.2 have been satisfied.

5. DEBTOR’S WARRANTIES AND REPRESENTATIONS .

Debtor warrants and represents to Secured Party:

5.1 Indebtedness . Upon the execution of each Schedule and the making by Secured Party of the Loan corresponding to such Schedule, Debtor is justly indebted to Secured Party for the full amount of the indebtedness set forth on each Schedule, and such indebtedness is not subordinated in any respect to any other indebtedness of the Debtor.

 

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5.2 Absence of Liens . Except for the security interests granted hereby and the Permitted Liens, the Collateral is free from, and Debtor covenants that the Collateral will be kept free from, all Liens.

5.3 Absence of Financing Statements . Without limiting the generality of Section 5.2, no financing statement covering the Collateral or any proceeds thereof is on file in favor of anyone other than Secured Party (and, without limiting the rights of Secured Party, if any such other financing statement is on file, it will be terminated or subordinated on terms and conditions satisfactory to Secured Party).

5.4 Information Supplied . All information previously and hereafter supplied and all statements previously and hereafter made, as applicable, by or on behalf of any member of the Debtor Group to or for Secured Party in any financial, credit or accounting statement has been and shall be, as applicable, materially correct, valid and genuine, including in any balance sheet, income statement or statement of changes in financial position or application for credit.

5.5 Organization; Authority; No Conflicts . Debtor (i) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction (it being represented and warranted that Debtor is incorporated in the State of New Jersey), and (ii) Debtor has the power and authority, and all necessary licenses or other authorizations, to own, lease, operate and encumber its properties and to carry on its business as now conducted. Debtor has full authority to enter into this Agreement and each of the Relevant Documents to which it is a party and in so doing it is not breaching or otherwise violating Law (including any Laws relating to its gaming operations), Organizational Documents, or any Contract or other Document to which it is a party, subject or bound (any consents required thereby having previously been obtained), and it has taken all such action as may be necessary or appropriate to make this Agreement and the Relevant Documents binding upon it.

5.6 No Governmental Consent Necessary . Other than any approval or consent necessary from the CCC (if any), no consent, authorization, approval or other action by, and no notice to or filing with, any Governmental Authority is required for the due execution, delivery and performance by Debtor of, or the validity or enforceability of, this Agreement, any Note or any other Relevant Document to which it is a party.

5.7 No Claims . There are no pending or, to Debtors’ knowledge, threatened Claims that may, individually or in the aggregate, have a material adverse effect on (a) the validity or enforceability of this Agreement, any Note or any other Relevant Document (including the rights and remedies of Secured Party hereunder and thereunder), or the ability of Debtor to perform any of its Obligations, or (b) the business, operations, properties or other assets, results of operations or condition (financial or otherwise) of Debtor.

5.8 Financial Statements . All consolidated and consolidating balance sheets, income statements, statement of changes in cash flow and other financial data that have been provided to Secured Party by or on behalf of Debtor (a) are, and all of same which shall hereafter be

 

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furnished to Secured Party shall be, complete and correct in all material respects, and (b) do (and as to such financial statements and other financial data to be delivered hereafter will) truly and fairly present the financial condition of the Debtor Group as at the respective dates thereof and the results of its operations and changes in cash flow for the periods ended on such dates, all in accordance with generally accepted accounting principles consistently applied during all periods. All other information, reports, and other Documents (a) heretofore furnished to Secured Party are, and (b) hereafter furnished will be at the time the same are so furnished, true, accurate and complete in all material respects. Except as shown on the most recent consolidated balance sheet of the Debtor Group, no member of the Debtor Group has any liabilities except those incurred in the ordinary course of business since the date of such balance sheet, which additional liabilities do not have an adverse effect on the Collateral or on the business, operations, properties or other assets, results of operations or condition (financial or otherwise) of any member of the Debtor Group.

5.9 No Material Adverse Change . There has been no Material Adverse Change since June 30, 2006.

5.10 Compliance With Laws . Debtor is in compliance with all Laws, including those applicable to its ownership, lease or use of properties and its other assets, the conduct of its business and otherwise, except for violations which do not, individually or in the aggregate, have or would reasonably be expected to have a material adverse effect on Debtor. Debtor has not received any notice of violation of any of the foregoing. Without limiting the generality of the preceding provisions of this Section 5.10, Debtor is not in violation of any judgment, order or decree of any Governmental Authority or any arbitrator.

5.11 Taxes and Assessments . Debtor has filed all federal, state and local tax returns and other reports (other than any immaterial ones) it is required to file (or has obtained valid, written extensions which are in full force and effect as to any not so filed). Debtor has paid all taxes, assessments and other governmental charges due and payable, and has made adequate provision for the payment of such taxes, assessments and charges accrued but not yet payable, which provisions are reflected in the balance sheets referred to in Section 5.8. Debtor has no knowledge of any deficiency or additional assessment in connection with any taxes, assessments or other governmental charges.

5.12 Books and Records . Debtor maintains its books and records relative to the Collateral and will, subject to the Debtor’s right to store Non-Gaming Equipment as permitted under this Agreement, maintain the Collateral at Debtor’s Atlantic City Property. In addition, the Debtor’s Atlantic City Property has been the principal place of business and chief executive office of Debtor since May 2001.

5.13 Title and Liens . Upon acquiring any Collateral, Debtor will have good and marketable title to all of the Collateral as sole owner thereof, free and clear of any Lien, except the Liens created by this Agreement and Permitted Liens.

Upon the proper filing and indexing of UCC-1 financing statements in the office of the State of New Jersey Department of Treasury, Division of Revenue, the Liens granted in favor of Secured Party pursuant to this Agreement and pursuant to any Relevant Document shall

 

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constitute perfected Liens in the Collateral in favor of Secured Party, which are prior to all other Liens on such Collateral and which are enforceable as such against all creditors of Debtor, against any owner or occupier of the real property where any of the Equipment is located and against any present or future creditor obtaining a Lien on such real property or personal property and against any other Person.

5.14 Other Matters . Debtor has no actual or contingent liabilities in any material respect arising out of or otherwise relating to any laws or other matters of any kind or nature whatsoever relating to the environment.

Debtor is not an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, nor is Debtor controlled by any such company.

Debtor owns the existing hotel and casino buildings where the Equipment will be used at Debtor’s Atlantic City Property.

There are no provisions in any Document to which Debtor is a party, subject or bound, including any Senior Debt Document or any Revolving Debt Document, that precludes Secured Party from exercising its remedies under this Agreement.

Debtor owns, or has a valid license or sublicense in, all know-how, licenses, inventions, technology permits, trademarks, trade secrets, copyrights, product designs, applications, formulae, processes and other intellectual property rights necessary in the operation of its business in the manner in which it is currently being conducted.

5.15 Representations and Warranties Applicable To Debtor Group . All of the foregoing representations and warranties made by Debtor with respect to itself also apply in full (as fully as if repeated herein), to the extent applicable, to each other member of the Debtor Group; it being represented and warranted by Debtor that the Debtor Group consists of Guarantor, Debtor, New Pier Operating Company, Inc. and no other Persons.

6. AFFIRMATIVE COVENANTS .

Debtor covenants and agrees that, until the later of (i) the full, final and indefeasible payment and performance of the Loans and all other Obligations under this Agreement and the Relevant Documents, and (ii) the expiration of the New Gaming Equipment Loan Facility, Debtor shall:

6.1 Defense of Claims . Defend at Debtor’s sole cost any Claim affecting the Collateral.

6.2 Compliance with Laws . Comply with all applicable Laws (other than gaming Laws) except for any non-compliance that would not reasonably be expected to result in a material adverse effect on Debtor, and comply with all applicable gaming Laws except for any non-compliance when the effect, individually or in the aggregate, is insignificant.

6.3 No Liens . Not place or suffer the placing of any Lien on any of the Collateral other than the Lien of this Agreement and Permitted Liens.

 

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6.4 Maintenance Of Licenses . Maintain in good standing any Licenses required to operate its gaming operation and other material operations.

6.5 Payment of Reasonable Expenses . Pay all reasonable attorneys’ fees and expenses and other fees and expenses incurred by Secured Party in enforcing its rights against any member of the Debtor Group under this Agreement and/or under any Relevant Document.

6.6 Payment of Taxes . Pay promptly all taxes, assessments, license fees and other public or private charges when levied or assessed against the Collateral or this Agreement.

6.7 Preservation of Security Interests . Do everything necessary or expedient or as reasonably requested by Secured Party to preserve or perfect the security interest of Secured Party and obtain, if a certificate of title be required or permitted by Law, such certificate with respect to the Collateral, showing the security interest of Secured Party thereon.

6.8 Access; Inspection . Permit Secured Party and or its representatives to enter upon Debtor’s premises after providing Debtor with at least forty-eight (48) hours prior notice that Secured Party wishes to inspect the Collateral and Debtor’s books and records pertaining to the Collateral, and to examine, copy and make abstracts from any and all books, records and Documents in its possession or the possession of any independent contractor relating to its finances or the Collateral (including its federal income tax returns), and Debtor shall assist Secured Party in making such inspection and copying but Secured Party’s inspection shall not materially interfere with Debtor’s business operations.

6.9 Maintain Priority of Security Interests . Cause the security interests granted by Debtor to Secured Party to continue effective irrespective of any retaking or redelivery of any Collateral and irrespective of the payment of the amount described in any Schedule so long as there are any Obligations owed by Debtor to Secured Party, provided, however, upon any assignment in whole of this Agreement, the assignee shall thereafter be deemed for the purposes of this Section the Secured Party under this Agreement.

6.10 Maintenance of Existence and Qualifications . Maintain and preserve in full force and effect its existence and good standing and all other rights, powers, franchises, licenses and qualifications (including proprietary rights) necessary for its ownership, lease or use of assets or the conduct of its business.

6.11 Payment of Taxes and Other Obligations . Pay (a) before they become delinquent, all taxes, assessments and governmental charges imposed upon it or any of its property or required to be collected by it, and (b) when due, all other indebtedness and liabilities of any kind or nature now or hereafter owing by it.

6.12 Maintenance of Assets and Records . Maintain (a) its properties, the Collateral and its other assets in overall good working order and condition and (b) complete and accurate books and records of all of its operations and assets.

6.13 Notice of Adverse Events . Promptly notify Secured Party in writing of the occurrence or existence of any of the following: (a) any Event of Default or any event which, with the giving of notice, lapse of time or both, or the occurrence of any other condition, would

 

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become an Event of Default; (b) any matter or event which has resulted in, or may reasonably be expected to result in, a Material Adverse Change, (c) any material Claim filed or made against any member of the Debtor Group or relating to its operations, or any adverse determination in or regarding any material Claim; (d) any loss from casualty or theft in excess of Five Hundred Thousand Dollars ($500,000) if not insured, or in excess of One Million Dollars ($1,000,000) even if insured affecting its assets; (e) whether or not otherwise reportable under this Section 6.13, any violation by it of any environmental Law, or any complaint, citation, order or other notice of a violation or a Claim involving any environmental Law, if the cost of cleanup or remediation, liability or penalty relating thereto may exceed Five Hundred Thousand Dollars ($500,000) singly or in the aggregate (the notice to Secured Party to include, along with other relevant information, the name of any complainant or claimant and the nature and, if known, potential amount of the claim); (f) any material Claim relating to ERISA; or (g) if any of the representations and warranties contained in this Agreement or in any Relevant Documents ceases to be materially true, correct and complete. With respect to any such matters, Debtor shall provide to Secured Party promptly after receipt, a copy of any complaint, citation, order or other notice of a material violation or material Claim required to be reported pursuant to this Section.

6.14 Information and Documents to be Furnished to Secured Party . Furnish to Secured Party in form and substance reasonably satisfactory to Secured Party:

(a) Annual Financial Statements . As soon as available, but in no event later than one hundred twenty (120) days after the end of each fiscal year of the Debtor Group, a consolidated and consolidating balance sheet of the Debtor Group as of the end of such year and the prior fiscal year, consolidated and consolidating statements of income for such year and the prior fiscal year, and consolidated statements of changes in cash flows and changes in stockholders’ equity for such year and the prior fiscal year (all in reasonable detail and with footnotes), audited by an independent certified public accountant reasonably satisfactory to Secured Party and certified by such independent certified public accountant, without qualification or exception, as presenting fairly the consolidated financial condition of the Debtor Group as of the dates and the consolidated results of operations, consolidated changes in cash flow and consolidated changes in stockholders equity of the Debtor Group for the periods indicated and as having been prepared in accordance with generally accepted accounting principles consistently applied; provided, however, in the event Debtor (or any member of the Debtor Group) is subject to the reporting requirements of the Exchange Act, Debtor shall provide to Secured Party each annual Form 10-K (or its equivalent) of Debtor (or such member of the Debtor Group) as filed under Section 13 or 15(d) of the Exchange Act within two business days of such filing, and Secured Party shall accept such Form 10-K (or its equivalent) in satisfaction of the reporting requirements otherwise provided in this Section 6.14(a).

(b) Quarterly Financial Statements . As soon as available, but in no event later than forty-five (45) days after the end of each of the first, second and third quarters of each fiscal year of Debtor, (i) a consolidated and consolidating balance sheet of Debtor as of the end of such quarter and the corresponding quarter for the prior fiscal year and (ii) consolidated and consolidating statements of income and consolidated statements of changes in cash flows and changes in stockholders’ equity, each for (A) such quarter, (B) the corresponding quarter for the prior fiscal year, (C) the period commencing at the end of the previous fiscal year and ending with the end of such quarter and (D) the corresponding fiscal period for the prior fiscal year (all

 

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in reasonable detail and with footnotes), certified by the chief financial officer of Debtor as presenting fairly the consolidated financial condition of Debtor as of the dates and the consolidated results of operations, changes in cash flow and changes in stockholders equity of Debtor for the periods indicated and as having been prepared in accordance with generally accepted accounting principles consistently applied, except for normal year end adjustments, which individually and in the aggregate are not material; provided, however, in the event the Debtor (or any member of the Debtor Group) is subject to the reporting requirements under the Exchange Act, Debtor shall provide to Secured Part